Foreign investors remain positive over PH real-estate industry

By Matikas Santos, Inquirer.net, 11-05-2013

MANILA, Philippines-Foreign investors looking at the Philippine real-estate industry see the benefits of coming into the country as greater than the risks such as typhoons, earthquakes, and even the traffic jams.

"[Metro] Manila remains the best value city to do business, largely because of the relatively low real estate costs, and Makati [city] remains to be the location of choice for luxurious residential spaces," head of real-estate firm KMC MAG Group Managing Director Michael McCullough, said in a roundtable discussion with reporters.

"The benefits outweigh the risks," he said when asked about the country's annual share of at least 20 storms and the risk of earthquakes hitting the metropolis because of the Philippines' location on the Pacific Ring of Fire.

The Pacific Ring of Fire is a circular belt around the Pacific Ocean where tectonic plates meet and a large number of volcanic eruptions and earthquakes occur. In the Philippines, numerous fault lines and volcanoes are scattered around the country.

One particular fault close to the metropolis, the West Valley Fault, is expected to cause a magnitude 7.2-earthquake similar to the recent quake in Bohol that destroyed centuries-old churches and roads and bridges.

"It's something that the locators here are willing to accept because of the fantastic labor supply. The quantity and quality of the people that they need are here in the Philippines," McCullough said.

KMC MAG Group, which was established in 2009 and has had P2 billion in investment transactions, sees the stable political climate, increasing remittances from Overseas Filipino Workers (OFWs), and still growing Business Processing Outsourcing (BPO) sector as factors that contribute to the optimism in the booming real-estate industry.

The recent upgrade of the Philippines Credit Ratings has also significantly improved the interest of investors in the country, McCullough said.

Melo Porciuncula, KMC MAG Group Head of Capital Markets and Investments, said that Manila was one of the most affordable cities compared to its neighboring cities in Southeast Asia.

"The thing with Manila, there's really great value, acquisition wise [and] land values, they're one of the most affordable in the region, that's the reason why [McCullough] was saying it's a great place to invest in Manila," he said.

Asked about the problems of congestion in Manila which is among the most densely populated cities in the world, Porciuncula said that they see Manila is not yet "fully utilized" and that there was still "room for growth and expansion."

"You can never discount the fact that it's a place of commerce and people will always converge, thus the expansion of Sta. Rosa [in Laguna] and Valenzuela. They're trying to find ways to make the Central Business Districts still accessible and have the suburb concept," he said.

"There are things that still need to be improved. We were hoping for improvement in public transport system and infrastructure. We have to remember that there are a lot of dense cities in the world that do not experience these problems," Porciuncula said.

The government will need to look at the projects of neighboring countries such as Hong Kong, Bangkok, and Singapore that dealt with the same congestion issues Manila has, he pointed out.

"I think it's a matter of political will, we need a better transport system, we need a better infrastructure program and that's what will answer the challenges that are attached with a dense city like Manila," Porciuncula added.

Big companies in the country have plans in the event of disasters that would severely affect business, McCullough pointed out.

also said they have Business Continuity Process services for their clients in the event of disasters.

But despite these contingency plans, he said that better urban planning is definitely needed to make businesses work better. Traffic, he said, cost around P2 billion in economic losses.

"We do need more urban planning, it's not just the cities that need to urban plan, the whole of Metro Manila needs to come together and work out some of these public transportation systems," he said.

"The traffic just going between Makati and Bonifacio Global City is becoming almost ridiculous and it's just only two kilometers away from each other and it takes you half an hour to 45 minutes sometimes [to get there]," McCullough added.

The implementation and completion of airport and railway projects also need to be done at a faster pace because of the already congested international airport in Manila. He cited the fast growth of Clark airport but noted that the lack of a high-speed railway to connect it to the business districts made it difficult to get there.

"We're clearly going to have to take the development outside of the metropolis but we need the high-speed rails, we need that massive infrastructure to make those areas developable," McCullough said.