BUSINESS | PROPERTY

Sponsored Article: The Philippine economy and real estate

The Philippines’ recent economic figures remain spectacular for investors in spite of the struggling global economy with America’s sluggish growth, Europe’s ongoing crisis, and China’s slowdown.

The country’s remarkable 7.6% GDP expansion in the first half made it the fastest-growing economy in Asia, characterised by strong macroeconomic fundamentals that offers plenty of opportunities for investment.

This positive environment is expected to continue over the next few years as growth forecasts remain positive, specifically the IMF which has recently raised its Philippine outlook for 2014.

Now, just what are the drivers to this growth? Well, the Philippines offers vast opportunities in the agricultural sector as it boasts extensive rainforests, mountainous regions and coastlines. It is a major producer of agricultural products and is rich in mineral and geothermal energy resources. 

The country is also a main supplier of parts in the automotive, aerospace, and electronics industries.

Another main driver of the local economy is its skilled and educated population. The country has a high number of overseas Filipino workers or OFWs (whose remittances strongly drive the Philippine economy). Its talented population has also contributed to the growth of Business Process Outsourcing (BPO) sector in its major central business districts: Bonifacio Global City, Makati and Ortigas, surpassing India as the leader in voice based call center services.

With a rising economy, the Philippines is on its way to a continued property boom. Last quarter, the best performing industry was construction, which translates into a high level of activity on property markets. The fastest growing type of real estate in the Philippines is the condominium development. 

Under the bonnet 

A question you might ask when investing in real estate is how much the rental rates are. Just to give you an idea, let’s take a look at how Makati, the country’s central business district, is doing. Rental rates in Makati condos vary largely depending on the grade and size of the condo building.

The average rental rate across condos in the Makati CBD is 646 PHP per sqm, while small high-end premium condo units located within the district have higher rental rates, reaching up to 1,300 PHP per sqm.

For capital rates, small one- to two-bedroom condo units account for 121,182 PHP per sqm. However, similar to the rental rates, the capital rate also varies within the district.

Condo units in expensive premium-grade buildings can be worth twice as much as below-average condo buildings. Makati remains to be the location of choice for luxurious residential spaces.  

In the next article, we will be talking about the steps for you to take to start investing in Philippine real estate. We will be answering frequently asked questions like, “Can foreigners own property?”, “How much do I need to set aside for real estate investment?” and “What are the risks involved?”. 

Source: KMC MAG Group-Savills Research

This article was supplied by Josh Alfafara. He specialises in leasing and selling of both commercial and residential spaces all over the Philippines. He is a licensed real estate broker and is currently the International Marketing Manager of Alveo Land Corp., an Ayala Land Company. He handled the launch of the company's first ever office building development, High Street South Corporate Plaza, and led his group to reach PHP 1.1B worth of sales during its launch. 

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