The Philippine economy registered full-year growth of 5.8% in 2015. Although slower than the GDP growth in 2014, it was still one of the fastest in Asia. Despite a difficult external environment, the local economy managed to grow due to strong domestic demand led by the growth of public construction and household consumption. Likewise the services sector continues to show strong growth led by the robust performance of the offshoring & outsourcing (O&O) sector.

Due to the resilient growth of the economy, the local property sector remained on an upward trajectory in 2015. Gross take-up of office space reached new highs due to the continued expansion of O&O companies, not just in Metro Manila, but in other urban centres, such as Cebu and Davao, as well. Consequentially, high-end and luxury condominium demand was sustained by the influx of expatriate executives. Demand for retail space steadily increased due to the entry of international retail chains and brands.

While the economy is expected to perform better in 2016, the possibility of repatriation and loss of job security in Middle East countries (where the economies are being severely affected by the record low oil prices) led Bangko Sentral ng Pilipinas to cut growth estimates for remittances coming from overseas-based Filipinos (OFs) from 5% to 4% this year.

On the supply side, the large completions in the commercial and residential (at least in the mid-end segment) sectors is expected to clip the growth in rents and capital values. In Metro Manila, approximately 1.8 million sqm of new office space may come on stream in 2016 and 2017, and over 106,000 residential condominium units are expected to complete over the next five years.

Despite these challenges, the overall growth outlook for the local property sector in 2016 remains promising. The continual expansion of the O&O sector is expected to fully absorb the new supply in just a little over three years. The employment generated by this growth should mitigate the softening growth of OF remittances, while the increase in income levels is expected to support retail consumption and buoy the demand for residential condominium developments going forward.

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