POGO slowdown seen triggering ‘healthy’ property correction
THE licensing freeze on Philippine Offshore Gaming Operators (POGOs) as well as China’s planned crackdown on online gaming will reduce the attractiveness of the Philippines as an investment destination, and will lead to an easing in property prices, analysts said.
“This could reduce the influx of POGO workers that pushed prices and lease rates higher… especially for residential, office, and commercial properties,” Michael L. Ricafort, economist at Rizal Commercial Banking Corp., said in a text message.
On Monday, the Philippine Amusement and Gaming Corp. (PAGCOR) said that is suspending acceptance of applications for offshore gaming licenses pending a review of the operations of POGOs. PAGCOR Chairperson and Chief Executive Andrea D. Domingo said the suspension will give the agency time to address all issues that have emerged from the industry’s operations.
PAGCOR has also floated proposals to relocate POGOs to what it calls “self-contained hubs,” as a safety measure for Chinese workers amid concerns some POGOs might also be in a position to facilitate spying on key government installations.
The proposal drew a sharp rebuke from the Chinese embassy, which expressed fears that the relocations might infringe upon the rights of Chinese citizens.
“Any reduction in the influx of Chinese POGO workers will lead to a healthy correction in real estate prices/lease rates after the government stopped accepting new applications for POGOs,” Mr. Ricafort said.
He also cited China’s crackdown on online gaming, which is viewed as a workaround for gambling, which is prohibited in China, and the Philippine government’s increased efforts to tax POGO workers.
Colliers International Philippines estimated that office rents will rise 6% annually until 2021, while residential rents are expected to rise 0.9% over the same period.
Overall, Mr. Ricafort said he does not expect a major impact on the economic relationship of the Philippines and China since both have maintained a “friendly diplomatic relationship,” which paved the way for the growth of the POGO sector in the Philippines.
Michael R. Mabutol, president and managing director of Pinnacle Real Estate Consulting Services, said that both office and residential markets are “perfectly cushioned” since expansion is based on actual demand and not speculation. Although the slowdown in take up of POGO firms may impede growth, there are still other occupiers, like Business Process Outsourcing (BPO) firms and multinational companies.
“On residential, the 4-6 million housing backlog coupled with steady demand from OFWs and young professionals could sustain the growth,” he added.
Asked to comment, Ateneo Policy Center senior research fellow Michael Henry Ll. Yusingco said that the Philippines still does not have a clear and coherent China policy and that the country’s officials do not have a unified way of viewing China issues.
“Some administration officials (are) giving Chinese intrusion into our territory the benefit of the doubt. Some are more concerned, calling out the wave of Chinese “visitors” as possibly weakening our national security. Some are raising the alarm that we are being bullied at sea, while some are still touting China as a trusted financier for our development aspirations,” he noted.
He described this as a “schizophrenic approach” to dealing with China.
“Filipinos will just have to wait for this administration to present a clear and coherent China policy. Until then, we should expect inconsistent reactions and tepid responses to whatever China does,” he added. — Vincent Mariel P. Galang