PH Property Market Seen Sustaining Robust Growth

“The PH property sector is continuing growth momentum under  Duterte administration.”

The Philippine property market may continue to boom in the next six years under the Duterte administration, on the back of an economic program that boosts infrastructure spending and countryside development,  property consulting firm KMC Savills said Wednesday.

The office sector, in particular, is seen to remain in a sweet spot especially as it still offers one of the highest rental yields in the region while vacancy rates are seen to stay at manageable levels.

“The economic agenda for the country prioritizes countryside development, infrastructure and agriculture growth, and increased government spending. Pair this with the administration’s goal of positioning the Philippines as one of the top three destinations in Southeast Asia for FDI (foreign direct investment) inflows by 2022, and we see a very positive outlook for the real estate industry,” said Michael McCullough, co-founder and managing director of KMC Savills.

“The property sector is continuing its growth momentum…The industrial sector, which has long lagged behind other segments, is also beginning to pick up as foreign manufacturing companies show eagerness in opening up facilities in and outside of Manila.”

In a briefing Wednesday, KMC Savills research head Antton Nordberg said Metro Manila’s performance in the first semester had been impressive, showing positive net absorption.  In the second quarter, vacancy rates tightened to 2.9 percent from 3.7 percent last quarter. These rates are seen to increase in the short-term, due to the completion of an additional 259,000 square meters of leasable space by the end of the year.

Nordberg said vacancy rates might start increasing but would still be below 10 percent by next year, when office supply peaks.  By end-2017 through 2018, the vacancy rates are seen to go higher.

Rental rates are seen to continue growing by 2.5 to 4 percent this year through 2017. The average rental rate in Metro Manila at present is P863.9 per square meter per month.

Nordberg said average yields for office property investors remained one of the highest in Southeast Asia at mid-7 percent, exceeded only by Vietnam’s 9-10 percent.

In markets like Singapore and Hong Kong, property yield was estimated at only 2-3 percent.

Yves Luethi, KMC Savills’s vice president for marketing services, business development and consultancy, said a significant portion of upcoming office supply being contracted ahead of turnover.  For new supply coming on stream by 2017, he said about 20-30 percent in KMC Savills’ pipeline would likely be leased ahead of building completion.

Overall, the global economic uncertainties created by Brexit—referring to Britain’s decision to exit the European Union—could be an opportune time for the Philippines to attract investors in search of alternative markets by addressing macroeconomic bottlenecks such as the stringent foreign ownership rules and weak infrastructure, the property expert said. Doris Dumlao-Abadilla

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