Philippine housing market growth to revive, says expertAlthough the pace of growth in the Philippines housing market has fallen recently, it is set to pick up again, as demand for high-quality accommodation grows, says JLL’s research chief
Growth in the Philippines residential market is set to pick up as the economy improves and offshore demand increases for high-quality accommodation, says a leading market commentator.
In recent months, the number of condo development launches has fallen, with some claiming it spelled start of a crash, but it is actually an indication of how the market self-regulates, according to Claro Cordero Jr., Head of Research, Consulting & Valuation Advisory for JLL in the Philippines, and growth is likely to return.
“While the growth forecast for the remainder of the year remains weaker than in the preceding years, positive growth is likely to be sustained by the continuous government spending on rehabilitation efforts in typhoon Haiyan-devastated areas, as well as big-ticket infrastructure projects. Barring any major externalities, growth is likely to come back in the succeeding quarters.”
His comments come after JLL country head David Leechiu forecast that that real estate sector would experience massive growth and could reach US$300billion by 2031, compared to US$48billion in 2011.
Despite that, the Philippines would still account for a tiny fraction of the global pie, moving from 0.2% in 2011 to possibly 0.3% in 2031.
By then, the market in China would account for US$26.4trillion, followed by India at $5.5trillion, with Asia-Pacific gaining almost half (48.8%) or US$44.94 trillion of the global real estate market, from 27% in 2011.
“The sentiment to invest money in real estate is very strong all over the world,” Mr Leechiu says.
An increase in the foreign ownership cap in corporations, from 40%-50%, and increasing the leasehold terms from 50 years (with a 25-year optional renewal) to 80-90 years are part of “necessary perquisites” for the country to increase real estate and other investment.
There is also a need to provide “credible and sensible” master planning to attract foreigners, he says.
Claro Cordero Jr. says talk of a property bubble in the Philippines, particularly in the residential market has been circulating since the 2008 Global Financial Crisis.
“To some, the exuberant residential market with its large number of new launches in recent years has been supported by the speculative buying as a result of the inflow of hot money into the system,” he admits.
“In reality, however, demand for accommodation in Metro Manila has been steadily rising, with an estimated housing backlog amounting to some 58,000 units annually, on average. The general improvement in income, driven by steadily growing remittances from overseas Filipinos and the growth of the offshoring & outsourcing sector, has further supported this growth in demand for high-quality accommodation.”
The growth of the residential market has been curtailed by excessive interest rates, as developers dominate the financing market and passed on the additional risks associated with property development to the buyers, but as commercial banks have offered more flexible financing options at lower rates, the demand for accommodation has risen, he says.