The CEO and co-founder of Leechiu Property Consultants is convinced that the Philippines today presents many opportunities in the real estate sector, despite the continued threats faced by the global economy. The situation, he believes, calls for businesses to succeed using the time-tested approach of working hard.
David Leechiu believes in the importance of giving sound advice to clients, especially with the presence of post-pandemic trends in real estate. Speaking to the Manila Standard recently, the property expert acknowledged the difficult and painful years of COVID-19. But he looks back on it with pride as his company Leechiu Property Consultants (LPC) managed to uphold its commitment to its clients and staff.
“Our employees are our biggest assets and we took care of them the best we could during the difficult years of the pandemic,” he revealed. “For our company’s primary thrust, we collated as much information, simplified it, and made it relevant and accessible to everyone. This enabled us to give as much fact-based property advice to clients across industries.”
Performing gracefully
“The Philippines, despite everything that’s going on in the world, is one of only three countries performing gracefully economically, and certainly more gracefully in the property sector,” said Leechiu. “What keeps the Philippines afloat in the last 20 years are the business process outsourcing (BPO) sector, remittances (from overseas workers), consumption, demographics and huge government spending.”
He listed the reasons that trigger optimism amid the impact of external factors. These include the passage of the country’s 2023 budget, fiscal consolidation, favorable demographics and economic environment, continued infrastructure spending, strong credit rating and sound financial system, slowing inflation, among others.
“These would eventually drive a lot of economic activity in the Philippines,” Leechiu said.
In particular, he pointed to the government’s P9-trillion infrastructure program that will not only help drive the country’s growth and expected recovery in 2025, but will also help the real estate sector to build momentum.
“Historically, increased infrastructure spending has helped boost growth as seen in the “drastic increase in our (economic) recoveries” over the last decade due to the implementation of the public-private partnership (PPP) and Build Build Build initiatives,” he noted. “Similarly, infrastructure has had a huge impact on real estate, as one of its most important effects is improved accessibility which, in turn, has helped prop up property prices and land values over time.
Townships coming up
Given this aggressive infrastructure buildup and the country’s continued recovery, one stands to gain from a resilient sector like real estate—considered by Leechiu as the “best instrument for investment in the last 60 years” and “the most resilient asset class in the world.”
Despite the numerous crises, natural disasters, political upheavals, election cycles and most recently the pandemic, the Philippine property sector has remained vibrant over the last 22 years. There are now 169 townships spanning 62,500 hectares across the country. Data from LPC showed that in Metro Manila alone, there are 13,264 hectares comprising townships and reclamation projects in varying stages of completion.
Office and residential capital values also continue to appreciate amid the boom-bust cycles of the past two decades. For example, Ayala Land’s projects have seen tremendous capital appreciation with exponential compounded annual growth rates (CAGR) and impressive rental yields.
“Look at Forbes Park today which is at P500,000 per sqm. What was once worth P50 million is valued at P1 billion 23 years after,” Leechiu illustrated. What changed? He pointed to LPC research showing that per capita income changed from $1,500 in 2000 to about $3,300 to $3,500 today. “The increase in per capita income will have a direct impact on how prices are going to change in real estate. It is going to be buoyed up just because of the sheer volume of wealth being created in this economy,” he explained.
“If you look at the entire portfolio of Ayala Land, you’ll see how the projects continue to appreciate from the time it was launched. Note that most of these projects continue to appreciate in value despite the pandemic,” Leechiu added.
Data from LPC showed that Ayala Land’s gated village projects in Makati, including Forbes Park, Bel-Air Village, San Lorenzo Village, Dasmarinas Village, and Urdaneta Village, have seen CAGRs of up to 16 percent. Prices of Ayala Land’s residential condominium projects in Metro Manila are also seeing steady CAGR of 6 percent to 14 percent and capital appreciation of as much as 254 percent from 2008.
Such developments, according to LPC, are in high demand among buyers “due to [their] appealing combination of open space, quality amenities and efficient property management.” For example, Ayala Land’s Serendra in BGC, which was launched in 2008 has seen capital values appreciate by as much as 254 percent, while over 119 percent is seen for Portico, Alveo Land’s signature development in Pasig.
Park East Place in Bonifacio Global City offers exciting opportunities for real estate investors.
This is why now is the best time to invest in these properties for value and price appreciation, especially over the long term, he averred.
Build them and they will come
Currently, there are 256 national and local PPP projects in varying stages of completion. Among those completed in 2022 and this year were the Tarlac-Pangasinan-La Union Expressway; Plaridel Bypass Road Phase 2; Alabang-Sucat Skyway Extension; Central Luzon Link Expressway; Estrella-Pantaleon Bridge; Binondo-Intramuros Bridge; NLEx-Harbor Link; and Skyway Stage3. Much awaited meanwhile are the Metro Manila Subway, North-South Commuter Railway and Samal Island-Davao City Bridge.
Amid all these developments and the country’s strong performance, the Philippine real estate sector today is indeed rife with viable prospects. Whether for own use or investment, these are ideal opportunities to consider investing on now more than ever.
Revival of POGOs
On the return of the Philippine Offshore Gaming Operators or POGOs, Leechiu said it is indeed happening.
For the residential condominium market, LPC said this grew eight percent from the previous quarter, with over 12,000 units sold.
Office space demand up
Demand for office space accelerated in the first quarter of the year and is on track to match or exceed the takeup in 2022 despite an expected slowdown in the economy, according to Leechiu.
“We seem to have reached new highs for the first quarter, which historically has been the slowest quarter of the year,” Leechiu said.
Office demand transactions from January to March this year more than doubled to 264,000 square meters (sq m) from the same period in 2022.
“[Demand] could be on par with 2022 numbers, if not better, and that’s despite all the things that are going on in the world,” Leechiu said.
Office leasing demand hit nearly 1 million sq m in 2022—the third-best performing year to date, according to Leechiu research..
This was driven by the IT and business processing outscoring sector, which grew 67 percent despite the hybrid setup that allowed some employees to work from home.
Traditional occupiers also accounted for 144,000 sq m of the first quarter demand figure.
Vacancy rates
Data from Leechiu Property, however, show that office vacancy rates remain elevated at 18.2 percent in Metro Manila after recently completed projects boosted available supply.
There was another 1.3 million sq m in the pipeline for the year “but supply is expected to significantly fall starting 2024.”
Among all the Metro Manila districts, Bonifacio Global City is expected to lead the market recovery.
Residential condos on an uptick
Meanwhile, Leechiu said the residential condominium market grew 8 percent from the previous quarter, with over 12,000 units sold. Sales in the luxury segment remain healthy, registering over 400 percent growth.
Eleven new residential towers with 4,900 units were launched during the quarter.
What keeps the prophet going?
“I always draw inspiration from Jack Ma, a quote that’s apt in today’s times which I share with everyone: “Today is hard, tomorrow will be worse, but the day after tomorrow will be sunshine,” he shared.
“I have been criticised repeatedly for being bullish, the so-called very naive “new prophet of boom”—but we in the company ground ourselves on the brutal reality of daily life—we are fully aware of the problems and challenges of this country, that is why we are just cautiously optimistic, and it is driven by facts, such as but not limited to the OFW remittances, BPO industry, tourism and President Marcos’ Build Better and More Infrastructure Program,” he said.