The Philippine real estate industry heads into 2019 with the expectation of further growth. There may be challenges, but various factors are set to drive the sector to new heights.

The Philippines’ economic growth slowed down in the first nine months of 2018, but the real estate sector remained resilient, driven by the record-high demand and supply for residential and office properties.

Heading into 2019, the Philippine property sector is set to grow further, buoyed by various factors. The future of the industry looks bright for the new year, not just in Metro Manila but also beyond it.

A review of the Philippine property sector of 2018

By the start of 2018, there were concerns that a real estate bubble was growing in the Philippines, due to the rising prices and supply of properties, according to Asia Property HQ. For example, there was a 10.4 percent year-over-year price increase for three-bedroom Makati condominiums in 2017, compared to 9.95 percent in 2016. Overall, prices increased by 5.7 percent on average across the Philippines in 2017, fueled by an 8.8 percent increase in residential properties across the National Capital Region.

However, by Q1, the supply had already decreased significantly. According to Colliers International Philippines, the number of new housing units declined to 12,700 per quarter, from 27,000 per quarter, with vacancy rates improving over H1. In Metro Manila, one of the key factors that closed the supply gap was the high demand from expats, local professionals, and Chinese investors.

The combination of technological and demographic trends has resulted in developers and customers implementing flexibility in their strategies for real estate in 2018, Business Mirror reported, citing Eric Manuel of Arch Capital Management and the Asian Institute of Management. Flexibility will also be key for the Philippine property sector in 2019, according to Colliers, echoing Manuel’s statement that companies will have to exhibit agility and the ability to adapt this year to be able to attract top talent and acquire the most market share.

Flexibility: The ‘name of the game’ in 2019

Flexibility is expected to be “the name of the game” for the property market of the Philippines 2019, Colliers wrote in its Top 10 Forecast for 2019 report.

For office properties, Colliers expects an additional supply of about 1 million square meters and a net take-up of 900,000 square meters in 2019, resulting in 5.3 percent of vacancy by the end of the year. The strong demand and evolving preferences of tenants are pushing for the creation of flexible workspaces, but with the projection of tight vacancy into 2019, Colliers expects rental rates to grow by about 9 percent this year.

Meanwhile, for residential properties, Colliers expects the delivery of 15,100 new units within the year, with almost half in the Bay Area. The real estate services and investment management company sees vacancies in the secondary market falling to 11 percent while forecasting lease rates to remain flat. Colliers also noted that residential developers are showing flexibility in adjusting their projects to cater to the employees of Chinese offshore gaming companies, and to local professionals.

Colliers forecasts the completion of around 200,000 square meters of new space for the industry’s retail segment this year. However, Colliers believes that vacancy will remain the same at 8.5 percent, as mall operators will continue to become more open to foreign tenants in the F&B and home furnishing businesses. This will redefine retail space absorption this year, while lease rates are expected to increase by about 1.5 percent in 2019.

The Philippine government looks to spend about 6.5 percent of the country’s GDP on infrastructure this year. Colliers encourages developers to continue tapping into the demand created by the Philippine market’s peculiarities and to push for the timely completion of infrastructure projects. These projects, which will form the foundation for the Philippine real estate sector’s 2019, will also dictate the strategies of developers.

The Philippine real estate sector beyond Metro Manila

The expected growth of the Philippine real estate market is not confined within the proverbial walls of Metro Manila though. Investments in major cities are pushing the sector forward, but emerging hotspots across the country are expected to also have significant contributions in 2019.

Colliers cited Bacolod, Cebu, Iloilo, and Pampanga as examples of such emerging hotspots that will help drive up the Philippine real estate sector this year.

The office property sector in Bacolod is a preferred location for business process outsourcing (BPO) and knowledge process outsourcing (KPO) operations, while horizon developments are the main drivers of its residential property sector. Meanwhile, Cebu remains the largest business destination outside of Metro Manila, but its residential property sector focuses on vertical developments, unlike Bacolod.

Iloilo is drawing interest from investors and BPO companies, but the city is not yet able to meet the demand. Most of the residential property market is mostly composed of house and lots, but condominiums have been generating interest due to the growing BPO industry and the OFW communities in the area.

The retail property sectors of the three cities, however, are mostly similar, featuring a combination of malls, foreign brands, and old retail shops.

Clark, Pampanga, meanwhile, is a very attractive outlet for investments as it is in the pathway of the government’s goal of spreading business outside of Metro Manila. Clark’s development has been limited by the lack of supporting infrastructure, but with the various projects in place to address the problem, it joins Bacolod, Cebu, and Iloilo as locations that are primed for further growth in 2019.

Green building and sustainability: The future is now

Chris Narciso, ArthaLand’s Executive VP, Business Development and a member of the Subdivision and Housing Developers Association’s board of governors, told Business Mirror that 2018 saw the highest ever number of registered and certified green buildings under credible rating tools such as BERDE, or the Building for Ecologically Responsive Design Excellence rating system, by the Philippine Green Building Council.

Narciso expects the continuation of the trend for green initiatives in the country’s real estate sector, with 2019 forecast as a banner year for the sustainability due to the commitment that was secured from a multitude of developers in their ongoing and planned property projects. Narciso added that with the establishment of BERDE certification as achievable at zero construction cost premium, excluding the actual certification cost, more of the Philippine property sector is expected to follow the green standards.

Bright 2019 for the Philippine real estate industry

Metro Manila is tagged as one of the best locations for real estate investments in Southeast Asia, based on recent figures and previous trends, according to Asia Property HQ.

Prices are rising, the demand remains high, and the market’s growth is sustainable. This is expected to stay the same for the next two to three years, making the Philippines an attractive spot for investors in 2019 and beyond.

However, it will not be smooth sailing the whole way. Colliers has identified certain challenged ahead for the industry, including rising interest rates and inflation, private construction delays, uncertainty with the second package of the Comprehensive Tax Reform Program, and right-of-way issues on infrastructure projects.

However, with growth in the property sector’s various segments and emerging hotspots, in addition to positive trends such as green building and sustainability, the Philippine real estate industry’s outlook for 2019 is as bright as the rising sun from the East as it welcomes the new year.

Source : Lamudi