THE Philippine economy grew slower than expected (4.3%) in the second quarter of 2023. With the subpar expansion, reaching the growth target of more than 6% in 2023 will likely be a challenge. Analysts are projecting a more moderate growth for the remainder of the year. Despite the tepid growth, the Philippines is projected to be one of the fastest growing economies in Southeast Asia.
The Philippine central bank on Oct. 27 raised the basic policy rate to 6.5% from 6.25%. This is likely to raise mortgage rates imposed by banks and affect the overall appetite for residential units.
Asset classes that generate recurring income, including retail and hotels, are benefiting from a personal consumption-backed economic rebound. Developers should now take a closer look at various property segments and identify which sectors to focus on. Specific property subsectors continue to outperform other subsegments.
Colliers believes that economic growth for the remainder of the year will likely be led by personal consumption, and this should further prop up retail and hotel segments. Greater office space take-up will partly hinge on business expansions within and outside Metro Manila, while residential demand will partly depend on remittances sent home by Filipinos working abroad as well as investors’ overall appetite for the upscale and luxury residential developments.
There are several opportunities in the market despite some persistent headwinds. Colliers is still optimistic that property stakeholders will be able to enjoy a strong finish towards the end of 2023 as opportunities still remain for selected property segments.
Developers should be able to plan ahead to take advantage of the Philippine property sector’s growth for the long term. Property firms should be mindful of new economic policies and programs likely to be implemented by the government starting 2024 and closely observe how these will redefine the regulatory environment for Philippine property stakeholders.
RESIDENTIAL: DEVELOPERS BANK ON DEMAND FOR RESORT-ORIENTED PROPERTIESCondominium leasing continues to recover across Metro Manila, especially with the return of more expatriates. Local employees gradually returning to on-site work also contribute to improved leasing especially in major business districts including Makati central business district, Ortigas Center, and Fort Bonifacio. Pre-selling demand has been recovering year on year, driven by the mid-income segment, but developers remain cautious of new launches especially given the substantial ready-for-occupancy (RFO) units and the elevated vacancies in the secondary market.
Colliers retains its earlier forecast that rents and prices will continue to improve for the remainder of 2023 but the substantial completion of new condominium units in 2024 is likely to exert a downward pressure on rents and prices next year.
Colliers has been seeing the expansion of resort or leisure-themed projects outside Metro Manila, and we project the launch of similar projects as property firms cater to a rising demand from a discerning and affluent market. Colliers believes that to stoke the market, attractive and flexible payment terms and promos should continue to be offered by developers. Green and sustainable features should also be integrated and highlighted as demand for these features rose at the height of the pandemic. This is also an opportune time for unit owners to upgrade and renovate to capture demand from returning expatriates.
RETAIL: SUSTAINING FOOTFALL AS IMPACT OF REVENGE SPENDING DISSIPATESThe impact of revenge spending across the country is starting to dissipate so the challenge for mall operators and retailers now is to sustain footfall and consumer spending. Colliers sees holiday-induced spending partly offsetting this projected slowdown. We are optimistic of sustained interest from retailers, especially those interested in occupying brick-and-mortar mall space in prime locations across major business districts in Metro Manila. We are projecting a slight increase in vacancy starting 2024 due to substantial delivery of new mall space.
Colliers believes that mall operators and retailers should cash in on holiday spending across the country. Holiday marketing initiatives should be amplified while mall operators should use the festive season as an opportunity to reactivate activity centers and curate events to attract more mallgoers and entice shoppers to spend more. Developers with upcoming malls should carefully assess the retail mix that they will offer to consumers. While operators and retailers continue to welcome more customers in-store, both should work together in improving the omnichannel shopping experience of Filipino consumers.
(To be concluded next week)
Joey Roi Bondoc is the research director for Colliers Philippines.