With COVID-19 restrictions continuing to loosen, and the economy being fully open, it seems as if the real estate market in the Philippines is going on a slow yet steady rebound. Still, in spite of these positive developments, there remain to be plenty of uncertainties and emerging trends coming as the country’s property sector enters 2023.
From inflation caused by global political and economic factors to the rising investment power of Filipino consumers, it can definitely be said that next year is set to be an unpredictable but promising one for aspiring homeowners and investors across the country. Now, discover the real estate trends you should watch out for this 2023!
1. Renewed Resilience Amid Inflation
Regionally, the Philippines joins its peers in the Asia-Pacific region in posting growth in the real estate sector into 2023, according to a recent report by Cushman and Wakefield. In fact, double-digit figures are to be expected as Asia-Pacific continues to recover from the aftermath of the COVID-19 pandemic. One must not count out the risks brought about by inflation, however, (expected by the Asian Development Bank to reach 5.3% in 2022) as it threatens to increase construction costs and lessen the potential pool of buyers for properties.
In spite of this, investing in real estate has proven to be effective in the long run, as housing prices have historically kept up with the rate of inflation over a longer period of time, in spite of short-term falls in demand. As such, prospective investors might nonetheless want to consider buying and holding in the near term, as real estate often weathers any economic hiccups that happen during inflationary periods.
2. A Heightened Demand for Luxury Properties
While today’s headwinds might put off some potential buyers, those in the luxury sector seem to be snapping up key real estate assets left and right. In a recent conference held by Lamudi Philippines titled “The Outlook: 2022”, Colliers Philippines Managing Director Richard Raymundo says that residential units are now being offered in luxury sizes, as compared to smaller units being put up for sale during the last Asian Financial Crisis in 1997. The luxury segment also proved to be the most resilient relative to the start of the pandemic in 2020, according to Michael McCullough, the managing director of KMC Savills in an article with Asia Property Awards. In comparison, the mid-segment also showed positive developments with continued recovery signs.
3. Sustainability Is A Necessity, Not A Preference
With the effects of climate change becoming more and more apparent in the Philippines and around the world, sustainability has no longer just become a preference among prospective property investors, but a requirement, as said by Michael McCullough of KMC Savills. Indeed, this has been made more possible with the emergence of even more Green-Certified buildings as mentioned in a JLL report, utilizing innovations such as energy-efficient lights and appliances and the use of eco-friendly building materials: and while rentals for such structures are around 21% higher compared to “brown buildings”, it is expected that the uptick of conversations on market preferences and corporate sustainability goals will help allay this should landlords properly engage their mix of tenants and stakeholders further.
In spite of government and information technology-business process outsourcing (IT-BPO) firms disputing the return to 100% onsite staffing, it seems that the trend of remote work is becoming the norm in the industry. Recently, the Fiscal Incentives Review Board announced that IT-BPO firms registered under the Philippine Economic Zone Authority (PEZA) can retain 70% on-site and 30% remote work indefinitely. Indeed, this change has proven to be beneficial to employees’ productivity and growth, as it allows companies to attract and retain more employees while maintaining the level of service to their customers. This also comes amid the IT-BPO industry posting excellent growth, providing 120,000 jobs and increasing revenues up to $29.49 billion last year. In addition, it is also expected to expand by another 10% this 2022, and increase its workforce by 8%, or 115,000 employees.
5. Millennials, The New Property Buyers
Millennial buyers in their mid-20s to early 30s have now emerged as a new (and investment-literate) market for property developers as well. According to Val Soliven, Executive Vice President and Chief Revenue Officer of Rockwell Land, they are now “…more self-aware, more educated, more conscious of investing. They know the value of their hard-earned money and where it will potentially grow versus just spending it.”
From being an age group once seen as not too keen on saving, and being avid spenders on travel, food, and other experiences, millennials are now expected to shape the country’s real estate market instead as they begin to get married and settle down, while also boosting their spending power.
6. Offices Are Now Entering The Post-POGO Era
Not so long ago, it seemed as if Philippine Offshore Gaming Operators (POGOs) were everywhere, with plenty of businesses popping up to cater to its mostly Mainland Chinese employee base. Yet since the onset of the COVID-19 pandemic and the crackdown of the Chinese government on online gambling, many have now vacated their once-packed office spaces, with up to 500,000 square meters being emptied out of local office space over the past two years. Leechiu Property Consultants even reports that office rental rates could drop from 55 to 80% should the remaining POGOs in the country all pull out.
While this still remains to be seen, rosier projections are also seen in the office sector, with Colliers Philippines reporting new supplies of office space at around 450,000 to 550,000 square meters in annual completion up to 2026 because of high demand from traditional occupiers implementing a return to the office, and some BPOs’ expansion plans.
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