REAL estate services firm KMC Mag Group, Inc. sees rosy prospects for the Philippine real estate sector in the next decade against a backdrop of slowing global growth and higher interest rates, but next year’s national election is deemed crucial to sustain the industry’s momentum.
“I still see the market will grow in the five- to 10-year horizon. A lot of that price growth will come from infrastructure development that will increase underlying land values,” KMC Mag Head of Research Antton Nordberg said in a briefing in Makati City on Wednesday.
Without boost from new infrastructure, the real estate market will remain “flat with no capital appreciation,” KMC Mag Managing Director Michael McCullough said in the same briefing.
One of the key factors that determine the future direction of the property sector will be next year’s national election, which may affect investments in real estate if a “candidate not viewed favorably from abroad” wins, Mr. McCullough said.
“There will be some churn. Six years ago, investors put on hold some investments… There was a bit of a pause,” he said.
Despite the weakening global growth, the Philippine property market — considered the “most affordable in the region” — is still expected to be one of the top beneficiaries of growth on the strength of its two main legs: overseas remittances and the business process outsourcing sector, Mr. Nordberg said.
The looming increase in interest rates in the US will have “minimal” impact on the local real estate scene, with a slowing Chinese economy deemed a “key risk” to the Philippine economy.
“Given the healthy external balance sheet, minimal fiscal deficit and limited exposure to external debt, the impact of the Fed interest hike will not be significant,” Mr. Nordberg said.
“China remains a question mark, but as long as the Philippine economy is driven by domestic demand, it will be less vulnerable to outside shocks,” he said.
Meanwhile, KMC Mag said developers are moving to redevelop their existing properties and attract new investors, with the Makati central business district commanding the highest average monthly rental rate in Metro Manila at P979 per square meter.
As written by Krista Angela M. Montealegre and seen on Business World Online