The Philippines’ election and real estateMay 26, 2016 / By
The recent Philippine election is seen as a critical juncture in the country’s economic growth path. From being “the sick man of Asia” 20 years ago, the Philippines is now regarded as one of the rising tiger economies of Asia, along with Indonesia and Vietnam. The annual GDP growth rate averaged a high 6% over the last six years. During the last stretch of the Aquino administration, the Philippines gained investment/credit rating status from the major rating agencies. All eyes are now on the economic plans of presumptive president-elect Rodrigo Duterte and on how he will utilise these achievements to move the economy forward.
The economic gains in the last few years were strongly manifested in the local real estate market. The heightened demand coming from the offshoring & outsourcing (O&O) and other multinational companies prompted developers to build more than 2.5 million sqm of office space in the last six years. The expansion of O&O companies and the sustained growth in the inflow of remittances from overseas Filipinos resulted in a general improvement in income per capita. This prompted developers to produce more than 100,000 residential condominium units and develop more than 3.5 million sqm of shopping mall space over the same period.
While much has already been accomplished, there is still a lot of work that needs to be done. The election issues raised so far have revolved around the poor provision of public services (such as the lack of improvement in infrastructure facilities) to service the needs of urban communities. Clearly, there is a need to develop more public infrastructure support as new emerging business districts to be completed will make available more than 2.7 million sqm of office space, 120,000 residential condominium units and 1.7 million sqm of shopping mall space over the next four years.
Beyond the need for the improvement of physical infrastructure, industry stakeholders are also keen to see whether regulatory reforms will be introduced to further level the competitive field for all investors. Limitations on land ownership by foreign nationals are seen as an impediment to the flow of foreign direct investments into the real estate sector. Another prospective improvement being pushed notably by the Philippine Stock Exchange and the Asia Pacific Real Estate Association (APREA) is the modification of the regulations of the local REIT market. A more liberal outlook on REITs – especially on the issue of minimum public ownership and the imposition of value added tax on property transfers – could revive the interest of investors and funnel more development capital into the local real estate market.
As the election fever cools down, the bigger challenge for the incoming set of leaders and the population of 100 million is to keep the rising economic tiger on its strong growth path. Both the provision of public services and the implementation of crucial regulatory reforms should remain top priority, especially if we want to support the continual growth of the Philippine real estate market.
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