Lamudi Real Estate Market Report

2017

The country's property market is booming,
transforming the Philippines into a real estate investment hotspot.

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Population / GDP

Philippines 6.7% GDP Growth
is the fastest in the region

Population
Gross Domestic Product
Gross National Income (Per Capita)
Source: World Bank

Chapter 1:
Local Market Overview

As a country, the Philippines is certainly unique. Nestled between the South China sea and the western Pacific Ocean, this archipelago is made up of over 7 thousand islands. With a population of over 100 million, this country has been known for its cultural wealth for many years. Recently, this paradise has made a name for itself in the real estate industry, and many investors from all over the world are now purchasing property all over the islands.

Thanks to regulatory reforms which have come to fruition over the past 15 years, the Philippines’ real estate landscape has turned into a haven for foreign investors and local buyers alike. 4 years ago, the Philippines began to make a name for itself as a highly reputable market among the Big Three credit rating agencies, first Fitch, the Standard & Poor, and finally Moody. With its new status came new success, and since then, the Philippines’ real estate market has been flourishing. In spite of natural disasters over the years, the Philippines has shown itself to be highly resilient.

Philippine Economy
Quarter-on-quarter, the Philippines’ Gross Domestic Product grew by 1.7% in the three months leading up to December 2016. This was 1% greater than the growth that was initially estimated for this period. While the industry sector grew more slowly than expected, the services sector remained buoyant. [1]

OFW Remittances
An excellent sign of the health of a country’s global economy is how much money is sent back to the country from citizens living abroad. Filipinos living abroad sent a record amount of money home to the archipelago’s banks last year, hitting “a new record high of $2.56 billion in December last year”. The country’s government’s growth target was exceeded, thus indicating stronger growth in 2016 than in the previous year. [2]

Foreign Direct Investment
According to Trading Economics, FDI increased by 26,710.80 PHP Million in Q3 of 2016. The average FDI between 2000 and 2016 was 40,681.25 PHP Million. FDI generally peaks between April and August and tends to fluctuate year to year. However, FDI has been steady since the regulatory reforms early in the 21st century. Please see Chapter 5 for more information on FDI and for forecasts for the future of FDI in the Philippines. [3]

Real Estate Market
Two years ago, global real estate consulting firm JLL recognized Metro Manila as one of its Top 30 Real Estate Investment Cities in the world in its Commercial Attraction Index. According to JLL, the key qualities that make a city successful in real estate are sustainable momentum, adaptability, and the ability to reinvent itself. Metro Manila definitely possesses these qualities. [4]

By 2030, JLL predicts that Manila will be one of the world’s top 18 cities in terms of GDP. Metro Manila stands alongside other popular cities with impressive momentum such as Jakarta (Indonesia) and Istanbul (Turkey).

  1. Trading Economics 'Philippines Foreign Direct Investment '
  2. Business Inquirer 'OFW remittances hit record high in 2016'
  3. Trading Economics 'Philippines Foreign Direct Investment'
  4. JLL City Clustering Tool

Chapter 2:
2015 vs 2016 Trends

Although 2016 may be described as a somewhat tumultuous year politically for the Philippines, everything seems to be working fine on the economic front. According to the Philippine Statistical Authority (PSA), the country’s gross domestic product (GDP) grew 6.8 percent in 2016, its fastest growth in the last three years. The Philippines also posted among the fastest GDP growths in Asia last year, along with China (6.7 percent) and Vietnam (6.2 percent).

In addition, the PSA reported that the country’s GDP grew 6.6 percent in Q4 of 2016. Although this was the slowest quarterly growth last year, it was higher than the 6.5 percent growth in reported in Q4 of 2015. The PSA cited manufacturing, trade, and real estate, renting, and business activities as the main drivers of the economy in Q4 2016.

According to Carlos Dominguez, Department of Finance Secretary, recent GDP growth rates gives the government more reason to push for the Comprehensive Tax Reform Program (CTRP), which would adjust the annual income tax rates. Studies have shown poor and middle-class Filipinos could stand to gain from the CTRP.

Philippine Real Estate in 2016

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Real Estate Developer Spending

SM Prime Holdings, Inc.
Reported 2016 Net Income: Php23.8 billion

Already one of the largest integrated property developers in Southeast Asia, SM Prime Holdings continues to cement its place among the top real estate developers in the Philippines by furthering innovative and sustainable lifestyles through the development of malls, residences, offices, hotels and convention centers.

In 2016, SM’s property holding firm saw its net income increase by 14 percent from a year earlier, driven by the expansion of its retail portfolio. In a press statement, SM Prime President Jeffrey Lim shared that “SM Prime sustained its overall performance in 2016 on account of focusing more on recurring income streams, complemented by the solid performance of the housing group.”

The residential group of SM Prime, comprised of SM Development Corporation (SMDC), Highlands Prime and Costa del Hamilo, among others, posted consolidated revenues of Php25.4 billion, which is up by 13 percent from the previous year. Upcoming premier property projects of SMDC include S Residences, Air Residences, Coast Residences, and Fame Residences. SM Prime is also expected to open seven new malls in 2017.

Ayala Land, Inc.
Reported 2016 Net Income: Php20.9 billion

Ayala Land, Inc. (ALI), the real estate subsidiary of Ayala Corporation, remains in the real estate forefront, with core businesses in strategic landbank management, residential development, shopping centers, corporate businesses, and hotels. Incorporated in 1988, ALI has since grown, going as far as buying an ownership stake in online fashion platform Zalora Philippines in February 2017.

ALI continued to progress with its 2020 growth plans by posting a net income of Php20.9 billion in 2016, a 19 percent increase from 2015. The developer launched Php61.5 billion worth of residential and office for sale products in 2016, via its five residential brands, Ayala Land Premier, Alveo, Avida, Amaia, and Bella Vita, with residential sales reportedly growing by 3 percent to Php108.00 billion.

The developer earmarked a capital expenditure of Php88 billion for 2017, Php3 billion more than in 2016. That year, ALI introduced two key mixed-use developments – One Ayala in Makati Central Business District (CBD) and the 17.5-hectare Gatewalk Central in Mandaue, Cebu. It also plans to complete seven shopping centers in 2017, with a total gross leasable space of 224,000 sqm.

Megaworld Corporation
Reported 2016 Net Income: Php9.27 billion (first 3 quarters)

Megaworld is well recognized as the “pioneer of the live-work-play-learn township concept in the country”. To date, the developer already has 21 integrated urban township developments, the largest of which are Twin Lakes in Tagaytay (1,200 hectares), Southwoods City in the boundaries of Cavite and Laguna (561 hectares), and Suntrust Ecotown in Cavite (350 hectares), to name a few.

Through a disclosure to the Philippine Stock Exchange (PSE), Megaworld announced that it intends to allocate Php60 billion for project expansions, 80 percent of which be spent expanding projects in its different townships around the country. The remaining 20 percent of the capital expenditure will reportedly be spent on land acquisition and investment properties.

