January 5, 2024
When considering an entry into property investment within the Philippines, the critical question of timing frequently emerges as a pivotal factor in decision-making. Within the local real estate landscape, divergent opinions prevail, with some seasoned agents advocating for an immediate investment plunge, while others exercise caution, advising prospective investors to bide their time. To furnish you with comprehensive insights that can guide your decision-making process, let's delve into an exploration of the present conditions characterizing the property market in Manila. By understanding the current state of affairs, you can better navigate the nuances and dynamics that define the real estate climate in the bustling metropolis.
Manila, currently facing vulnerabilities and fragility, scores low on the Fragile State Index at 80.5. Factors such as susceptibility to natural disasters, resource limitations, socio-economic disparities, and a history of political instability contribute to the country's precarious state. This suggests caution when considering a property purchase in the Philippines.
On the economic front, the Philippines is forecasted to experience significant growth. The IMF predicts a 6% growth rate for 2023 and 5.8% for 2024, attributing this expansion to strong consumer demand, a robust labor market, and increased remittances. The country's economy is expected to grow by 27.5% over the next five years, presenting a potential opportunity for investors to capitalize on lower property costs and benefit from appreciation.
The Business Confidence Index, currently at a robust 42, reflects Filipino business leaders' unwavering confidence in the economy. This optimism, driven by business-friendly policies, suggests a thriving economy with increased job opportunities and higher incomes. This positive sentiment creates a favorable environment for property investors to earn rental income and potentially witness property values appreciate.
Building Permits Surge:
The surge in building permits in the Philippines, up by 66.1% within the last year, indicates confidence in the property market. While this suggests a growing real estate sector, it may also lead to increased housing supply, potentially causing housing prices to drop in 2024.
Stagnant Property Prices:
Despite a 13.4% increase in home prices over the past five years, the Philippines is currently experiencing stagnant property prices. This trend raises questions about immediate appreciation potential, emphasizing the need for careful consideration.
Population and GDP Growth:
With a 2.6% increase in GDP per capita over the last five years, the Philippines' population is getting slightly richer. This, coupled with a growing population, could drive increased demand for rental properties, particularly in cities like Manila, Cebu, or Davao City.
Rental Yields and Inflation:
Rental yields in the Philippines currently range from 1.6% to 4.3%, indicating moderate income potential. However, the projection of increased real estate supply and rising inflation may impact property affordability and rental rates, requiring investors to weigh these factors carefully.
While the forecasted economic growth and business confidence are positive indicators, the combination of factors such as political stability, market dynamics, and regulatory environment demands careful consideration. The surge in building permits and improving financial status of the population may contribute to increased real estate activity, but oversupply and demand imbalances could influence market dynamics. The neutral signals of stagnant property prices and average rental yields, coupled with the country's vulnerable state, warrant prudent decision-making before diving into property investment in Manila in 2024.