"The boom is fueled by three sectors."
Not only is there a serious shortage of water in Metro Manila.
There is also a serious shortage of land—for residential, commercial, industrial, warehousing and factory space. Office and residential housing are also in short supply. Demand is outpacing supply.
Consequently, land prices, office rent, and residential housing prices in the national capital have seen the highest increases in Asia, outpacing the inflation spiral of traditionally expensive properties in Hong Kong, Singapore and Tokyo.
The deficit and the high prices in Metro Manila are likely to last over the next five years, continuing an explosion in Philippine property that began in 2006, for a solid a decade and a half of boom.
The supply deficit in properties and their price spiral are not unique to Metro Manila.
Key regional hubs like Clark, Cebu, Davao, Puerto Princesa and San Vicente (the next Boracay) are experiencing a property boom not seen in the last half century.
Clark will provide the biggest supply of office space in the next five years. The resort town of San Vicente (Palawan) has doubled beach front property prices to P10,000 per sq.m.
“We are seeing all-time high in real estate values across all sectors in 2019,” reports David Leechiu, CEO of the property consulting company bearing his name. “This is the biggest real estate boom in the history of this country,” Leechiu points out.
For office, the best bet is still Bonifacio Global City where land now sells at P1.3 million per square meter. In Makati, commercial land now sells for P1.5 million per sq.m., up from P3,000 per sq.m. 25 years ago.
For residential, Dasmariñas in Makati has seen an increase to P400,000 per sqm from P300,000 last year.
The boom is fueled by three sectors: 1) Chinese investors and workers; 2) overseas Filipino expats or OFWs; 3) business processing outsourcing and IT.
Rudy, a realtor, bought 45 units of condo residences at SM’s Mall of Asia area. His now rents out the units—P40,000 a month for 20 square meters; P50,000 to P55,000 for 32 sq.m.; and P65,000 a month for units over 32 sq.m. Nearly all his renters are Chinese—workers in online gaming shops nearby and whose employment contracts include board and lodging. Meanwhile, his condo units have appreciated 30 to 50 percent in value. “There are no sellers,” says Rudy.
“The Chinese have made a significant impact on the market,” notes Leechiu. He suggests that the government should allow foreigners to have at least 50 percent equity in property. (The Constitution limits foreign ownership of land to 40 percent). “A 10 to 11 percentage point increase in equity ownership (to 50 or 51 percent) will have a substantial impact and push the boom for another ten years,” he says. “Allowing the foreigners to come in is the only way to solve our poverty,” argues. “The locals have had a 40 to 50-year headstart in the property market and yet we still have this poverty.”
Leechiu notes “a surge in Mainland Chinese buyers in the residential condominium sector and we anticipate for this to continue for the long term especially with rekindled diplomatic ties between Philippines and China.”
Leechiu sees resurgence in the IT-BPM industry because of the rise of hourly wages in the United States from $7 per hour to $15. IT-BPM has diversified in the past years and have returned to the country for expansion.
In Leechiu’s Market Report dated March 2019, here are the highlights in the current Philippine property market:
• The highest land value in Bonifacio Global City at P1.3 million per sq.m. and the highest condominium price at P540K per sqm in Shang at The Fort.
• Offices at Bay and Alabang still enjoy the lowest vacancy rate at 1 perccent—translating to record rental rates with P1.2K/sq.m./month in the Bay and P750/sq.m./month in Alabang. Makati City and Bonifacio Global City will have very low supply of office space by 2021.
• There is only 216k sq.m .of PEZA accredited space so far this year in Metro Manila against forecast demand of 450K sqm from the IT-BPM industry—this deficit will be the biggest hurdle for growth in IT-BPM expansion—there are 29 buildings (totaling 544K sqm of vacant office space) under PEZA application across Metro Manila. LPC pleads for the government to approve more PEZA zones in Metro Manila and across the Philippines. Quezon City has the largest supply of PEZA Accredited space from now until 2023.
• The Philippines has recorded more than 200K sq.m. of office demand as of 1Q 2019. The IT-BPM industry led the Philippine office demand with 115K sq.m. or 56 percent of the 1Q 2019 take-up followed by the Offshore Gaming industry with 36K sq.m. With Metro Manila making 92 percent (187K sq.m.) of that demand. Regional districts have started strong with Clark, Tarlac, and Davao leading the provincial sites.
• Offices at Bay and Alabang still enjoy the lowest current vacancy rate at 1percent. Makati City and Bonifacio Global City will have a very low supply of new buildings coming in by 2021. We are seeing record high office rental rates across the districts.