FOR 10 straight years, the Philippine property sector experienced good times and, according to a leading property expert, the good news is that it will continue to grow.
In a recent interview with the BusinessMirror, Ateneo program director for real estate, Professor Enrique Soriano III, said that the industry will continue to experience growth in the demand for housing and office spaces, especially for the business-process outsourcing (BPO) industry outside of the traditional commercial business districts. “The expansion of the BPO industry will be felt in provincial cities such as Iloilo, Cebu and Davao,” said Soriano, who is also a turnaround advisor for Asian markets in the Wong and Bernstein advisory group.
The IT and Business Process Association of the Philippines (Ibpap) recently reported that the BPO industry achieved 18.7-percent growth in revenue approximately amounting to $18.4 billion in 2014. The organization cited the rising demand for services from the global offshoring industry, health-care information management, global in-house centers plus gaming and animation. Moreover, the Ibpap said it is optimistic that the industry is on track to achieve $25 billion in revenues and reach the 1.3 million employment level by 2016.
Meanwhile, property management and consulting firm CBRE Philippines recently pointed out in a recent media briefing that the office sector, in particular, posted a strong performance toward the end of 2014 and will likely post further gains this year.
He cited that the continued demand for BPO services, political stability and positive economic growth indicators as the drivers for the industry’s continuous growth this year.
According to CBRE data, vacancy rates in major Metro Manila office buildings remained under 3 percent. By the end of 2014, the vacancy rate dropped from 2.53 percent to 2.13 percent quarter-on-quarter, CBRE said. During this period, Metro Manila lease rates rose by 2.6 percent.
Although some analysts believe the property sector is already ripe for correction, Soriano said the overall outlook will still be bullish. “Depending on which asset classes, overall the sector is still robust but admittedly the less aggressive players and new entrants in the mass-market condominium segment have faltered and have registered slow year-on-year take up in sales performance,” Soriano said.
“The bigger and more diversified players have cornered a bigger market share and are expected to dominate the property scene this year and [in] 2016. This natural dominance by the major players is expected when the property cycle transitions to the mature phase in mid-2015,” Soriano added.
On the part of the government, Soriano said the Bangko Sentral ng Pilipinas (BSP) has been in the forefront of monitoring local banks’ exposures in the real-estate sector. Moreover, he said the BSP has cautioned banks to temper borrowings, especially to new players that are inexperienced. “The BSP has initiated metrics by having Banks undergo stress tests to determine fundamentally sound ratios and capability to manage a real-estate portfolio,” he said.
As far as the possibility of a slackening of demand is concerned, Soriano said there will be a slowdown in the market starting 2016 as the remaining units will be completed. “There is going to be deceleration in 2016. But this will be limited to select areas and a specific class,” Soriano predicted.
Soriano stressed that end-users, investors and developers should not expect the current boom to continue in the succeeding years. “Perhaps, what we should caution the end-users, investors and developers is the wrong notion of assuming that recent price performance will continue into the future without first considering the long-term rates of price appreciation and the potential for mean reversion,” he said.
For end-users, Soriano said that the buyers should be educated. He suggested that they should gather all the information they need before signing a contract. Further, he said end-users should evaluate their requirements and scrutinize thoroughly the track record of the developer.
For developers experiencing slow take up, Soriano said they should expect lower velocity in the coming months. “The next best option for them is to review their strategy, revisit their structure and invest on the right operating executives,” he advised.
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