Via Philippine Daily Inquirer: Full Speed Ahead

Pronove Tai International Property Consultants CEO Monique Pronove recently spoke with the Philippine Daily Inquirer’s Amy Remo on what lies ahead for the Philippine property market.

“Overall, the real estate market will stay healthy in 2019.

Expected supply in the office property market is at 1 million sqm, with demand to be driven by the IT-business process outsourcing (IT-BPO) sector on the back of improved skilled-labor force, innovative technology application, and upgrade on infrastructure.

Offshore gaming growth will remain dependent on supply availability in Makati City and the Bay Area, while coworking spaces will continue to grow by an average of 5 to 10 percent share as compared to the 2 to 4 percent average share in 2018.

In the residential market, Chinese buyers and renters will continue to push up property prices while foreign retirees will continue to take up residential dwellings in emerging cities such as Clark in Pampanga, Cebu City, and Davao.

In the office market, the Philippine Offshore Gaming Operators (Pogo) are growing by an average leasing transaction of 81,000 sqm per quarter since 2017. To date, the offshore gaming firms have accounted for 23 percent of the 790,000 sqm office take-up in the first three quarters. Chinese nationals working both in the online gaming activities and its support services dominated offshore gaming firms.

With the influx of working Chinese nationals, the demand for residential units also increased most notably in Makati City and the Bay Area (Pasay City and Parañaque City) office districts. The recorded transactions from Chinese tenants contributed to the rising prices and rents in the residential market as they closed deals without price negotiations.

With the enhanced China-Philippines bilateral relations, it is expected that mainland Chinese nationals and companies (e.g. China Telecom, GAC Motors) will continue to come to the Philippine market in the short-term period most specifically during President Duterte’s administration.

The demand from offshore gaming firms has already changed the landscape not only in the office market, but also in the residential market.

Offshore gaming saved the property sector most specifically with the slowed demand from the ITBPM sector last year. Moreover, the government’s target of 1.5 million to 2 million Chinese visitors per year (2018 to 2020) will likely happen.

This will further enhance the tourism sector as well as the retail market catering to Chinese nationals.

However, the influx of Chinese-related businesses are currently changing the buyers’ profile in the residential market in the Philippines due to the rising prices of residential houses in Metro Manila. This pushes local buyers to go outside Metro Manila, where housing is more affordable.

Moreover, the Chinese impact on the Philippines is considered unsustainable in the long term due to policy issues. The change of government approach related to China (if any) in the coming years will definitely impact the sectors that have been driven by the Chinese.

However, there are key issues in the economy that could dampen the momentum growth of real estate industry and these include rising interest rates and inflation rates.

The real estate industry is not yet affected by rising interest rates as of the moment but the residential market remains vulnerable if the concerned monetary agencies and banks do not act accordingly and in a timely manner.

While economies remain strong in most parts of the world, growth is threatened by geopolitical tensions which create an atmosphere of uncertainty. For instance, the West Philippine Sea dispute may have an impact specifically on Chinese driven sectors such as offshore gaming, the hospitality sector, and the residential condominium market.

While the Philippines and China enjoy improved bilateral relations, future changes in international policies governing Chinese relations will surely impact Chinese investments as well as sectors driven by Chinese money. This may dampen the growth of Pogo firms in the office market as well as in the residential market.

Property developers should thus maintain tenancy mix in most of their projects. The state-run gaming corporation Pagcor should spearhead attracting other foreign denomination into the Philippines with offshore gaming activities.

For now, there is no cause for concern over an overheating market. Both private developers and the banking sector are very much attuned to the property market and in fact, are very proactive as we have seen in the past. We have seen the immediate slowdown in completions when there were signs of oversupply in the residential condominium developments and the tightening of property loans by the banks.

Our lessons from the Asian financial crisis, during which we had big developers going bankrupt, have taught us well and have left us with a cautious imprint so that the industry now checks and regulates itself to avoid another crisis.”

Read more here: https://business.inquirer.net/261838/full-speed-ahead