Megaworld has said that it expects to make as much as Php20 billion in rental income, and have a total rental space inventory of more than 2.5 million square meters, by 2020. This will be bolstered launches of new office towers in Iloilo Business Park, Newport City, Eastwood City, Southwoods City and Las Pinas City; and new commercial centers in McKinley West, Boracay Newcoast, and Iloilo Business Park.

Vista Land & Lifescapes, Inc.
Reported 2016 Net Income: Php6.38 billion (first 3 quarters)

One of the leading homebuilders in the Philippines, Vista Land & Lifescapes (VLL) provides a wide range of residential products to customers from different income segments via its subsidiaries: Brittany, Crown Asia, Camella Homes, Communities Philippines, and Vista Residences. The developer is also has a hand in commercial properties, via its retail subsidiary Vista Malls.

In late 2016, it was reported that VLL would be spending allocating P18hp billion to build 10 shopping malls to add to the Vista Malls portfolio. Founder and CEO and Former Senator Manny Villar bared that to be built are seven Vista Malls and three (smaller) Vista Places. This after VLL acquired affiliate shopping mall developer Starmalls Inc., which place the former’s mall ownership at the time to 17 all over the country.

On the residential front, a notable project of VLL’s is the Php2.2-billion Costa Vista Boracay, which is envisioned to become a prime destination within the upscale portion of the white sand beach. Through condo arm Vista Residences, the 6.5-hectare mixed-use development is designed to six mid-rise residential towers, private villas, a hotel, a convention center and a commercial quarter.

Robinsons Land Corporation
Reported 2016 Net Income: Php6.15 billion

Robinsons Land Corporation (RLC) is widely known for its retail real estate property developments, with 44 shopping malls built and currently operating its banner, spaces of which accounted for a great deal of the annual net income the developer earned between September 2015 to September 2016. Under its residential division, RLC has built 79 residential condominium buildings and other housing projects.

The developer has been one of the largest gainers in 2016, increasing its net income by almost eight percent from the year prior. RLC now parlays that growth to 2017, starting with setting a capital expenditure of Php16 billion for the year, 53 percent of which the developer reports will go to the development of new, and expansion of existing, malls, offices and hotels.

The real estate arm of conglomerate JG Summit Holdings Inc. continues its pursuit of also entering the real estate market of China. After acquiring an 8.5-hectare property, RLC is looking to building a 1,300-unit master-planned township project in the sub-provincial city Chengdu, which would be its first in the country. Domestically, RLC is strengthening its retail presence in the country by developing malls in Naga, Iligan, Ormoc, and Bataan, and expanding those in Antique and Butuan.

Visible Trends in the Real Estate Sector in 2016

Suburban Apartments and Townhouses

One of the most searched property types by Filipinos are apartments and townhouses, especially in suburban areas like Quezon City, Parañaque, and Las Piñas. These properties are very much in demand among renters, especially starting families. One of the reasons is that these property types provide much larger spaces (including parking space for multiple vehicles) than condos, yet they are more affordable than standalone houses.

To give would-be buyers and investors an example, three-bedroom door apartments in Parañaque average Php3.5 to Php4 million, or monthly rents of Php18,000 to Php25,000. On the other hand, townhouses in Quezon City can be had for as low as Php2.8 million to as high as Php17 million.

Residential Lots

Unlike high-rise condos, where a seemingly infinite number of units can be built on a relatively small plot of land, there is only a limited amount of land developers can convert into subdivisions or gated communities. This is the reason why there aren’t a lot of them within really prime locations in Metro Manila. This is also one of the reasons residential lots in these projects are highly sought-after as their values tend to appreciate quickly.

One example is Alabang West by Megaworld subsidiary Global-Estate Resorts Inc. (GERI), a gated enclave situated between the cities of Muntinlupa and Las Piñas. According to GERI, land values in the 62-hectare township surged 19 percent in the 11 months since its launch, from Php47,000 to Php56,000 per sqm. The company also announced that 80 percent of Alabang West’s 788 residential lots as of late 2015 have already been sold.

The same can be said for Ayala Land’s Vermosa project in the cities of Dasmariñas and Imus in Cavite. Within this estate is The Courtyards project, a high-end gated community where an average lot measures approximately 693 sqm. This low-density community, upon completion, will have about seven to eight lots per hectare.

Strata-titled Offices

Unlike offices intended for IT and business process outsourcing (BPO) firms, which are built and owned by real estate developers and rented to third-party companies, strata-titled offices can be bought by individual investors and buyers and have them rented out to companies. Many people liken them to residential condos (hence, the term “strata-titled”) as they are similarly owned and managed.

For property buyers looking to diversify their investment portfolios, strata-titled offices makes sense as there is currently a shortage of office space in Metro Manila, especially in the major business districts. This means that rental rates for offices in these areas are expected to increase over the next few years.

In addition, Colliers International said in its third quarter 2015 report that decreasing land-bank options in the Makati CBD, Bonifacio Global City (BGC), and Ortigas Center is also pushing capital values of office buildings upward.

Among strata-titled developments currently on the market include Alveo Financial Center along Ayala Avenue, which has 363 units and sells on average Php223,000 per sqm. Others include The Stiles in Circuit Makati, also by Alveo Land, and has 283 units, which sell for about Php198,000/sqm.

Also in Makati is Century Properties’ Century Spire. This 60-story, Daniel Libeskind-designed tower will rise in Century City and will have approximately 283 office units for sale. The average price is Php203,000/sqm.

Other strata-titled office towers for sale in Metro Manila include Capital House in BGC (Avida Land; 222 units; Php142,000/sqm); One World Place in BGC (Daiichi Properties; 283 units; Php136,000/sqm); and Parkway Corporate Center in Alabang (Filinvest Land; 390 units; Php168,000/sqm).

Townships Outside Metro Manila

With land values in Metro Manila becoming very expensive, property developers are looking further afield for their next big-ticket projects. Among these projects include Century Properties’ Azure North in San Fernando, Pampanga, where the company to plans to duplicate its success with the Azure project in Parañaque; and Ayala Land’s Alviera in Porac, Pampanga, and Vermosa in Laguna and Cavite.

These developers are banking on their previous success to push these projects forward and all look to perform well in 2016. Ayala Land, for example, will be spending Php70 billion over the next decade on its Vermosa project, which when completed will include office, retail, hotel, residential, and educational segment. In late 2014, Ayala Land Premier started marketing residential lots in The Courtyards section of Vermosa, and has since sold Php4 billion worth of inventory.

Upscale condos in the major CBDs

Metro Manila’s condo boom is far from over, but developers are holding back on heir new launches due to massive supply especially in the mid-market segment. This does not mean, however, that no opportunities are available in the condo market. On the contrary, high-end condos, especially larger ones, are expected to perform well both in capital appreciation and rental rates.

