The Philippines’ real estate sector will be a major beneficiary of the accelerating growth momentum being quarterbacked by the government of President Rodrigo Duterte, anchored on rising private investment and public spending on infrastructure.
“People know what are the right things to do to boost growth,” said Michael Mann, chief economist for Asia of Standard Chartered Bank. “It’s all about the implementation of existing plans, knowing what can be delivered. If it’s investment and infrastructure, if you provide it, they will come.”
During the Euromoney Philippines Investment Forum in Bonifacio Global City last week, Mann said the growing contribution of investment to gross domestic product (GDP) could provide a key source of extra growth outside the money sent home by overseas Filipinos and the business process outsourcing industry —the two main pillars of the Philippine economy.
“Addressing infrastructure bottlenecks will enable the country to make investments one of the economy’s major growth drivers, thereby unlocking the potential of other sectors,” Mann said at a media briefing during the forum.
He lauded the Duterte government’s commitment to simplify business rules, and cut red tape and enhance the quality of labor, all of which will make the Philippines’ more competitive, particularly in the AEAN market, where counties like Vietnam hold the lead in terms of attracting foreign direct investments (FDIs).
Real estate growth to continue
KMC Savills, a global real estate service firm, agreed that the local real estate sector is in for a continued boom in the next six years – a positive impact of the government’s economic growth plans.
The administration’s economic agenda prioritizing countryside development, infrastructure and agriculture growth boosts the Philippines’ position as one of the top three destinations in Southeast Asia for FDIs by 2022, said Antton Nordberg, KMX Savills head of research.
Among the new administration’s plans is to lift foreign ownership rules from 40 to 70 percent, at the same time, lifting limits on land lease from 25 to 40 years.
With the ASEAN integration offering the country participation in global production networks, relaxation of foreign ownership restrictions will appeal to investors who look at the global market for goods and services.
This will further open the country up to competition, Nordberg said.
“Relaxing restrictions will attract investors in key industries, where they are presently barred from entering and providing competition,” he said. “Raising the cap on foreign ownership will complement the country’s bid to become an investment destination, and open the economy to strategic industries.”
SCB’s Mann agreed, saying that more foreign firms are keen on participating in one of Asia’s fastest growing economies. “
“Money is not an issue,” he said. “Just like in Vietnam, it will be about political will, clarity, level playing field and being liberal in terms of ownership and operation.”
“The government must work on simplifying rules, easing restrictions on foreign ownership and establishing a record of stability and predictability to attract more foreign direct investment,” he pointed out.
Strategic location, infrastructure spending
Nordberg said that aside from making current investors keen on expanding their foothold in the country, it will also bring in more foreign investors in public utilities and other infrastructure that need big capital investments.
The government’s increased infrastructure spending and countryside development likewise opens more opportunities for Philippine real estate, as infrastructure eases the costs of logistics for industrial firms.
“We’re optimistic that local consumption will offset the declining global demand, leading to an industrial real estate growth of 6-7% this year and exponentially after that.”
Definitely, the real estate industry is in a sweet spot, Nordberg added.
“The Philippines has a strategic location, a large and fast-growing market and knowledge of English,” he said. “Growth rates in the industrial segment could even double in the next years. Office spaces will also continue to be on the rise, as we have a 40-million strong workforce and cheap labor.”
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