Philippines Real Estate Market Report – 2020 : Ken

Research

• How the Philipppines Real Estate Market Performing?

The Philippines real estate market exhibited a significant growth during 2010-2015. The market

grew at a CAGR of ~%, reaching USD ~ billion in 2015 from USD ~%billion in 2010. Growing

foreign investments accompanied by development in the infrastructure has strengthened the

growth of the Philippines real estate market. Moreover, factors such as rapid urbanization

driven by growing middle class, surging BPO industry, rising number of international tourists,

OFW remittances has further translated the demand for real estate sector in the Philippines.

The market is further expected to witness an impressive growth during the forecast period

2016-2020. The market is witnessed to grow at a CAGR of ~% to reach USD ~%billion by 2020.

The major segments in the real estate sector include revenues from residential units leasing

and sale, office spaces, retail leasing and revenues from hotel sector.

The Philippines real estate market in Manila is expected to witness a rapid growth during the

forecast period 2016-2020. The market is expected to witness a CAGR of ~% during the

forecast period owing to a tremendous growth an expansion in the retail sector followed by

increasing number of residential units and increasing office supply. Other major markets

contributing to the growth in the real estate include Cebu and Davao. The Philippines real

estate sector witnessed a positive outlook during 2014-2015. Growing demand from the

business process outsourcing (BPO) industry, rising rents, a construction boom and a

substantial increase in foreign remittances played a vital role in the Philippines real estate

sector expansion. Demand for residential units remained high. However, high liquidity in the

system kept the capital values outpacing the rental growth. The commercial sector witnessed

a shortage of supply which led to an increase in the rentals during 2015

• How has the Real Estae Market in Metro Manila Performed?

Metro Manila dominates the Philippines real estate market. The market for real estate in Metro

Manila exhibited revenue of USD ~billion in 2015 as compared to USD ~ billion in 2010. The

market witnessed a CAGR of ~% during 2010-2015. The significant growth in the province is

attributed to a number of factors including high take-ups in the office sector, continuously

expanding retail sector, followed by major expansion in the BPO industry. The rapidly

growing employment and income boom generated by these BPO companies has fueled the

demand for more commercial spaces in Manila. Average rents of prime and Grade A office

developments in Metro Manila maintained an upward trend in 2015 owing to robust office

demand and healthy leasing activities during the period. The commercial real estate sector

which includes the offices posted revenues accounting to USD~ million in 2015. The office

sector posted a CAGR of ~% during 2010-2015. The office sector has witnessed a high

demand in the leasing segment owing to affordable rentals in Manila.

The retail sector contributed to the highest market share in the Manila real estate market

accounting for ~% share in 2015. The positive economic outlook, leading to the rise in

private domestic spending, has created a favorable condition for the retail sector. Strong

fundamental such as constant OFW remittances, a growing middle-class, and the good

employment situation translate to increased purchasing power during 2010-2015. The retail

sector in Manila is entirely dominated by the leasing sector. The demand for residential

apartments is backed by increasing popularity of condominium, rising BPO sector which is

leading to an increase in the number of employees, thereby leading to a rise in demand for

residential space in Manila. A rise in the total number of licenses for economic housing

resulted also led to a growth in the residential real estate market. The residential sector

contributed a share of ~% in the Manila real estate market in 2015.

• The hotel market in Metro Manila exhibited a compounded annual growth of ~% during

2010- 2015 on the back of rising tourism in the country. The majority of existing hotels and

serviced apartments are located within the business districts, thereby increasing the demand

for hotels in the regional International tourists in the country reached ~ million in 2015.

• How Have Different Sectors Performed In Manila?

The major chunk of share in the real estate revenues in Philippines was held by the retail real

estate contributing ~% in 2015 owing to continuous increase in the retail stock supply with an

increasing demand driven by expansion of new and existing international brands in the major

shopping malls within Metro Manila. Moreover, the positive growth of remittances and

sustained high level of spending is fueling the retail property market in the region.

The demand for residential apartments on the other hand is backed by increasing popularity of

condominium, rising BPO sector which is leading to an increase in the number of employees,

thereby leading to a rise in demand for residential space in Manila. The region witnessed a

tremendous growth in the investment by real estate companies such as Ayala Land, SM

Prime, Century Properties, Robinson land etc., who are increasingly focusing on new

residential developments. In case of commercial sector, the BPO sector remained the primary

driver of the office property market in 2015. The hotel market in Metro Manila exhibited a

robust growth in 2015 on the back of rising tourism in the country. The majority of existing

hotels and serviced apartments are located within the business districts, thereby increasing

the demand for hotels in the regional International tourists in the country reached 5.4 million

in 2015.

• What Has Been The Contribution Of Davao In The Philippines Real Estate MARKET?

The real estate market of Davao flourished with growing population, increasing construction

activities, lower rentals as compared to Metro Manila, improvement in infrastructure and

migration of people to Davao owing to rapidly growing employment opportunities in the BPO

sector. Though Davao, contributes only a fraction of share in the overall Philippines real

estate market, the province is certainly becoming a choice of property purchase in

Philippines. The real estate market in Davao grew at a CAGR of ~% during 2010-2015, posting

revenue of USD ~ million in 2015.The demand for residential units has remained strong in

Davao due to fast take-up in the low-cost segment. The sector contributed revenue

accounting for USD ~ million in 2015, a ~% increase from 2014. The residential real estate

segment in Davao is majorly dominated by the real estate sales market due to lesser capital

values of condo units in the region. The rapid influx of people into Davao City has

tra sfor ed it i to the ou try’s largest ur a ized area i ter s of populatio , whi h i tur has pushed the demand for retail space in the city. The retail segment posted a CAGR of ~%

during 2010-2015 and is expected to showcase a growth of ~% during 2016-2020.

