The Philippines is an archipelago that boasts of more than 7,100 islands. Comprising of mountainous terrains, plains, dense forests, and coastal areas, the Philippines is one of the countries with the richest biodiversity. In terms of foreign property investments in the Philippines, the country enjoyed a steady rise in foreign direct investment in recent years. The bulk of these investments in the manufacturing and real estate come from Japan, Singapore, the US, and most recently, China.
The Philippines Economic Status
The country is among the most dynamic economies in the East Asia and Pacific region. One notable strength of the Philippines is its economic dynamism rooted in robust consumer demand. The country has a buoyant business activity with significant improvements in the service sector, mainly business process outsourcing, finance and insurance industries, and real estate.
The country’s strong economic fundamentals and a globally competitive workforce are aiding the growth momentum the Philippines is experiencing now. From 2010 to 2017, the country has had a sustained average annual growth of 6.3%, with an all-time high of 6.7% in 2017. Growth moderated in 2018 due to decreased global trade and rising inflation rates. However, this 2019, the country is expected to reach 6.4% as inflation slows down. The economy also has forecasted growth of 6.5% in 2020 and 2021.
In terms of economic freedom, the country still lags. It is the 70th freest in the 2019 Economic Freedom Index of 2019. In the APAC region, the state ranked 15th out of 43 countries. Much of the government’s priority is to maintain law-and-order challenges more than making any institutional reforms. However, the Foreign Investments Act is undergoing a significant overhaul in Congress and hopefully open up the country for more foreign investments.
Liveability in the Philippines
In the world rankings, the Philippines still lags in terms of liveability. There is still much to improve in the country. In the latest Global Liveability report by the Economist Intelligence Unit, Manila ranks 103rd. The capital city has an overall liveability score of 62 over 100. With the highest score noted in Education (66.7) and infrastructure (64.3).
The cost of living in the Philippines is considerably lower than most of its neighbouring countries. The quality of life in the country depends on income. Those who live in urban areas have higher salaries but a higher cost of living compared with those in the suburban and rural areas. What may be expensive for the locals may be quite affordable for most foreigners. This affordability is one of the reasons why many still choose to live in and visit the country.
The latest Human Capital Index report by the World Bank showed the country ranked 84th out of 157 countries.
Property Investments in the Philippines
Looking at the Philippines’ residential market, one will see nothing but growth thanks to the robust economic performance. From 2010 to 2018, property prices in the Makati CBD area have risen by as much as 132%. Still, the prices are affordable by international standards. Plus, they also post good yields.
In the Makati area, the average price of an upscale three-bedroom condominium unit increased by a staggering 15.55% in 2018, from a year-on-year rise of 10.46, 9.95%, and 13.43% in 2017, 2016, and 2015, respectively. In the Fort Bonifacio area, the same property type enjoyed a massive increase of 17% per square meter during the same period.
However, house price increases are notably concentrated in these business districts. Nationwide, price appreciation is more muted. According to the Bangko Sentral ng Pilipinas (BSP), regional residential property market only rose by 4.4%.
Property Market Trends in the Philippines
Demand for real estate is strong in the country. While it will slow down, the end-user demand is still there thanks to local and foreign high net-worth individuals who continue to fuel the residential sale market.
In the Colliers report, there will be an increase of more than 1 million square metres of office space, which will yield a 5.4% vacancy by the end of the year. Knowledge process outsourcing (KPO) will drive the demand for office space for the next year.
Flexible co-working spaces are also on the rise. “We see Manila’s flexible workspace stock expanding by at least 10 percent per annum over the next three years on the back of continued rise of micro, small and medium enterprises ; influx of multinational corporations and outsourcing firms looking for plug-and-play offices; and the implementation of a set of policy reforms likely to improve the country’s business climate,” Colliers predicted.
The same report says that these co-working spaces will mushroom in malls, residential towers, hotels, and even professional dormitories.
Land prices also continue to increase, particularly in major upscale areas in the Metro. Land prices in Forbes Park increased by 34% per square metre, while those in Ayala Alabang had a modest increase of 15.8% per square metre.
Rental rates in the country remain steady despite moderate increases in the supply, particularly in condominiums projects. Average rents in Makati, Rockwell Center and Fort Bonifacio increased by 0.8%.
CHG Recommendation: Invest in Luxury Condominiums in Metro Manila
In terms of residential towers, luxury condominiums still take the cake. Bay Area is the best investment option for foreigners. By 2021, the Bay Area will have 15,000 units and will overtake established markets such as the Makati CBD.
Luxury condominiums have the most attractive yields. Additionally, the area caters to a wide variety of tourists – wealthy locals, foreign investors, and offshore gaming firms, so the demand for property investments in the Philippines is high. While gross rental yields in Metro Manila is high from 7.01% to 7.16%, investors must be wary of taxes and other associated expenses.
Since the country is expected to receive tons of tourists, foreign investors can still make good money from rentals. In the first half of 2019, the state already breached the 4 million mark of international tourists. This signals an 11.43% increase from the past year’s figures. With the country’s intensified tourism campaigns and continued infrastructure development in the country, including the construction of new airports, more international tourists and investors are expected to come.