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THE country?s property sector performed well in 2008 in several key areas and had been ?resilient? in spite of the situation, but rising construction costs forced developers to increase prices.

Colliers International said that relative to other countries, the Philippines? property sector performed well. Developers were still able to bank on sales despite higher prices. Projects remained profitable. In short, it was just one of those ?challenging? years.

CB Richard Ellis Philippines agreed with this observation, describing the RP property sector in 2008 performing well in general.

Things could have looked much rosier, though. Ramon Jose E. Aguirre, manager for research of Colliers International cited the sector?s weakness: higher prices of construction materials.

?Developers had to hike up their projects? prices to save profit margins,? Aguirre observed.

Good years

He recounted that 2006 and 2007 were also good years for the property sector, which saw countless condominium units become available, and many other promising developments coming into shape.

Aguirre revealed that ?in those two years we saw a property construction boom.?

?Relative to 2008, 2006 and 2007 were better because of two things. First, construction costs skyrocketed during 2008, hurting both investors and developers. Second, a lot of developments already in the market in 2008 happened because of the boom. Supply has temporarily met demand,? Aguirre said.

Global Property Guide?s senior economist Prince Christian R. Cruz, said he sees several signs that the market is already weakening.

?Several developers have moved the completion dates of their projects, postponing it by around two to four quarters. While projects that have already started construction are still expected to be completed, new projects have been put on hold,? Cruz noted.

He added that some developers have offered discounts of up to 30 percent on their new condominium and subdivision projects. ?This is an apparent reversal of the 10 to 20 percent price hike implemented early this year to cover rising construction costs,? Cruz stressed.

Strengths

Aguirre said the strengths, as usual, would be the main growth drivers of the property sector which performed generally well throughout the year: the OFW remittances and the BPOs (business process outsourcing firms).

?At the rate of 15 percent growth this year, remittances continue to be a main contributor of the money invested in real estate. BPO companies are the main demand drivers of office spaces. BPO companies? employment generation also strengthens purchasing power of Filipinos,? he said.

Rick Santos, chair of CB Richard Ellis Philippines, said in a phone interview that the call center and the BPO sector continue to strengthen.

?Especially in the third and fourth quarter of the year, as companies try to save costs in the United States and Europe, they?re having to put more of their back offices down here in the Philippines,? Santos added.

Cruz added that on a positive note, the rental yields on condominiums in Metro Manila?s central business district remained high.

Data from Global Property Guide show yields ranging from 8 to 11 percent.

Call center agents and employees of BPO firms drove rental demand.

Mid-sized units (70 to 120 sq m) earned the highest returns at more than 10 percent.

Residential growth slowing

The Global Property Guide said the global financial turmoil and high inflation have slowed down the country?s real estate growth. Although luxury condominium prices continue to rise, the residential sector has definitely been slowing.

In an e-mail to Inquirer Property, Cruz said the average price of luxury 3 bedroom condominiums in Metro Manila rose by 12 percent by the third quarter of 2008 from a year earlier, according to data from Colliers International.

?Adjusted for inflation, the average condo prices actually fell by 0.16 percent over the same period. This implies that if you bought a luxury 3 bedroom condo last year, you are actually better off keeping your wealth in cash,? Cruz quipped.

The Global Property Guide added that ?the slowdown comes on the heels of a minor recovery from the Asian crisis. Condo prices rose by an average of 14.2 percent (11.2 percent in real terms) in 2007, following a rise of 9 percent in 2005 and 2006, (around 2 percent in real terms).?

Cruz also observed that demand from overseas Filipinos, which contributed strongly to the rise in residential real estate prices, has now weakened due to high inflation, erratic exchange rate movements and the global financial turmoil. The slowdown in Philippine economic growth and higher interest rates have also been pulling housing demand down.