According to Colliers, condo vacancy rate is lowest for luxury condos in Makati, expected at 5 percent to the third quarter of 2016. This is due in part to Metro Manila’s leasing market, driven primarily by expats and the BPO sector. On the other hand, JLL reported that rents for Metro Manila luxury condos continue to grow, albeit moderately, on the back of strong demand from expatriate employees of MNCs.

How do agents advertise their property listings?
Source: Lamudi Brokers Survey 2016

Internet & Mobile Penetration

0%
of Filipinos
are active
internet users

Chapter 3:
Internet Penetration

As the internet takes over the planet, it is unsurprising that the Philippines’ internet landscape is changing rapidly. The country’s Internet penetration level is gradually growing and currently, stands at over 43.5%. [1] Between 2000 and 2015, the country’s internet penetration level went from 2% to over 42%. This is a dramatic increase, and the number of internet users is likely to have doubled from the figure of 23,259,726 (2010) to over 46,000,000 by the end of 2017.

A sharp increase in the usage of smartphones, especially cheaper Android devices has made a huge difference to the increase in internet penetration across the archipelago. As a result, increased usage of apps has made a huge wave in the marketing of products and services to those living in the Philippines. This is true across industries, from fashion brands to real estate services.

Lamudi conducted a survey back in 2014 which found that 88%of real estate brokers considered the internet to be used frequently during the house-hunting process. The survey also showed that about the same proportion of agents believed that the future of the industry was online. The survey also found that the internet is now the number one method used by real estate agents to advertise property.

In 2015, Lamudi conducted another survey among licensed real estate professionals. The survey found that 91% of surveyed professionals observed a significant increase in inquiries made online. In addition, 59% of the surveyed professionals cited an online listings platform as their most widely used online channel to advertise their property listings, while 18% of them cited social media platforms.

The Rise of Online Real Estate Portals

Back in the mid-2000s, real estate apps, sites, and portals didn’t really exist in the Philippines. Agents and house hunters relied on traditional media e.g. newspapers, magazines, printed classified ads, and broadcast media.

As internet usage has expanded, many agents have taken their property advertising away from paper classifieds and have moved online. Particularly in the Philippines, real estate agents can recognize the value of having a strong online presence, especially on widely used real estate apps and portals such as lamudi.ph.

Across industries, an increasing budget is being spent on digital marketing. As competitors get more and more skilled at search engine optimization, social media marketing, and other methods, the pressure is on to advertise with quality and care. This is why many agents opt for a strong presence on a pre-existing property listings platform where SEO and social media help is taken care of. When targeting house hunters in the Philippines, It’s important to understand online behavior and online preferences within the population. Successful digital marketing strategies can make a business, while social media outreach that has not been well thought through can turn out to be detrimental.

From a consumer perspective, house hunters now have all the information they need about a property at their fingertips. From seeing detailed images of prospective homes to contacting landlords or sellers quickly and easily, many Filipinos now prefer to look for property from the comfort of their own homes or on their mobile devices while on the move.

Virtual Reality Expo 2016

Lamudi hosted the Philippines’ first Virtual Reality Real Estate Expo in September this year and it was a massive success. The showcasing the most impressive properties in the country. The Expo took place on the weekend of September 3rd and September 4th and attracted huge crowds from all over the islands and beyond.

The future of buying and selling property is in being able to fully immerse oneself in the home that is being bought or sold through using technology. A high quality and fully interactive image in today’s world is worth its weight in gold in any business, especially in real estate. With VR, buyers are able to experience what it’s like to live in the property for sale. Armed only with a pair of VR goggles, investors can view properties and make investment decisions from the comfort of their own homes.

Virtual Reality (VR) is set to transform the face of the Real Estate market, just as it has in so many other sectors since VR goggles were first released. Lamudi is at the forefront of using this innovation. It is likely that VR technology will transform the property purchasing process more than ever before. Today’s buyers want more than static pictures, they want to be able to view properties within a 360° online environment either from their armchair at home or from a mobile device while they are on the move. This is now possible, and it is revolutionary. VR is likely to open up the market to international buyers and make home buying a faster and more efficient process. Since the country has been a recent location for one of the most exciting VR expos in the world, the Philippines is far ahead of many neighbouring countries.

  1. Internet Live Stats 'Philippines Internet Users'

Average real estate prices

0%
of survey respondents
live in a house, duplex,
townhouse or bungalow

Chapter 4:
Real Estate Prices

Albeit at a much slower pace, property prices, especially in Metro Manila, remain on an upward trajectory. Given the Philippine capital’s limited supply of land and skyrocketing prices, real estate developers are venturing out of the traditional business districts and even out of Metro Manila itself for their next big projects. Examples of these include Ayala Land’s Vermosa project in Cavite, Century Properties’ Azure North in San Fernando, Pampanga, and Megaworld Corporation’s Twin Lakes project between Tagaytay and Laurel, Batangas. In addition, newer townships and mixed-use projects have also been launched in Bacolod, Iloilo, Cebu, Davao, and Lapu-Lapu. These big-ticket projects are contributing positively to the housing markets where they are located, leading to higher prices of properties.

For this report, Lamudi Philippines analyzed price data from its approximately 60,000 property listings comprising condominiums, houses, townhouses, apartments, and foreclosed properties.

Metro Manila Condos in 2016

Condo for sale

Lamudi analysis shows that Makati and Taguig feature some of the Philippine capital’s most expensive condominiums in 2016. The average price of condos in Makati stood at approximately Php160,000 per square meter in 2016, followed by Taguig and Pasay, which boast average condo prices of Php135,900 and Php109,290 per square meter in 2016, respectively.

The majority of Makati’s condo listings are concentrated in the central business district (Legaspi and Salcedo Villages), Rockwell Center, and Century City. However, in recent years, the city’s fringe areas have also seen developments primarily due to the lack of developable land in the CBD. These fringe areas include Malugay Street, San Antonio Village, and Chino Roces Avenue.

Most of Taguig’s condo listings are located in the Bonifacio Global City, McKinley Hill, and Acacia Estates in Barangay Ususan. On the other hand, Pasay’s condos are situated in Newport City in Villamor and the Mall of Asia Complex in the Bay City.

Average price of condo per sqm, based on Lamudi’s 2016 listings
CITY Ave. Condo Price/sqm (2016)
Makati 160,345.25
Taguig 135,977.17
Pasay 109,293.55
Mandaluyong 96,905.19
San Juan 92,154.85
Manila 87,651.88
Muntinlupa 83,448.65
Quezon City 82,224.21
Pasig 77,351.76
Marikina 74,959.62
Paranaque 68,094.51
Valenzuela 58,936.21
Las Pinas 53,309.00
Caloocan 50,094.54

At the other end of the price spectrum is Caloocan and Las Piñas, where one can find some of Metro Manila’s most affordable condos on a per square meter basis. The average price of condos in Caloocan stood at Php50,094 per square meter in 2016, while those in Las Pinas at Php53,309 per square meter.

