Property investments seen rising

Business World by Bettina Faye V. Roc, 11-13-2013

At the 4th Annual Asia Pacific Real Estate Investment Summit yesterday, industry stakeholders and government officials alike touted the various opportunities in the country's growing real estate sector. "Economic growth bodes well for real estate here in the Philippines. The local market will continue to grow amid the prevalence of low interest rates, the high liquidity ... and with the housing backlog still to be addressed, as well as tourism goals, there is a lot of room for private sector investment," Jaime E. Ysmael, Ayala Land, Inc. chief financial officer, said. "And there is renewed interest in the country given our favorable economic performance, as well as our investment-grade status. This will continue to contribute to the industry's development," Mr. Ysmael said.

The Philippine economy expanded by 7.6% in the first semester, faster than most Asian countries and exceeding the government's 6-7% goal for the year. The country is also now considered investment grade by the three major credit rating agencies after Moody's Investors Service, on Oct. 3, raised its credit rating one notch to Baa3 with a "positive" outlook from Ba1. Fitch Ratings and Standard & Poor's had earlier raised their ratings for the country to investment grade -- BBB- from BB+ with "stable" outlooks -- in March and May, respectively. Finance Secretary Cesar V. Purisima said in his keynote speech that, aside from the country's own economic fundamentals, regional developments should likewise contribute to the real estate's expansion.

"For example, by 2015, ASEAN (Association of Southeast Asian Nations) will become a more integrated community. Competition will be wider, which will be good for consumers, as this will spur growth in the market," Mr. Purisima said. "We are also about to hit our demographic sweet spot, with a young population just about to enter the labor force. Purchasing power will shift, not only for us but also for a lot of countries in the region. That will widen investors' markets," he said. Financing is likewise available and accessible for developers and endusers, members of the banking industry said. Bank of the Philippine Islands (BPI) Capital Corp. President Cecilia L. Tan said several financing instruments may be tapped in the capital markets. "On an overall basis, the financing support for real estate is there. Developers have to start looking at the capital markets, which is awash with liquidity. For end-users, we've lengthened tenors so they can enjoy lower interest rates," Ms. Tan said. BDO Capital & Investment Corp. President Eduardo V. Francisco said that the investment-grade status will continue to help developers and end-users lock in lower interest rates and borrow at lower costs for financing. Mr. Francisco noted, however, that there are still areas that need more financial accessibility. "For example, for those sectors with the highest need -- in particular, socialized housing -- these are the unbankable. So, there's a need for a government effort to help these sectors," he said. "The move to do developments outside Metro Manila sort of addresses this segment, but other segments are in a better position. There must be a comprehensive program," BPI's Ms. Tan added. Mr. Purisima said another challenge is the continued increase in external risks that could affect real estate, such as vulnerabilities to climate change. "There is a need to share risks, and also plan communities better," said the Finance chief. Industry players and stakeholders said that while investors -- particularly firms from neighboring countries -- are starting to look at the Philippine real estate market, the business environment here could also still be improved. "Business compliance still takes long, although it has substantially improved," said Jose Carmelo J. Porciuncula, head of business operations and capital markets at KMC MAG Group, Inc. "Foreign ownership limits also need to be revisited, maybe, and the capital markets developed further to provide more space for real estate investments here," Mr. Porciuncula said. BNP Paribas Director Khim Siew Han noted that investor sentiment in the Philippines has increased given its strong fundamentals. "Demand is still good; rental values here compared to the whole region are still pretty competitive.... Business should keep driving the real estate market's growth here, especially in middle and lower markets," he said. Growth in the real estate sector will in turn drive economic expansion, Mr. Purisima stressed. "Long-term investments and commitment of capital will help the government remain on this growth trajectory and make it more sustainable," he said.