• What Is The Market Scenario Of Real Estate In Cebu?

Metro Cebu is the second largest province in the Philippines. The province contributed a major

chunk of revenue to the real estate industry in the Philippines during 2015. Market witnessed

a rapid growth, posting revenues amounting to USD ~ billion in 2015. The market grew at a

CAGR of ~% during 2010-2015, owing to surge in overseas remittances from Filipinos abroad,

increasing demand for middle range and economic housing projects by OFWs, huge

investments by major real estate developers in Philippines accompanied by low interest rates

has led to an increase in the construction and demand for residential units. The residential

real estate sector grew at a CAGR of ~% during 2010-2015. The market for residential sector

in Cebu is dominated by the residential sales sector owing to high demand for small and mid

size condos, moreover, OFW are continuously investing money in the purchase of residential

apartments for investment purpose. The continued expansion of the call center industry and

more professionals operating firms have maintained a robust growth in the office property

market. The demand for office space was also supported by the boom in BPO firms due to

cost effectiveness and quality labor pool. The sector grew at a CAGR of ~% during 2010-2015.

The retail sector also contributed largely to the real estate market due to vibrant spending

activities and high foot-traffic across districts, leading to an average mall occupancy rate of

~%. The compounded annual growth rate in the sector accounted for ~%. The hotel sector in

Metro Cebu is growing on the heels of growing number of tourist arrivals in the region. The

real-estate revenues in the hotel sector reached USD ~ million in 2015. Tourist visitor arrivals

grew at double-digit rates, creating a surge in demand for hotels and resorts. The real estate

developers are continuously investing in the expansion of existing and construction of new

hotels in the province. The real estate market in Cebu is expected to exhibit a positive trend

owing to the availability of cheap labor along moderate rise property rentals which in turn is

expected to bolster investments in the province. Moreover, a continuous increase in the

office building projects along with residential projects is expected to brighten the future of

the market. The Cebu real estate market is expected to witness a tremendous growth in the

CAGR accounting for ~% during 2016-2020.

• What have been the Trends for Philippines Real Estae Market?

The Philippines real estate market is driven by growing OFW remittances which help in funding the

real estate se tor. The Philippi es was the world’s third largest re ipie t of foreig re itta es in 2014. It is estimated that remittances from overseas Filipinos account for a tenth of the

Philippi es’ GDP. According the bank of Philippines, personal remittances from overseas Filipino

workers (OFW) reached USD ~ billion in 2015, which is ~% higher than for the same period in

2014. Philippines has witnessed a gradual shift in the marketing expenditure of the real estate

advertisers from offline to online advertising. The real estate advertisers have now started

spending more on digital advertising owing to growing popularity of online real estate websites

across globe. The Philippines rapidly rising Internet penetration rate, a technology savvy

population and an optimistic real estate market is driving the market for online real estate in the

country.

IT-BPO industry in Philippines will continue to drive the growth of Real estate market in the

country. The business process outsourcing sector has been a significant contributor to the

growth of the office market. The IT-BPO sector registered an ~% revenue increase in 2014.

There is a very strong demand for commercial spaces which is been utilized by BPO centers

and offices. On the other hand, the demand for residential units will continue to be strong

due as the BPO sector has led to the arrival of expatiates with the expansion of multinational

companies. This market adds to the demand for more residential units With the growth in

tourism, more hotels are are expected to be introduced in 2015. The increasing arrival of

domestic visitors and international travelers has raised the demand for hotels,

accommodations, and other forms of tourist facilities in the Philippines, thereby leading a

growth in the Philippines hotel sector.

• What Are The Issues & Challlenges Faced By Philippines Real Estate Market

With an exceptional growth of the BPO sector in Philippines, the leasing market for residential

and office space has remained active. Many residential Office real estate projects are

expected to be completed during the forecast period. This in turn has led to a shortage in

supply of office spaces and residential units. The shortage, however, has led to the increase

of rental rates. Current trends also saw the development of several serviced offices, which

cater to the booming outsourcing industry and needs for high-quality office spaces at lower

average rates. Despite the strong demand, financing remains a challenge for prospective

condominium owners. It has been witnessed that the majority of the growing middle class

still doesn't qualify for bank loans. Major real estate developers are constantly trying to work

around this by taking on the bank loans and offering more affordable payment schemes;

however, the Central Bank's strict policy is hampering the lending, thereby posing a challenge

for the growth in real estate market.

The increased competition in the industry has also posed a challenge for the real estate developers.

The increased competition is more apparent in the residential and budget hotel sector across

the country, which have lower barriers to entry than the office, retail, and industrial sector.

• What Is The Status Of Brokerage Market In Philippines?

The brokerage market in the Philippines is segmented on the basis of brokerage from the sale of

property and from leasing. There are around ~ real estate brokers in Philippines having an

average real estate transaction size of ~ properties annually in the leasing segment and around

20 sale transactions. The leading real estate brokerage companies in Philippines include Phil.

Property expert, property 24, Cebu Realty & Brokerage etc.The brokerage rates for sale of

property in Philippines have aligned between 3-5% of the cost of property while for renting it

has stayed equal to one month of rent of the property rented.

• Source: https://www.kenresearch.com/manufacturing-and-construction/real-

estate/philippines-real-estate-market-research-report/29319-97.html

• Contact:

Ken Research

Ankur Gupta, Head Marketing & Communications

Ankur@kenresearch.com

+91-9015378249

Thank you