Condo for rent

As expected, Makati and Taguig are two of Metro Manila’s most expensive condo rental markets. The average monthly rental rate of Makati condos stood at Php917 per sqm in 2017, while those in Taguig stood at Php894 per square meter. They are followed by Pasay (Php878/sqm), Mandaluyong (Php736/sqm), and Muntinlupa (Php699/sqm).

Average rent of condo per sqm, based on Lamudi’s 2016 listings
CITY Ave. Condo Rent/sqm (2016)
Makati 917.70
Taguig 894.35
Pasay 878.87
Mandaluyong 736.13
Muntinlupa 699.38
Marikina 698.91
Paranaque 643.73
Pasig 615.72
Quezon City 613.98
Manila 610.31
Las Pinas 478.26
San Juan 470.58

Metro Manila Houses in 2016

The price of houses behaves in a similar way to condos. As expected, homes in the more popular areas such as Makati, Muntinlupa, and Taguig are more expensive, due to both scarcities of supply and location. Those in Caloocan, Navotas, and Valenzuela are much cheaper. The cities of Paranaque and Quezon, on the other hand, boast numerous subdivisions or gated communities that range from very high-end to affordable. For this reason, these areas can be considered as mid-end markets.

Makati stands as the most expensive housing market in the Philippines; house and lots for sale in the city have an average price of Php207 million. It should be noted that the city is the location of some of the country’s most exclusive enclaves, including Forbes Park, Dasmarinas Village, Urdaneta Village, San Lorenzo Village, Bel-Air Village, and Magallanes Village. It is followed by Muntinlupa, home to Ayala Alabang; Taguig (McKinley Hill Village), and San Juan (Greenhills Village).

Average price of house and lots in Metro Manila, based on Lamudi’s 2016 listings
CITY Ave. House Price (2016)
Makati 207,191,558.15
Muntinlupa 58,323,719.16
Taguig 34,351,761.87
San Juan 24,999,737.29
Pasig 19,736,188.31
Mandaluyong 17,854,390.71
Quezon City 13,791,143.20
Paranaque 12,274,171.10
Pasay 9,962,208.05
Manila 8,751,473.83
Marikina 6,353,809.97
Las Pinas 6,278,618.81
Valenzuela 3,714,233.75
Navotas 3,201,170.00
Caloocan 2,929,928.37

What is your reason for moving house or apartment?
Source: Lamudi Customers Survey 2016

Foreign Direct Investments

FDI up 40.7%

in 2016

Economic Growth Rate
Source: Worldbank

Chapter 5:
Economic Outlook

Economically, the Philippines did better in 2016 than in the previous year. Growth hit 6.8%, making 2016 a more successful year than 2015 when the economy only expanded by 5.9%. [1] Strong economic fundamentals have always been heralded as the driver of the country’s growth. These fundamentals include strong private consumption, annually increasing government spending, especially on public infrastructure, a growing business process outsourcing (BPO) industry, and record-level OFW remittances.

These days, the economy is also benefiting from a trend where the number of working-age Filipinos outnumber those who are unable to work either due to being underage or past retirement age. These working Filipinos have strong spending power and thus contribute to boosting the nation’s economy.

It cannot be denied that 2016 was a challenging year in terms of the global economic environment. According to Heritage.org, one of the main current challenges for the Philippines is encouraging entrepreneurial dynamism in the country’s population. [2] Starting a business in the Philippines can seem like a daunting prospect for many amidst uncertainty surrounding legal procedures and a fragile implementation of property rights. Wealth is not spread very evenly and it is mainly concentrated within certain families and within large corporations. As regulatory measures improve and subsidies are made more readily available to new businesses, the entrepreneurial environment should gain momentum.

The economy of the Philippines relies very heavily on trade. According to Heritage (Ibid), imports and exports make up 61% of the country’s GDP. The Philippines’ financial industry is strong but lifting certain restrictions on other sectors while boosting regulatory bodies would strengthen the economy as a whole.

Upcoming Infrastructure Projects

Immediately after assuming office in June 2016, the Philippines’ new president, President Duterte announced a number of plans to upgrade the country’s infrastructure. [3] Among other projects, the president announced plans to invest PHP 37.8 billion in Metro Manila’s bus network. He also announced that he would invest PHP 2.4 billion in Leyte’s Eastern Visayas Regional Medical Center, and PHP 7.8 billion in work on New Bohol Airport, including plans to make the project more sustainable. Air traffic control and airport maintenance are a major concern for the current administration. Plans to drastically improve airport safety and security are a high priority for the government. PHP 74.6 billion will be invested in Naia Airport. The planned construction project aims to boost connectivity between the terminals and Metro Manila, both road and rail. This project, named the BRT project, is due to be completed in 2020.

FDI in Real Estate

Foreign direct investment in the Philippines’ real estate market has traditionally been considerably lower than in neighboring countries. There are a number of reasons for this trend, most importantly, the heavy restrictions on foreign nationals purchasing property in the Philippines. Foreign nationals can purchase condo units on the archipelago, but they are not permitted to purchase land. As long as 60% of the owners of a condominium are Filipino, 40% of the building can be owned by foreigners. This limitation is not encouraging to foreign investors and therefore, FDI in real estate is suppressed.

In spite of the restrictions governing real estate ownership, the government of the Philippines is clearly aware of the importance of heightening foreign direct investment in the country more broadly. The country’s potential in terms of attracting foreign investors is now being recognized, partly thanks to recent data which has emerged. The country is already doing better than its neighbours, Myanmar and Vietnam. According to the United Nations Conference on Trade and Development, the archipelago is forecast to be one of the world’s top 15 FDI destinations in the next few years. To make this predicted success come into fruition, the Philippines’ government will need to make some changes to attract medium term investors.

Back in July 2016, the Philippines’ Secretary of the Department of Trade and Industry announced the government’s plans to boost FDI before 2022 (the end of President Duterte’s presidency”). [4] The government intends to update the foreign investment negative list (FINL), opening up options for foreign investment through removing barriers preventing trade deals in certain sectors. Although real estate will not be included in this reform just yet, by removing barriers to foreign trade deals, the government is showing more signs of openness when it comes to FDI in general. Perhaps reforms to the laws governing real estate ownership are on the horizon thus attracting more foreign investors to the sector. Even if not, other incentives are likely to have a positive impact on attracting foreign buyers in the real estate industry. One such incentive includes tax reforms to lower both corporate and personal taxes (Ibid). Investors from overseas may consider purchasing on the islands thanks to incentives such as this.

