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

The Philippines is projected to become a $1-trillion economy by 2030, with the information technology-business process outsourcing (IT-BPO) and remittances from abroad as main drivers, said an international analytics firm.
Rajiv Biswas, IHS Global Insight chief economist for Asia-Pacific, estimated that the Philippines, with a gross domestic product of about $292 billion, has the potential to become a $695-billion economy by 2025 and over a $1-trillion economy by 2030.

“Two important growth drivers for the Philippines’ economy are the rapidly growing information technology-business process outsourcing (IT-BPO) sector and the strong flow of remittances from Filipino workers abroad,” Biswas said.
“The rapid growth of the IT-BPO industry is also creating positive transmission effects for the rest of the economy, including rapid growth in demand for commercial floor space, underpinning the development of existing and new office parks in urban centers,” Biswas added.

IHS also cited the Philippines as the only sovereign entity in Asia with improving credit prospects.

IHS, whose reports are used as reference by other organizations including credit-rating agencies, investment banks, and development institutions, cited the trend of improving financial fundamentals, investor confidence, and governance standards in the Philippines.

In its “Sovereign Risk Review” report for the third quarter of 2015, IHS, which also assigns its own credit ratings, said it upgraded its outlook on the Philippines’ credit rating from “stable” to “positive.”
The improved outlook means that the Philippines’ existing credit rating with IHS, set at the minimum investment grade of “BBB-“, has a chance of being raised over the near term.

The Sovereign Risk Review compares and assesses every sovereign worldwide across ratings agencies.

IHS said in the report that what’s more encouraging about the Philippines is that the strong macroeconomic fundamentals are combined with improvements in governance.
“…apart from the clearly strengthened macro-financials over the last few years, the more recent upgrade to the Philippines’ outlook to positive in Q3 rested on improved governance standards and reforms enhancing competitiveness under the Aquino administration,” it said in the report.

The Philippines is the only sovereign in Asia that garnered a positive action from IHS.

IHS recognized the Philippines’ comfortable liquidity as evidenced by sustained surpluses in its current account, as well as continually improving manageability of debt on the back of prudent fiscal management and growing economy.
Investor Relations Office (IRO) Executive Director Editha Martin welcomed the favorable views of IHS on the Philippines, saying they would help in further improving international perception of the economy.

“Although the Philippines now enjoys investment grade sovereign credit ratings from a wide list of international debt watchers, further building confidence on the economy is a never-ending task as we aim for sustainability of gains. The positive assessment of IHS on the Philippines is a welcome development,” Martin said.

She cited the concrete benefits of favorable credit ratings, including lower interest rates on loans as well as business confidence that helps boost investments and job creation.

As seen on Sun Star.