KMC Savills delivers 2018 Market Outlook to CTREB

Real Estate, Metro Manila, Research Report, Industry Insights, Market Reports, Property Outlook, CTREB, TRAIN Law

The City of Taguig Real Estate Board invited KMC Savills to deliver the 2018 Outlook during their January General Membership Meeting.

Research Manager Fredrick  Rara shared the latest GDP growth of 6.6% YoY registered during the last quarter of the year, making the Philippines one of the fastest growing countries in Asia. This momentum will most likely be sustained by a big government spending plan and PH's exemplary investment portfolio. Based on recent data, it seems like Public-Private Partnership is taking the sidelines as the government focuses on full public spending.

He also addressed the issues surrounding the newly-implemented Tax Reform for Acceleration and Inclusion (TRAIN). He emphasized that it will "not be a big deal" but it will most likely have a slightly adverse effect on the real estate sector. The direct impact will be felt due to the lowered estate taxes and VAT-exempt association dues and residential leases.

However, Rara warned that the said tax reform will also raise the excise taxes and that will make it heavy for the consumers. This will also raise the prices of coal and fuel affecting both construction and electricity costs. Eventually, inflation is expected to jump significantly. To be specific, he predicted that cement price will have a 5-10% hike in price resulting to a 5-10% escalation in residential projects since developers would retain their margins at 30 to 40% per project.

Rara also briefed the CTREB members on the office market updates including a brief insight on the new developments in the residential market. He made it very clear that while the Business Process Outsourcing sector consistently ruled the demand, the Philippine Offshore Gaming Operators (POGO) are also establishing their big share on the office spaces in the country. He pointed out that the Bay Area grew by 6% because it's a hub for POGOs.

In terms of residential, he shared that the take-up is "really good" with the luxury or high-end market producing 5000 units per year. It is also possible that rents will pick up at the same pace.

In conclusion, Rara stated that the overall market outlook for 2018 is looking extremely bright. The office sector will remain "bullish" but rent needs to be properly mitigated to meet the current demand. However, TRAIN will be inflationary, and the Central Bank will most likely raise the prices of goods to keep it under control. The residential market also needs to be more mindful of the country's 10-year bond given that the yields are just starting to escalate.