  1. Trading Economics 'Philippines GDP Growth Rate'
  2. Heritage '2017 Index of Economic Freedom'
  3. Business Inquirer 'Duterte OKs P171-B infra projects'
  4. Oxford Business Group 'Philippines in bid to boost FDI'

Lamudi Demographics

Chapter 6:
Demographics

The Philippines has witnessed some major shifts in terms of demographics in real estate over the past decade. As the country becomes increasingly developed, urbanization is on the rise and the spending power of the young professional generation is greater than ever. As a result of increased urbanization, space within the country’s major cities is rather limited these days. Consequently, vertical living has boomed and condominiums are literally rising by the day.

With a population of over 2.7 million, Quezon City is the most populous area in the country. Nearby Manila, is the second most populous city, with nearly 1.7 million inhabitants. Who is buying property in these areas? What are the demographic trends?

Which groups buy and rent in the Philippines?

Lamudi analyzed data from users in Metro Manila who searched for condominium units in the city. The great majority of those searching for condos (65%) are female, while (35%) are male (both in the rental and the buying category). The majority of these users (40.1%) are between the ages of 25 and 34. This is striking evidence that young professionals have acquired impressive spending power and are looking for their own homes. Only 3.07% of searchers are over the age of 65. However, the 55-64 category made up 19% of searches, followed by the 35-44 category (17%).

When do most people look for property online?

The most popular day for property hunting in the Philippines is on Mondays. Data from Lamudi indicates that users are much more likely to search for property during the working week than at the weekend. This trend may exist because users search while they are on their lunch break at work or when they are on their way home from work. Indeed, searches peak between 1 pm and 11 pm in the evening.

Which cities are the most popular?

Makati is the most popular area among Lamudi users, followed by Taguig, and Quezon City. Close to Makati, Fort Bonifacio is highly sought after.

Which buildings are the most expensive and which are the most reasonable?

Trump Tower in Makati is home to the most expensive condominium units in the city. Alphaland Makati Place follows close behind, followed by Raffles Residences. The most reasonable condo units in Makati can be found at Classica Tower and Condominiums. In Taguig, the most expensive condo units are located in Avida Towers and the least expensive are located in Rainbow Ridge Condominium.

Number of Properties on
Lamudi Philippines

Total Number:

Chapter 7:
Onsite Trends

Lamudi Philippines is constantly in the process of analysing online search data for the purpose of monitoring the market and user needs. Examining the trends for the most searched areas and property types in the country are central to understanding the moving parts of the Philippines’ real estate market.

In accordance with trends from previous years, Quezon City is the most searched area among Lamudi users. Makati is the second most popular city among searchers. The popularity of Pasig and Taguig remains somewhat suppressed. Quarter on quarter, search traffic volume is growing. Metro Manila is the central focus of this growth.
Property Types
Buyers favor houses over condo units in the majority of cities in the Philippines

Although vertical living is still growing in popularity, the majority of buyer searches are centered around houses and lots. However, the preference for houses very much depends on the city in question.
In Quezon City, those looking to purchase property in 2016 were focused on houses (over 50% of searches). Meanwhile, in Makati, condos are still the most sought after (over 40%). Areas, where houses are the most popular, include Las Pinas, Muntinlupa, Pateros, and San Juan. Areas, where condos are more sought after among buyers, include Manila, Taguig, Malabon, and Mandaluyong.
We are noticing that mixed-use developments are growing in popularity within the major cities of the Philippines. Such mixed-use developments may be made up of residential apartments, office space, hotel rooms, gyms, spas, restaurants, and other lifestyle facilities. This trend could be a result of the impressive growth in tourism observed in 2016. The country almost reached its target of 5 million tourist visits in 2016. However, other age-related factors may also contribute to this trend. Millennials with greater spending power form the largest proportion of users seeking accommodation in mixed-use complexes due to their lifestyle-oriented consumer habits.
Conclusions

Because of the tendency to rent rather than purchase condominium units, the majority of users looking to purchase property via online portals are seeking houses. This trend is particularly observable among users aged 35+. The most popular area is Quezon City.

How government regulations are affecting
the property market

As more non-Filipinos show interest in investing in real estate,
foreign ownership continues to be debated.

Chapter 8:
The Change in Laws

Perhaps the most common question that an international investor of property in the Philippines asks is: are foreigners allowed to own land in the country?

This question is quite timely as an increasing number of foreign nationals are showing interest in Philippine real estate. In 2014, local news website GMA News Online reported that up to 20 percent of pre-selling luxury condos from local developer Ayala Land Premier go to foreign buyers, which includes a mix of both overseas Filipinos and foreign nationals.

The relative affordability of Metro Manila’s luxury condos compared to places like Singapore, Hong Kong, and Tokyo is perhaps one of the reasons foreign buyers are flocking to the Philippines.

In fact, in 2014 the Philippine capital was ranked fourth out of 23 Asian cities in terms of its city investment prospects, according to a survey by the U.S.-based Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC). [1] Metro Manila closely follows Tokyo, Shanghai, and Jakarta, which occupied the top three positions for 2014. Although Metro Manila slipped to eighth position in the 2015 and 2016 reports, the Philippine capital was rated “fair” in both investment and development prospect by ULI and PwC. [2] [3]

But despite this, property ownership here remains highly regulated. Although the Philippines is not the only Asian country that prohibits foreigners from owning real property, it is arguably one of the most restrictive locations for foreign investors.

Foreign Ownership of Real Property

The Philippine constitution explicitly states that Filipino citizens are entitled to own or acquire land in the country. Foreign nationals, on the other hand, are not allowed to own land, although there are exceptions, detailed below:

  • Acquisition before the 1935 constitution
  • Purchase of not more than 40 percent interest in a condominium project
  • Purchase by a former natural-born Filipino citizen subject to the limitations prescribed by law. Natural-born Filipinos who acquired foreign citizenship are entitled to own up to 1,000 sqm of residential land, and one hectare of agricultural or farm land
  • Filipinos who are married to aliens who retain their Filipino citizenship, unless by their act or omission they have renounced their Filipino citizenship

On the other hand, if they are Filipino investors and want to acquire property on a leasehold basis, they can do so but only for a period of 50 years, which may be extended for another 25 years. Individual foreign buyers, in contrast, may lease land for a maximum period of 25 years only, which can be extended for another 25 years.

There is another legal way for foreigners to own land, and that is through a duly registered company. However, the company must be at least 60 percent Filipino owned and there must be at least five people sitting on its board.

In addition, the Condominium Act of the Philippines (RA 4726) allows foreigners to acquire condominium units and shares in condominium corporations up to not more than 40 percent of the total and outstanding capital stock of a Filipino-owned or controlled condominium corporation. There are also some single-detached homes and townhouses in the Philippines with condominium titles; therefore, a foreign national can technically acquire one.

If married to a Filipino national, a foreigner can acquire and own a property. However, the foreign spouse’s name cannot be on the title but can be on the contract to buy the property. In the event of death of the Filipino spouse, the foreign spouse is allowed a reasonable amount of time to dispose of the property and collect the proceeds, or the property will pass to any Filipino heirs or relatives.

