2009 FORECAST
Tourism, office sector to push growth
By Tessa Salazar
Philippine Daily Inquirer
First Posted 18:44:00 01/02/2009
Filed Under: Construction & Property, Real Estate
Conclusion
WHAT would 2009 be like for the property sector?
First, the challenging scenario: Widespread decrease in economic activities is expected in 2009 for the first time in decades as funds to support business activities across all sectors of the global economy dry up, as described by CB Richard Ellis Philippines. “It’s déjà vu for the Philippines with recollections of the 1997 Asian Financial Crisis remaining all too vivid for affected sectors of the economy such as banking, real estate and construction.”
Overall demand could slow down due to the belt-tightening of buyers/investors, according to Colliers International. Ramon Jose E. Aguirre, manager for research of Colliers International, enumerated the challenges that include downward pressures on profit margins, and developers still recovering from higher steel prices (among other construction prices). Also, a lot of ongoing developments (particularly in Metro Manila) could fiercely compete for firms.
Full impact
Global Property Guide said that with the full impact of global economic crisis expected to be felt in the Philippines in 2009, sectors that rely heavily on the international market are expected to be the most severely affected. The Philippines’ real estate sector is one of these sectors.
GPG senior economist Prince Christian R. Cruz added that around 70 percent of permanent overseas Filipinos (dual citizens, immigrants) are in the United States, 11 percent in Canada with some in Australia (6 percent), Europe (6 percent) and Japan (3 percent)—countries seriously affected by the global financial meltdown, with ongoing recessions in the States, Europe and Japan.
“These countries are seriously affected by the global financial meltdown, with ongoing recessions in the States, Europe and Japan. The credit crunch has seriously affected the desire for more investments. With the housing market playing a pivotal role in the crisis, housing investments are expected to be shunned,” Cruz said.
He added that “the overseas Filipino workers themselves are also experiencing problems. About half the OFWs work in the Middle East, where soaring house rents and food prices are fueling runaway inflation. The recent drop in oil prices is expected to affect the growth of Middle East countries, as well.”
Now a rosier scenario: The real estate industry may have been preparing for the worst with the players expected to become more cautious, creative and strategic in 2009 according to Colliers International.
Rethinking strategies
“Developers are rethinking their strategies and plans. They factored in the crisis abroad already. Come to think of it, the global economic crisis actually has a positive impact on how companies think. They are being more cautious, creative and strategic. Industry players and investors are now smarter, that’s why I personally think the industry will come out better than our foreign counterparts,” Aguirre said.
Rick Santos, chair of CB Richard Ellis Philippines, said it’s back to the basics for 2009 as the remaining liquid investors flock to traditional investment instruments such as direct investments and ownership of real estate. “The way to go is revisiting investment opportunities from bricks and mortar business or companies which have a physical presence that offers face-to-face customer experiences.”
Aguirre said there might be a market for overseas Filipinos in 2009. The focus would be other regions (less of the United States and more of Asia, however).
Meanwhile, Cruz said OFWs in Hong Kong, Singapore and Taiwan are also being affected by the economic slowdown. He stressed that “a squeeze on OFW resources could have a significant impact on mid-priced housing units.”
Aguirre said that for the property sector to grow, two demand drivers must hold up: the business process outsourcing office and overseas Filipinos’ remittances. Growth may also be seen in other forms of developments such as tourism-related leisure and retirement projects.
Santos said during a phone interview that the office and tourism sectors would be drivers for growth. Continued demand could still be seen in areas even outside of Manila such as Cebu, Davao, Clark, Baguio and Cagayan de Oro.
“The notable drivers of growth for Philippine real estate in 2009 would still be tourism (for domestic and foreign travelers), business process outsourcing (voice and nonvoice) and OFWs who continue to align to the demands of the global labor markets,” Santos said.
Touch-and-go BPO industry
Global Property Guide said rental demand is expected to remain steady in 2009. The financial crisis can affect the BPO industry both ways, however. The slowdown in consumption and sales in the States and the downsizing of financial institutions will affect several call centers. Some firms have already announced cutbacks in growth targets while putting on hold expansion projects.
“On the other hand, the recession in the States may push the remaining call centers there to move their operations overseas, with the Philippines as one of the top destinations. This can push the Philippine BPO industry to remain expanding amid the global slowdown. As call centers expand, demand for rental units also increases,” Cruz said.
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