Phililppines Real Estate Report Q4 2011
Business Monitor International, October 2011, Pages: 63
The Philippines has a very healthy economy, despite being in a region of unrest and following the disaster in Japan in early 2011. This is following a stellar 2010 when full-year real GDP growth was 7.6% yearon- year (y-o-y), the highest in over two decades. Growth will moderate in 2011 but even as the pace of moderation continues, it will still reach 4.5% y-o-y expansion in 2012.
The commercial real estate market continues to recover from large drops in rents and values in 2009. Overbuilding and oversupply of commercial real estate caused issues in some areas, particularly in Cebu. Residential housing remains in short supply, with the Manila Times reporting in July 2011 that there is a shortage of 3mn homes. However, the residential market is suffering from increasingly stringent residential property loan rules brought in after a fraud incident concerning ‘ghost borrowers’.
The country opened up the market for real estate investment trusts (REITs) after passing the Act Providing the Legal Framework for Real Estate Investment Trusts and for Other Purposes in February 2010. It allowed investors to benefit directly from a property’s income rather than investing only in the developer. However, in July 2011, the tax agency added 12% value added tax (VAT) on the transfer of REIT assets and the Bureau of Internal Revenue (BIR) added 30% income tax, severely reducing its attractiveness to developers.
Some of the key opportunities in the real estate market are:
- The government is trying to resolve the conflict in the South China Sea and end 40 years of insurgency from the rebel group the Moro Islamic Liberation Front (MILF) by offering the prospect of autonomy. A more settled region will improve the perception of the country in the eyes of foreign investors.
- The Philippines is one of the fastest urbanising countries in East Asia. With an English-speaking and relatively low-cost workforce, it is ideally placed to participate in high-demand services such as business process outsourcing.
- Many residents in cities in the Philippines continue to experience poverty, environmental degradation and living in slums or other inadequate housing arrangements. Economic development has created rural-to-urban migration. Some key risks to the real estate market are:
- Political unrest in the Middle East and North Africa causing a decline in overseas remittances, economic difficulties in the US and the eurozone and commodity price fluctuations pose risks to private consumption growth.
- Despite President Benigno Aquino III’s pro-foreign direct investment (FDI) policies, the changes in the law affecting REITs mean developers that had planned to set trusts up have stopped. In August 2011, mall developer SM Prime Holdings dropped its plans to raise US$500mn via a REIT and Ayala Land dropped its plans to raise US$400mn following the tax rises by the BIR and the tax agency.
Executive Summary
SWOT Analysis
Philippines Real Estate And Construction SWOT
Philippines Political SWOT
Philippines Economic SWOT
Philippines Business Environment SWOT
Real Estate Market Overview
Table: Philippines’ Real Estate Market – Historic Rents, 2009-2010 (PHP per m2/month)
Table: Philippines’ Real Estate Market – Net Yield, 2010-2012 (%)
Table: Philippines’ Real Estate Market – Terms Of Rental Contract/Lease, Mid-2010
Real Estate Market Analysis
Industry Forecast Scenario
Real Estate Outlook
Table: Philippines’ Real Estate Market – Forecast Rents, 2011-2012 (US$ per m2/month)
Table: Philippines’ Real Estate Market – Forecast Net Yield, 2008-2015 (%)
Construction Industry Outlook
Table: Philippines Construction And Infrastructure Industry Data, 2007-2015
Table: Philippines Construction And Infrastructure Industry Data, 2012-2020
Construction And Infrastructure Forecast Scenario
Macroeconomic Outlook
Table: Philippines Economic Activity, 2008-2015
Real Estate And Construction Business Environment Ratings
Table: Asia Real Estate And Construction Business Environment Ratings
Philippines’ RECBER
Philippines’ Business Environment
Table: BMI Business And Operation Risk Ratings
Institutions
Table: BMI Legal Framework Ratings
Infrastructure
Table: Labour Force Quality
Market Orientation
TABLE: Annual FDI Inflows In Asia, 20060-2208
Table: Asia Pacific Trade And Investment Ratings
Table: Leading Philippine Export Destinations, 2002-2009
Operational Risk
Competitive Landscape
Company Profiles
Ayala Land
EEI Corporation
Filinvest Land Incorporated
First Philippine Balfour Beatty
Megaworld Corporation
Robinsons Land Corporation
SM Prime Holdings
Vista Land & Lifescapes Incorporation
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Ratings
Table: Weighting Of Indicators
Project Finance Ratings Indicators
Table: Design And Construction Phase
Table: Commissioning And Operating Phase – Commercial Construction
Table: Commissioning And Operating Phase – Energy And Utilities
Table: Commissioning And Operating Phase – Transport
Sources
- Ayala Land
- EEI Corporation
- Filinvest Land Incorporated
- First Philippine Balfour Beatty
- Megaworld Corporation
- Robinsons Land Corporation
- SM Prime Holdings
- Vista Land & Lifescapes Incorporation
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