RE/MAX, the world’s leading franchisor of real estate brokerage services, sees the launch of Real Estate Investment Trust (REIT) to contribute to the continued growth of the Philippine property sector. The sector has been on an upward trajectory in recent years with 2018 experiencing a very strong performance particularly in the office segment which registered an increase of 22 percent in actual transactions from 875,000 square meters in 2017 to 1.1 million square meters in 2018 — the highest recorded take up in Philippine history.
The growth in the sector is fueled by the country’s strong economic growth with Gross Domestic Product (GDP) going up to 6.4% in 2019 as against 6.2% the previous year. Demographics also play a big role with the presence of a skilled young English-speaking workforce, considerable natural wealth and an economy that has successfully integrated enterprise outsourcing (BPO). Favorable government policies such as the TRAIN law and the Build, Build, Build program plus the lowering of interest rates by the Bangko Sentral ng Pilipinas are other major factors driving the local real estate market.
“The boom in the property sector paves the way for the entry of REIT. REIT, in turn, will serve as catalyst for further growth as it provides a platform for developers and retail investors to increase their participation in the sector,” said Gary Hablero, Director for Commercial Investments of RE/MAX Capital.
A REIT is a company that owns, operates or finances income-producing real estate. Properties included in a REIT portfolio may include apartment complexes, data centers, health care facilities, hotels, infrastructure—in the form of fiber cables, cell towers, and energy pipelines—office buildings, retail centers, self-storage, timberland, and warehouses.
“It would be a good idea for retail investors to consider going into REITs as they offer a lot of advantages versus other investment vehicles,” said Mr. Hablero.
REITs provide substantial and stable dividend yields yet they have a low barrier to entry. The stocks are publicly traded which means the companies are highly regulated and affords the investor a certain amount of liquidity. It also allows investors to diversify their portfolio – this reduces risk and offers access to the real estate market with low correlation with other stocks and bonds. Lastly, REITs are generally professionally managed and offer competitive long term performance.