Analysts believe that the Philippine real estate sector could be close to reaching the summit of the post-Asian currency crisis cycle, and that demand will last for two or three more years. Appetite for real estate has been whetted by big demand and low interest rates, making it more affordable for people to buy units for their own or for their family. This situation is different from what the real estate sector was like ten years ago, when people only bought property due to speculations that prices will increase throughout the years.

Central bank data shows that as of September 2007, the total real estate exposures of Philippine banks about to Php 220 billion, showing an increase of 2.4% from the previous year. Loans for commercial property development and infrastructure projects made up the most of this amount (79.9% or Php 154 billion) while 20.1% or Php 38.6 billion was allocated for residential units by individual borrowers or homeowners. This improvement is mostly due to rigorous collection, restructure, settlement, and foreclosure efforts.

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The Department of Environment and Natural Resources (DENR) Secretary Lito Atienza imposed a ban on all hotel and vacation home construction projects in Boracay island.

Atienza has been attempting a moratorium on construction since August of last year, which local mayor Ciceron Cawaling failed to heed. According to Atienza, the island can no longer handle the additional construction without dire environmental consequences. Evidence of the island’s environmental degradation can be seen in the flooding of several business establishments during a period of heavy rains last year.

The DENR is currently writing a moratorium to the mayor to remind him of his duty to protect the island and enforce the construction ban, stressing the Constitution’s mandate to protect the environment. Should Cawaling fail to do anything about it, the Department of Interior and Local Government will have to act against him.

News source: The Inquirer

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The low, 6% interest in Pag-Ibig housing loan packages resulted in more Pag-ibig members and beneficiaries in Cebu and nearby provinces to build more housing units. The 6% interest rate was introduced in 2006 to make loans more affordable for families with low income. Loan packages up to Php 300,000 have a 6% interest rate, down from 9%; loan packages between Php 300,000 to Php 500,000 dropped from 10% to 7%. This results in a low monthly amortization that can get as affordable as Php 1,800 a month.

Since the drop, more low-income families (usually government employees that earn a monthly salary of Php 8,000 to Php 10,000) have benefited from the Pag-Ibig housing project. As of November 2007, the Cebu branch surpassed its target of 1,199 housing units. In Mandaue City, the housing loan program built 962 units for 971 families – 90% of their targeted 1,181 housing units.

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The Philippine Daily Inquirer made a real estate property forecast for 2008 and it looks like we’ve got a fairly good year ahead of us. Rent for office space will continue to have strong growth, and could increase as much as 15%. The demand for this will come from the BPO sector, including call centers, but there won’t be much supply for the year 2008. Vacancy in the Makat CBD and Ortigas Center are currently at single digit levels.

Accessibility still remains a key factor for the middle-income market, and prices are based upon the units’ proximity to schools, business centers, malls, and transportation hubs. High-end developers will also test the Php110,000 per sq/m price level for projects in prime locations with premium amenities.

Cluster residential condominiums will continue to emerge to give a sense of privacy and exclusivity for buyers. There will be an additional 10% increase in 2008, depending on the location. Locations like Fort Bonifacio, however, will find it difficult to increase their prices due to larger supplies.

For the hotels and leisure sectors, expect them to cater to a broader market. There will be condominium projects that are easier to maintain and are more affordable to the middle class, such as Terrazas de Punta Fuego and Hamilo Coast. Boutique hotels will be more popular as more leisure concepts get launched. There are also going to be more hotels in the Makati CBD (Raffles and Fairmont), making it easier for travelers to book rooms in the business district.

Ultimately, the growth in real estate is due to the demand for offshore services, increase in Korean investors in the country, and an increase in Initial Property Offerings from real estate developers. As Philippine properties continue to get sold to key markets abroad like California and Dubai, the income generated here will contribute significantly to Philippine real estate.

Source: Philippine Daily Inquirer, December 29, 2007, B2-1