A Look at the Best Property Investments in the Philippines

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Darlene General, Negosentro |  The Philippine real estate market is not showing signs of slowing down. Positive outlooks and forecasts for 2017 proved correct as the property sector sustained its growth on the back of a strong local economy.

The year 2018 should not be any different and the Philippines is projected to continue a full-year economic growth. According to World Bank projections, the Philippine economy is seen to grow at 6.9% next year, especially with a higher infrastructure spending set by the government.

Property investment is also seen to sustain its momentum as developers are becoming even more aggressive and competitive in terms of building innovations, development of cities, and even financing and payment schemes.

They say you can’t lose in real estate as the value of each property invariably goes up. But if you’re looking to invest, you must know what you are getting into if you are truly in it to win it. Let’s look the property market in the Philippines and how you can work your way around it.

Condo market on the rebound

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The latest data on the condominium market are very encouraging. In 2016, property developers sold 38,800 residential condo units in Metro Manila alone ahead of completion or via pre-selling. That is about 25% higher than the units sold in 2015, according to property consulting firm Colliers International. The progress, following some four years of decline, is mostly attributed to a favorable interest rate environment.

With the delivery of pre-sold units expected in the next few years, the vacancy rate for condos is expected to increase, bringing rental rates on a slight downward trend. But the good thing is that the rental market also continues to grow. The demand for rental properties is driven by the young workforce who desire to live closer to work, and continues to create investment opportunities for property owners, according to Colliers. These “worker accommodations” present a more stable and steady income for property owners.

Offering condos for short- and medium-term lease is also encouraged to cater to business travelers and mobile young professionals who consistently move from place to place as a requirement of their job. This is seen to address high vacancy rates in the central business districts.

Acquiring a condominium has also been made easy. For pre-selling condos, you can pay the 20% or 30% down payment without interest for five years. Banks are also offering low equity, low interest rates, and longer payment periods. This has attracted middle-income owners and Overseas Filipino Workers to invest in condominiums.

Residential developments outside major cities

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When it comes to residential properties, investors should look beyond the three main business districts (Makati, Bonifacio Global City, and Ortigas Center). A lot of young urban professionals still cannot afford to rent a condo on their own, much less a condo in these major business hubs. The property investment market must look at the peripheries of these cities where residential and condo markets are also growing, such as Pasig and Mandaluyong. These other top cities in the Philippines are seeing steady growth as it becomes home to BPO companies, condominium developments, and other commercial establishments. The good news is that the price of properties here is more affordable and competitive.

Residential real estate has also been conquering other key cities all over the Philippines. Cities like Cebu, Davao, Bacolod, and Baguio are also seeing condominium boom.

Investing in leisure developments

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The country’s biggest property developers are becoming more aggressive with building leisure developments outside Metro Manila. These premium and exclusive developments are usually resort-themed, meant to entice investors of the luxury market. These investors offer their units for rent and provide not only a place to stay but the whole holiday experience. Tagaytay, Baguio, Rizal, Batangas, Subic, and Bataan are just some of the locations of these leisure properties.

Demand for office spaces

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If the rate of vacancy for condos are on the upward trend, the demand of the office market remains very positive. A real estate services firm said the Philippines is among the top preferences in the office market in the Asia Pacific region essentially because of the young population driving the economy.

According to the Q1 2016 report of the Philippine Property Digest, in that quarter alone, 92,600sqm of Grade A office developments were built in Metro Manila. This brings the total stock of prime and Grade A office spaces in the metropolis to approximately 6.4 million sqm in 2016. The demand is attributed to the growing offshoring and outsourcing (O & O) industry in the country. Ortigas, Makati, BGC, Quezon City (Eastwood and Eton Centris), and Alabang are the top locations for the office market.

Apart from the continuous expansion of the O & O sector, the healthy leasing activity of office spaces are also brought about by the robust growth of other industries such as IT, software, and financial services.

The office market is an attractive sector in Philippine real estate given low vacancy levels and high rental rates. In Makati and BGC, for example, rent ranges from Php540 to Php1,250 per square meter per month. Positive investor sentiment is likewise seen to continue the upward trajectory in terms of rates, demand, and capital value growth.

The popularity of hip open working spaces is also driving the office market. These do not have to be big but must focus on building a healthy and productive community of young workers in various fields.

With the Philippine economy projected to sustain its growth momentum for the coming year, the real estate industry is also expected to continue its upward trend. The millennial workforce also is seen to boost investment opportunities further for the property market.  

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