Further, any natural-born Filipino citizen who has lost his citizenship may still own private land in the Philippines up to a maximum area of 5,000 square meters in the case of rural land. In the case of married couples, the total area that both couples are allowed to purchase should not exceed the maximum area mentioned above.

Former natural-born Filipinos who are now naturalized citizens of another country can buy and register, under their own name, land in the Philippines but limited in area. However, those who avail of the Dual Citizenship Law in the Philippines can buy as much as any other Filipino citizen. Under Philippines Dual Citizenship Law of 2003 (RA 9225), former Filipinos who became naturalized citizens of foreign countries are deemed not to have lost their Philippine citizenship, thus enabling them to enjoy all the rights and privileges of a Filipino regarding land ownership.

Steps to Gaining Dual Citizenship

If you are in the Philippines, file a Petition for Dual Citizenship and Issuance of Identification Certificate (IC) pursuant to RA 9225 at the Bureau of Immigration (BI) and for the cancellation of your alien certificate of registration.
Those who are not BI-registered and based overseas should file the petition at the nearest embassy or consulate.

Future Directions

According to Charlie Gorayeb, former national president of the Chamber of Real Estate and Builders’ Association (CREBA), some countries were quick to realize the importance of foreign investors in fueling local economic growth. Two—Malaysia and Thailand—have been specifically liberal when it comes to foreign ownership. Unsurprisingly, in 2013 alone Malaysia attracted US$12 billion of FDI.

Many believe that the real estate market will benefit if some of the restrictions imposed on foreigners are lifted. In an interview with Lamudi, David Leechiu, country head and international director of global estate consultancy firm JLL Philippines, said allowing foreign ownership was another way of expanding the demand within the market.

The upcoming ASEAN integration, too, is expected to put pressure on the local real estate industry to open up. For the Philippines to remain competitive on a regional scale, relevant market reforms must be put in place, such as lifting of foreign ownership restrictions. The local real estate market has also been pushing for a law that will consolidate the function of the government’s major shelter agencies to address the needs of both consumers and developers. In fact, a bill proposing the creation of the Department of Housing and Urban Development has already been approved by the Senate in the 15th Congress, but was not acted upon by the House of Representatives. In 2013, Senator Loren Legarda revived the proposed bill in an effort to address the country’s four million housing backlog.

However, the privilege granted to foreigners to purchase property, according to Gorayeb, must not come without corresponding mechanisms of control. For example, in order to protect the Philippines' natural resources, lands that can be acquired by foreigners should be limited to those classified as alienable or disposable. He adds that agricultural lands purchased by foreigners should remain as such and, to channel investment to poorer areas, foreign ownership should be encouraged in underdeveloped locations to spur growth.

Footnotes
[1] Urban Land Institute and PricewaterhouseCoopers - Emerging Trends in Real Estate - Asia Pacific 2014
[2] Urban Land Institute and PricewaterhouseCoopers - Emerging Trends in Real Estate - Asia Pacific 2015
[3] Urban Land Institute and PricewaterhouseCoopers - Emerging Trends in Real Estate - Asia Pacific 2016

Laws influencing real estate

Renting versus Buying

0%
of survey respondents
use online property portals
to find real estate

Rent
Sale

Chapter 9:
Renting versus Buying

Renting - flexibility over stability

Over the past decade, the living and purchasing habits of citizens in the Philippines has been changing. In contrast to trends in most other countries, the Philippines’ younger generation now has greater purchasing power than ever before. On the other hand, while previous generations were interested in settling down quickly and were likely to remain in the same company for decades, the younger generation is more dynamic. These days, young professionals residing in the Philippines are unlikely to spend their entire career within one firm. For many, their careers will involve travelling and working in different cities, even abroad. Given these circumstances, it is unsurprising that modern day upper middle-class property hunters in the Philippines are initially more inclined to rent than to buy, opting to purchase later in life. Bhavna Suresh, founder and managing director of Lamudi in the Philippines, sums this up perfectly - “for the younger generation, in particular, renting allows flexibility, less commitment, and less investment than making the big decision of buying a property”. Many young residents are put off by the additional costs and responsibilities which are associated with owning property. Consequently, we have found that over two-thirds of Lamudi users on the archipelago are more interested in renting than buying.

Younger property seekers are renting, while older property seekers aspire to buy

According to data gathered over the past 3 years, only 31% of Lamudi users in the Philippines are looking to buy. This figure is lower than one would expect from a country in SE Asia. However, when you take into consideration the fact that the majority of Lamudi users (40%) are between the ages of 25 and 34, this figure seems less surprising.

Type of home and tendency to purchase

A bias towards renting in the Philippines is not a new phenomenon. Traditionally, the Philippines has been a market that was predominantly geared towards families renting their homes, particularly in the low-middle income bracket. The main reason for this has been that many low-middle income families face difficulty in obtaining a home loan. While individuals in this category are typically more interested in owning property and being settled than young professionals who are earning more, it is more challenging for them to do so because of financing difficulties. It is hoped that the government will put in place schemes to make financing easier for low income families.

Those in the middle income bracket are likely to find it easier to purchase homes in the short-medium term since the market is shifting towards the middle income budget more than the low income and luxury budget. In terms of the high end market, wealthy Filipinos with the ability and the desire to purchase luxury property are likely to do so. Some of these homeowners will choose to live in their property, raising a family in their late 30s and early 40s. However, many will buy to let, renting out their luxury property to overseas nationals who are currently prevented from purchasing land in the Philippines. This trend may explain why 95% of Lamudi users looking to purchase homes are searching for houses rather than condo units. In the rental market, condos are more popular. This trend is likely to be explained by the fact that condos tend to be closer to central business districts (e.g. in Metro Manila) and younger generation renters (under 35) are seeking convenient crash pads which are close to the office.

Chapter Sustainability and Affordable Housing

5.7 million unit backlog
of affordable housing

Chapter 10:
Chapter Sustainability and Affordable Housing

The Housing Backlog
As the real estate market grows and becomes increasingly popular, especially among foreign investors, local Filipinos are concerned about the availability of affordable housing on the archipelago. The housing backlog that has emerged in the Philippines is a cause for concern on the islands. According to a recent report, “at least 2,600 homes will have to be built every day over the next six years” to tackle the 5.7 million unit backlog before the end of this presidential term. Of course, this would be an impossible feat. However, the figure goes a long way in highlighted a major concern for the industry. [1]

The main issue facing Filipinos is the lack of low cost and social housing aimed at those who can’t afford the high prices that land in the Philippines is commanding these days. As the population increases in size, the cost of living increases, and incomes don’t increase with the rising expenditures, finding an affordable home is becoming a great challenge.

