These 4 key themes will drive growth in the PH property market this year


MANILA – KMC MAG group managing director Michael McCullough is bullish about the Philippine property market this year.

“There are a lot of reasons for this optimism, chief among them low interest rates, quantitative easing from the central bank, and positive feedback from investors. These factors have helped create a favorable climate for both local and foreign businesses,” he said in a recent briefing.

According to him, the first key theme is the growth of townships, which have created pockets of development in Metro Manila. KMC MAG estimates investments in townships this year reaching P300 billion. Among the major developers of townships are Megaworld, Ayala Land and SM Prime, with other players like Vista Land and Federal Land joining the fray.

“The live-work-play lifestyle encapsulated in these townships have resulted into a lot of success for some of the major developers, so it’s no surprise that new players are working to c apitalize on this and bring the concept to new areas,” said McCullough.

“The township concept also provides a way for developers to be part of the solution
to the congestion in Metro Manila. With developers taking the critical first step and building
in other areas within and outside of the Metro, they’re creating new microdistricts and encouraging more Filipinos to live, work, and play closer to home. We hope that this will help reduce congestion and make Metro Manila more liveable,” he added.

A second key growth theme this year is the business process outsourcing (BPO) office segment, which has been a source of expansion for many years.

Developers are bringing to market 560,00 square meters across Metro Manila’s central business districts (CBDs) this year alone. Almost half are in the Bonifacio Global City (BGC) area, with other projects sprouting in Alabang, Ortigas and the Manila Bay area. These include the Alabang Town Center BPO building, Vector Three, BDO Corporate Center and Five E-com.

The growth in BGC is supported by the lack of supply in the Makati CBD and Quezon City.

A third key growth theme is the retail sector, as lower oil prices give consumers more disposable income. According to KMC MAG, demand for retail space within malls has peaked, with developers planning an additional 600,000 square meters through 2018.

Development is spreading outside Metro Manila, with Ayala Land, SM Prime and Robinsons Land taking the lead, and new players like Cosco Capital and DoubleDragon following suit.

“The expansion of BPOs to new wave cities and the economic growth in major cities such as Cebu and Davao have spurred developers into pursuing more projects outside of Metro Manila,” said McCollough, citing SM City Seaside, which is a 472,470 square meter mall in Cebu.

“Once this has been completed, it is expected to break into the list of the world’s biggest shopping malls,” he said.

KMC MAG said the Philippines enjoys a cost advantage with Manila’s $49.1 per square meter monthly prime mall rental rate the lowest in the region.

“We hope that this boom in the retail market would persuade more local companies to seek out foreign retailers and pursue the unique opportunity that the country provides,” said

The fourth growth theme is the residential sector, particularly the middle class segment where demand remains high when compared with the falling yields in the luxury segment. Driving this demand are overseas Filipinos and BPO workers who are investnig in condos.

“Previously, the gains in the residential market were largely due to luxury and high-end properties, but now we’re starting to see attractive returns for lower-end products,” said McCullough.

“The growing demand and the shortage of residential units in this sector has led to a shift among developers, who are now focusing on providing more developments catering to the middle-income sector,” he said.

The only hitch is financing, with many from the middle class unqualified for bank loans.

“We have seen developers try to work around this by taking on the bank loans and offering more affordable payment schemes,” said McCollough.

“However, the central bank’s tightening might scale bank the lending. This will not be a problem for major developers, but second tier and mid -sized players may face a bumpy road,” he said