Date: February 1, 2024
In 2023, the Philippines real estate regained its status as an attractive market. Manila, particularly, achieved a notable accomplishment by ascending to the pinnacle of the luxury real estate residential market with a remarkable 21.2% year-on-year value gain. This surpassed renowned destinations globally, displacing Dubai to the second position with a 15.9% increase and elevating Shanghai from 5th to 3rd place with a 10.4% rise.
Manila's impressive double-digit growth becomes more noteworthy when considering the global residential home prices, which increased by a mere 2.1% between September 2022 and 2023. Beyond Manila's dominance in the luxury home market, positive developments abound for the country in 2023. Despite existing headwinds, the tailwinds have propelled the Philippines into becoming an appealing investment destination, showcasing resilience and rapid economic growth in 2023 amidst global challenges like inflation and supply chain disruptions.
The progress of the country's infrastructure projects is also a cause for optimism. The government's commitment to spending $160 billion on 194 high-impact Infrastructure Flagship Projects (IFPs) is unfolding as planned. While Luzon received the bulk of the focus, with 76 projects, significant upgrades were also made in Visayas (34) and Mindanao (25).
In Metro Manila, key projects such as the Central Terminal in Quezon City, connecting the LRT-1 and MRT-3 systems, and the MRT-7 linking Manila to Bulacan province are underway. Despite some delays in 2023, the Department of Transportation remains optimistic about commencing operations in early 2024.
Looking ahead to 2024, the Philippines real estate landscape anticipates increased building activities, driven by the rising demand from the luxury market. This surge in demand is expected to trigger renewed construction in tourist-friendly areas like Palawan, Bohol, Cebu, Davao, Batangas, among others.
With the waning impact of COVID-19, businesses are returning to normal operations, and expats, especially those associated with Business Process Outsourcing (BPO) firms and multinationals, are reentering the market. This resurgence is leading to increased demand for premium units, with expats considering property offers ranging from P670,000 to P750,000 per square meter.
However, the rising property prices pose a challenge for Overseas Filipino Workers (OFWs). The OFW market's interest in property ownership grew from 8.1% to 11.7% in Q2 2023. Developers must find a balance in costs, ensuring that properties remain affordable for OFWs, who are eyeing a price range between P2.5 million to P7 million for low/mid-income condominium units.
Shifting focus to office spaces, the Philippines is poised to accommodate growing demand in 2024. Developers and leasing agencies should take note of the upcoming trends, with Colliers estimating a take-up of 300,000 sqm, 80,000 sqm higher than the 2023 estimate. Flight-to-quality strategies are becoming prevalent among BPOs, particularly in key CBDs like BGC, Makati, and Ortigas. Rents for office spaces are experiencing a seesaw effect, thriving in CBDs like BGC, Ortigas, and Makati but facing higher vacancy rates in other areas like the Bay Area and Alabang.
The outlook for hotels and retail spaces is positive, driven by the Philippines' impressive GDP growth. The improvement in infrastructure and roadways, such as the fully operational Skyway in Metro Manila, is enhancing travel convenience. Efforts to promote the Philippines as a desirable MICE (Meetings, Incentives, Conferences, and Exhibitions) venue and the gradual return of tourists are further boosting the prospects for hotels and retail areas.
As the economy flourishes, retail space becomes an attractive venture for foreign brands. The government's efforts to ease regulations on foreign brand entry into the local market are contributing to the influx of new brands in 2024. For homeowners and investors, the current positive climate in the Philippines real estate market, coupled with government support and a favorable investment environment, suggests a promising year in 2024. However, prospective investors should conduct thorough research and exercise patience to uncover hidden gems before the market becomes highly competitive.
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