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Gov’t spending augurs well for property sector -- Colliers

Posted on January 31, 2017

THE SUSTAINED acceleration of the Philippine economy has affirmed bright prospects for the real estate sector, with the government’s infrastructure thrust unlocking more growth areas, a property consultancy said.

In a flash report released on Monday, Colliers International Philippines cited the increase in public infrastructure spending that helped grow gross domestic product (GDP) by 6.8% last year, the fastest pace since 2013.

Government spending rose 8.3% -- faster than the 7.8% recorded in 2015 -- on higher disbursement for public infrastructure projects such as highways, farm-to-market roads, bridges and access roads to tourist destinations.

“Government spending will continue to sustain the country’s economic growth given the more-than-60 projects that the Duterte administration committed to implement in the next five years, perceived to become the ‘golden age of infrastructure’ in the country,” Colliers noted in its report.

“The government’s thrust to intensify infrastructure development bodes well for the long-term growth of the economy and this should trickle down to various sectors including real estate,” it added in the report “Robust GDP trickles down to property.”

The government’s infrastructure pipeline includes roads, railways and bus rapid transit systems, which the property consultancy expect to provide access to major township projects in the National Capital Region and other key areas.

“The expansion of Metro Manila’s railway system should unlock underutilized areas for township developments while the construction and expansion of roads within Metro Manila will help connect the business centers of Makati, Pasay, Ortigas and Taguig,” Colliers noted.

The property consultancy expects sustained demand for office space, as reflected by pre-leasing activities of business process outsourcing (BPO) and knowledge process outsourcing (KPO) firms as well as the growing interest of offshore gaming companies.

About a third of office developments due for completion this year have been pre-leased, with the strongest demand seen in the business district of Taguig City. In 2016, offshore gaming companies took more than 80,000 square meters (sq.m.) of the space available.

“The 10% increase in private construction last year partly reflects the sustained appetite for office space. The growing demand for office buildings is complemented by the surge in demand for office, accounting and computing machinery (+21%),” Colliers said.

At the same time, establishing rail systems in the northern, central and southern parts of Luzon should spur manufacturing activities in those regions.

The 10 months to October last year saw net foreign direct investments of $6.2 billion, most of which went to real estate, wholesale and retail trade as well as manufacturing. Colliers expects more inflows to the food and beverage, chemical and chemical products and basic metals segments of manufacturing.

“With the projected inflow of more manufacturing investments, we encourage property firms to develop industrial estates in alternative hubs where infrastructure support is accessible such as Pampanga, Bataan, and Bulacan,” Colliers said.

The property consultancy also cited the expected increase in tourist arrivals beyond 6 million and sustained increase in remittances from Filipinos living or working abroad among the drivers of the real estate sector’s growth.

GDP may expand 6-6.5% this year amid the absence of multiplier effects from an election-induced spending, Colliers said, as remittances and BPO revenues continue to drive the economy.

“The Philippines will also benefit from the construction of infrastructure projects under the public-private partnership scheme and the sustained surge in manufacturing investments from Japan, China and Taiwan as foreign manufacturers take advantage of the country’s trade deals with ASEAN and the European Union and improving viability as an investment hub in the region.” -- Keith Richard D. Mariano