Who can help?
While the situation seems insurmountable at times, the government has been coming up with a variety of suggestions in an attempt to help quell the backlog. These suggestions include potentially providing developers with tax breaks which may entice them to building large social housing projects (ibid). Of course, real estate developers are in the business to make money. The majority of developers are interested in projects which will allow them to maximize their profit. Low-cost housing projects are usually considered to be less worthwhile due to lower perceived profitability. However, if the government can attract developers with schemes such as Income Tax Holidays, it is likely that developers will be more likely to take on projects which are outside of their usual sphere.

Meanwhile, private companies such as Century Properties are doing their bit to increase the number of affordable units in the Philippines. Century Properties recently partnered with global business enterprise Mitsubishi Corporation to develop horizontal housing units in Cavite that are geared toward first-time homebuyers. The partners secured a 26-hectare property in Tanza, Cavite and are developing around 4,000 affordable homes. This project is Century’s initial foray into affordable housing, and it is hoped that other developers will follow suit. One way of cutting costs for developers, further making a project more likely to be profitable is by making homes less expensive to build. New technologies are being developed all the time to make low-cost, high-quality construction materials a reality. This new technology includes specialized new materials, from light steel frames to high-resistance steel meshes.

Three years ago, the National Housing Authority started an accreditation program called “Accreditation of Indigenous Technologies for Housing”. This program is destined for companies who develop technologies that can reduce the overall construction time and cost of building homes, especially affordable housing. Eight companies have already been accredited, and more companies are expected to join them in the near future. Developers who are interested in both getting involved in low-cost home construction, as well as a profitable new way of engaging in corporate social responsibility, are likely to adopt such technology for new homes in the Philippines.

Improving Access to Finance for Prospective Homebuyers
In addition to the housing backlog, many prospective homebuyers are facing financial difficulty meaning that they do not have access to home loans. Being approved for a home loan is currently an enigma for many in the Philippines. This is because mortgages are currently hard for the average local wage earner to access in the country. According to Ricky Celis, the Chief Executive Officer of Ayala subsidiary Amaia Land, “The Philippine government needs to generate and mobilize funds for end-user financing, [to] reinforce what was a predominantly Pag-IBIG Fund-dependent sector.” Merely subsidizing loan interest rates is not enough, according to Atty. Ryan Christopher Tan, president of Organization for Socialized Housing Developers of the Philippines. In a recent interview, he expressed the view that “We’re not yet at the level where the government is spending a fractional portion of our gross domestic product on housing for the poor”. In order for the Philippines’ real estate sector to prosper to its full extent, this has to change.

[1] Business Inquirer 'Low-cost housing backlog swells to 5.7M units'

Saving Energy at home
Solar Panel Systems
Wind Power Systems
Unplug Electrical Devices
Water Efficient Appliances
LED Light Bulbs
Thermostat

Luxury Property Market

"For a condo to be
considered luxury,
it must offer much more
than a high price tag.”

Manila's
luxury property
market is highly
sought-after

Chapter 11:
Luxury Property Market

Luxury property in the Philippines has been growing in popularity over the past 7 years, particularly in Metro Manila. Savills’ local associate firm KMC MAG Group (Metro Manila Property Outlook, 2015) expressed that although demand for luxury residential homes is still very healthy, the market is beginning to shift towards middle-income property. He confirmed that this will help sustain overall market growth in the long term. Most of the demand for luxury homes comes from overseas foreign workers and young professionals in the business process outsourcing sector. This is mainly because these groups have the most purchasing power.

In spite of the emerging shift towards middle-income property, the archipelago’s luxury property market is far from waning. Luxury homes are still in high demand and many gated complexes in the capital can reach prices that exceed Php 1 billion. Trump Tower, Alphaland, Raffles, Park Terraces, and Amorsolo Square rank among the most luxurious and costly complexes in the country. These high rise condominiums are attracting high net worth investors from all over the globe. Indeed, the presence of such phenomenal works of architecture are contributing to the Philippines’ status as a highly competitive country, not just in Asia, but all over the world.

Prices of luxury condos are likely to keep rising in the medium to long term, especially as the country becomes increasingly popular with foreign business people and tourists with high levels of disposable income.

The Market

The majority of luxury properties are centered in Metro Manila. Makati and Taguig are the most sought after areas and there is a plethora of high-end gated communities all over Mandaluyong, San Juan, Muntinlup, and Quezon City. In other areas of the Philippines, one can find properties in Tagaytay, Baguio, and Cebu for over Php 20 million.

According to Chris Wells, a real estate agent working for Colliers International, in order “for a condo to be considered luxury, it must offer much more than a high price tag.” Because space is lacking in the major cities of the Philippines, properties that really aim to be deserving of the “luxury” label must go one step further. Whether it’s spectacular views, the addition of state of the art technology, multiple terraces with hot tubs, multiple levels, or all of these things, the extra mile is what counts. Luxury home buyers want the best location, high ceilings, privacy, large entertaining spaces, and most importantly of all, heaps of unique character. Lamudi’s luxury property listings in the Philippines focus on high-quality luxury condominiums and single-family homes.

Chapter 12:
Interview

What are the biggest challenges for the real estate market in Metro Manila in 2017?

Let’s start with real estate in general. I believe the biggest challenges that our market will face are due to infrastructure or the lack thereof. So accessibility is really important particularly for residential projects that aren’t in Metro Manila. Commute times will continue to increase before it gets better. And that potentially limits the sale take up if the infrastructure doesn’t catch up.

In terms of commercial real estate, there are so many things that the Philippines is facing like the Duterte and the Trump effect, which has slightly caused some companies to wait and see. So they’ve pushed back decision-making whether they are entering the Philippines or not. But otherwise, the companies that are here are expanding and expanding quite rapidly. There have also been some other recent developments such as a lot of the gaming companies that have set up shop here. They’ve taken up a significant amount of the office space recently and now PEZA [Philippine Economic Zone Authority] is questioning whether they should be allowed in PEZA facilities or only BPO and call centers should be allowed on those. So that is causing some uncertainty and it’s both a threat and an opportunity for landlords based on which way they want to go with it. But interesting times for sure.

What are the biggest opportunities in the local property sector?

I still believe in the high-end or premium residential. There are a lot of opportunities and still interest rates haven’t moved yet. If you put your money in a bank, you are not going to earn very much. If you put your money into real estate, it is a hard asset and you get some yield plus some capital appreciation, so it is still looking like a very good investment.

The Philippine economy posted growth of 6.8% in 2016, the fastest growth in the last three years. How has this affected the local real estate market?

Due to the recent Q1 GDP announcement that came out, I think it is around 6.4%, which is down from the previous quarter’s GDP [growth of 6.6%]. In terms of how this affects the real estate market, long-term macroeconomic fundamentals affect the real estate market [and] not short-term GDP growth figures per se. So I think what’s important to note is that average salaries are rising in the Philippines faster than almost any other country in Asia, which is creating a stronger middle class. And again 70% of our GDP is consumption-driven and so as the middle class will consume more goods, they will start to demand higher end-products and more luxury products so the economy is quite strong and I think any real estate developer needs to look a longer, ten-year look and not just quarterly or yearly figures to base their decisions on. They need to look at the macroeconomic fundamentals of the country, which is very strong and will be in the next 10 years.

