Strong economic growth to support property sector

BETTER than expected gross domestic product (GDP) growth in the third quarter of the year should translate to growth in the property sector over the next three years, real estate services group Colliers International said on Friday.

In a statement, Colliers said that it projects the country’s full-year GDP for 2016 to grow by 6.5 percent to 7 percent.

On Thursday, the Philippine Statistics Authority (PSA), announced that the country’s GDP grew by 7.1 percent in the third quarter of 2016 from the 6.2 percent growth recorded in the same period in 2015. The period also marks the first three months of the Duterte administration

“We see an annual growth of between 6 percent to 6.5 percent over the next three years as macroeconomic fundamentals remain sound and the contribution of investments and manufacturing to national economic output continually expand,” Colliers said.

“Overall, the bullish economic outlook should support the growth of property market segments including office, retail, industrial, and hotel and leisure,” the real estate services firm added.

Among the drivers of the economy’s growth in the past quarter was public construction, which surged by 20 percent on the back of higher government infrastructure spending.

Colliers noted that this would be the main driver of the country’s GDP growth in the medium term as the Duterte administration plans to further increase infrastructure spending.

“The implementation of key projects around the country bodes well for the property sector as the projects will provide access to properties that could be redeveloped into planned communities,” Colliers said.

Also, the development of regional airports will translate to more domestic and foreign tourists in key areas in the southern Philippines, which in return will encourage developers to build more accommodation facilities such as hotels.

“The construction and rehabilitation of highways and trains should result in a more aggressive development of retail, residential, and office buildings in Metro Manila and its peripheries,” the real estate services firm said.
In addition, private construction was also a driver of the GDP growth in the third quarter of the year as it surged 16.2 percent.

“This reflects the sustained appetite for office and retail developments, mainly fueled by a continuously growing IT-BPM sector and rising purchasing power of Filipinos,” Colliers said.

The real estate services group noted that in Metro Manila alone, an estimated 86,000 square meters of new office space was delivered in the third quarter, almost double the 45,000 square meters a year ago.

Apart from office spaces, the growth in private constructions also resulted from the development of shopping malls. It noted that around 118,000 square meters of new leasable retail space was completed from April to September of this year.

In addition, another 380,000 square meters of retail space is expected to be completed by the end of the year, according to Colliers.

The real estate services group expressed its bullish outlook for the retail sector, as it is driven by household spending which grew by 7.3 percent year-on-year in the third quarter.

“Household spending is supported by sustained inflow of OFW remittances ($19.5 billion for the first eight months of the year, up 4.5 percent YoY); improving employment situation (July unemployment down to 5.4 percent from 6.5 percent a year ago); low inflation (average of 1.6 percent for the first 10 months, below the central bank’s 2 percent to 4 percent target); low interest rates (4.3 percent to 6.6 percent); and the continued implementation of poverty alleviation programs such as Conditional Cash Transfer (CCT),” Colliers said.

Moreover, the manufacturing sector was also one of the drivers of the economy’s growth in the previous quarter as it grew by 7 percent.

Colliers cited data from investment promotion agencies (IPAs) such as Philippine Economic Zone Authority, Clark Development Corporation, and Subic Bay Metropolitan Authority that reported a 15 percent rise in committed investments from P58 billion in the first half of 2015 to P66.6 billion in the first half of the 2016.

“Nearly a third of the total committed investments will be funneled into manufacturing and around 35 percent of the new manufacturing activities will be in the Cavite-Laguna-Batangas area,” Colliers said.

The country’s improving competitiveness as a manufacturing destination will make it attractive for more investments, which may result in higher demand for industrial space, according to Colliers.

“The lack of industrial lots in established hubs such as Cavite, Laguna, Batangas, and Clark should compel firms to explore developing industrial estates in alternative locations such as Bataan, Bulacan, Tarlac, Pangasinan, and La Union in Luzon; Cebu in Visayas; and Davao in Mindanao,” Colliers said.

Colliers also noted that the multiplier effect of ramped up public infrastructure development and as well as the expansion of the country’s manufacturing sector will significantly contribute to the GDP growth.



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