What is the trend that is driving the commercial and office space segment in the country?

The trend that has been driving the commercial and office space segment has been typically in the last 17 years is the BPO and KPO market, which is continuing to grow albeit a slightly slower pace. The OFW remittances also trickle into real estate particularly into retail so a lot of that money goes into food and beverages; thus, everyone is in malls and you can’t even get a space in restaurants now.

Manila is now an emerging international destination for global investors. What is driving this international interest in the local market?

Mega Manila—which I’d like to call it—is driving international investment basically because there is yield, there is capital appreciation, there is an incredible amount of pent-up demand for certain residential products more, so on the lower to mid-income segments and you’ve got a rapidly growing middle class. All great things and a very young, very youthful labor force. All very important macroeconomic fundamentals for long-term growth.

What more could be done to increase the supply of low-cost and affordable housing?

There are a lot of solutions that don’t cost taxpayers any money. There’s a ton of government land in Metro Manila that you can rent to developers or even for free. Let developers use a land for free for 25 or 50 years and you need to build affordable housing on it. Maybe it’s 22 to 30 square meter units. They are safe, they have backup power, and they would survive a Yolanda [typhoon]. We wouldn’t have to worry people getting flooded at their house or their houses burning down in some illegal settlements. It’s not that hard to do. I believe that the current president has probably got the will and strength to push something like that through. I guess politicians haven’t considered it very much. They think that taking people out of Metro Manila and sending them a hundred miles away is going to help and it’s not because the jobs are here [in Metro Manila]. We need people to live and walk to work and towards where they’re going to play. And then you don’t have to build infrastructure because if you want to build a subway it’s going to cost us $30 billion and we can’t afford that. Just build an affordable housing in and around the [central business districts] and traffic is solved.

Real estate nowadays is not only about finding a place to live; it is also a way to create wealth. Do you believe that property developers and real estate professionals are finding efficient ways to cater to the evolving needs of our market? If yes, what are they? Do you propose any improvements in this area?

I believe that anything really super efficient in the Philippines when it comes to any sort of real estate transactions, investments, or information is not there yet. The largest store of wealth in the world is in real estate, though. Manila has the majority of wealthy families and they all have some kind of real estate play to their portfolios. There’s a lot that can be done to improve the efficiency of real estate transactions and I think part of that comes down to valuations. Really knowing the true value of real estate makes it easier for banks to lend. Makes it faster for people to get a loan and not have to go a developer and shadow banking segments to get funds. So much of the sales are driven by small down payments and monthly amortizations and that is straight to the developer. The developers’ job is to develop real estate and it’s not to give loans. That’s the bank’s job and the banks are falling behind their duty to finance for the Philippines.

Technology, the Internet, and mobile phones are fast transforming consumer markets across the region. In what ways has the real estate market been impacted and where do you see major technology-driven impacts in the future?

It’s amazing that Internet penetration in the Philippines is very, very high, but when it comes to real estate I think the decision-makers are still a generation or two behind using technology to make these decisions. In other countries, a lot of the research is done about where to invest about which area or which project, but we haven’t seen the same here. We see online marketing, which is semi-effective for now. I mean it should be a lot more effective in the future but at the current state, it’s only partially utilized. Technology can play a part in real estate particularly in information in the pre-buying stage. It’s really important. People should list those properties online and look at portals or websites that show different kinds of transparent information with regards a property. People could find a property online but it’s not the case right now. A lot of people are still buying because they were given a brochure or saw a showroom in the mall and that’s impacting their buying decisions. It is still an emotional decision—you go to a showroom, they offer you a beverage, and they have a beautiful showroom that looks nothing like the unit that [the buyer] will get. They show a marketing video and they appeal to the emotion. That is still the driving factor not technology at this time. But when technology comes, it comes fast [and] it can present a monumental change when it comes.

Michael McCullough

Managing Director
KMC MAG Group (an international associate of Savills)

Outlook 2017

The best words to describe the outlook for the future of the Philippines this year are resilience and promise. The BPO market is flourishing, overseas workers’ remittances have been impressive, and the economy continues to grow in strength. Investors all over the archipelago are pre-committing to new builds. In spite of challenges e.g. a mismatch between the supply of luxury property and the supply of more affordable property, demand for property in the Philippines remains buoyant.

On the whole, vacancies are few and far between on the islands and the office sector is particularly strong. It is predicted that the BPO and office market will continue to thrive in 2017. However, is thought that high levels of overseas remittance growth will not be sustained to the same extent in the future. This is due to global economic issues, including difficulties in the Middle East – a region which employs many Filipino expatriates.

As an investment prospect, Manila’s placement has shifted dramatically in 2017. Data from PwC on historical investment prospect rankings shows that Manila has moved up the ranks from 8th place in 2015 and 2016 to the third most promising city for investment in the Asia-Pacific region. The Philippines’ capital city is now ahead of Sydney, Hong Kong, and Singapore in terms of investment promise. Manila is placing itself as a highly desirable city for real estate.

In order to attract more investors from abroad, the country needs to become more open to foreign capital entering the market. Measures and policy amendments relating to the real estate industry may take place under Duterte’s administration foreign investors may be attracted as a result. Although it is very unlikely that land ownership policy will change in the near future, measures may be put into place such as relaxation rules. These kinds of rules could give way to the emergence of REITs. Some investors are wary of the new policy that has accompanied the Duterte administration. However, the president has expressed his intentions to bolster the economy and boost investment in the nation so there is every reason to be positive.

According to a developer based in the Philippines who was interviewed by PwC, “The market is reaching a very heated point in the property cycle after several years of strong growth. The challenge developers will face next year is sourcing for land, so it will become harder to find new development opportunities”. Finding suitable land to build on is a challenge in any rapidly expanding global city. In recent years, developers in Metro Manila have been building up, making the skyline taller and taller and increasingly impressive. Other cities are also building up and up, including Makati and Cebu City.

What is the outlook for affordable property in 2017? All over Asia’s emerging markets, there is talk of government incentivized low-cost housing schemes to provide affordable homes to those who are suffering due to a backlog. Nothing has been announced for the Philippines yet, but the government is certainly aware of the problem and talks are expected to occur soon. Policy shifts are expected across sectors in the Philippines and this is influencing predictions for the year ahead.

The demographics of the Philippines bode well for the future. Young professionals with strong spending power will continue to drive the residential market forwards. Improved infrastructure development, increasing FDI, and solid economic fundamentals will attract businesses to the island's major cities thus boosting the office sector yet further. The country’s historic resilience in the face of global economic downturns implies that it is not easily knocked and that it will continue to thrive.