A look at some reasons why the Philippines has emerged as one of Asia’s most promising investment destinations.
By Romesh Navaratnarajah
The Philippines remains as one of the bright spots in the region. With GDP growth at 6.1 percent in 2014, it is one of the fastest-growing economies in Asia, according to a report by KMC MAG Group Research, an international associate of Savills (refer to Figure 1).
The report stated that business sentiment in the country will stay very optimistic in 2015, which will have a positive impact on foreign investments.
For the first 10 months of 2014, foreign direct investments reached US$5.3 billion, surpassing the target of US$4.4 billion set for the year.
Gearing up for the AEC
Plans for ASEAN integration through the ASEAN Economic Community (AEC) in 2015 will further improve its business environment as companies can choose to utilize the country’s low-cost labour while having access to Singapore, one of the world’s major financial centres.
“The upside of the integration will become significant in the long term since economic integration increases competition. As the specialization of each country gains momentum, ASEAN products will likely become more competitive globally,” the report said.
OFWs making an impact
Remittances by Overseas Filipino Workers (OFWs), who transfer a portion of their earnings to their families back home, is also growing at a steady rate of 6.2 percent year-on-year and was predicted to reach the US$26 billion level in 2014.
“The remittances are a vital part of the economy accounting to around 10 percent of the GDP, fueling the domestic demand and residential property markets,” noted the firm.
As a result, there is ongoing demand for new housing units, coming mainly from two sources: OFW remittances and the young workers employed in the country’s booming Business Process Outsourcing (BPO) sector.
“OFWs are investing in residential condominiums while the latter, currently enjoying increased purchasing power, are increasingly able to afford condominiums.
“The construction sector remains active as new condominiums are being built. It is estimated that there are around 130,000 condominiums in the pipeline across Metro Manila,” revealed the report.
Meanwhile, the rise in supply of new condo units is pushing up residential prices and rents in the metropolitan area. In 2014, lease rates in the high-end segment climbed by about three to four percent and prices by four to five percent on average, which resulted in an average yield of 4.5 percent. The growth rate in the lower segments of the market remains higher, highlighting the strong demand for more affordable homes.
Financing still an issue
Although buying interest is high, the report found that access to financing is still an obstacle for potential homeowners. “Majority of the growing middle-class still do not have the capability to pay off bank mortgages. As a workaround, developers take on the bank loan and offer relatively more affordable payment schemes for alternative financing, which has been acceptable so far,” stated the consultancy.
However, the central bank of the Philippines has since clamped down on such practices, which may scale back real estate lending and impact home sales. But the tightening of rules is necessary to prevent smaller developers from taking too much risk.
Looking ahead, the country’s future looks even brighter with growth for the entire 2015 and beyond expected to surpass last year’s levels. The World Bank reckons growth this year will reach 6.5 percent, much higher than the global rate of three percent. And the Philippine government is confident a growth of seven to eight percent can be achieved for the next two to three years.
“The Philippines’ stable macroeconomic fundamentals, the government’s commitment to reform, the central bank’s prudence, and steps towards opening itself to foreign trade via the ASEAN integration highlight significant economic potential and sustainable growth in the long term,” concluded the report.
Image: Night shot of Ortigas Centre, a major business district in Metro Manila. (Photo: Ramir Borja; Wikimedia Commons)
Restrictions on foreigners
A growing number of Singapore-based buyers and investors are looking at Philippine properties as an alternative to more established overseas destinations like Australia and the United Kingdom due to the country’s proximity to the city-state and much lower prices.
Another factor is the tough cooling measures that have hit the residential market in Singapore, placing many restrictions on local and overseas investors looking to buy a second home here.
But before you start searching for your dream home in the Philippines, there are several buying restrictions that overseas nationals must be aware of, according to KMC MAG Group, the local associate of Savills.
● Condominium ownership
Overseas nationals can purchase up to 40 percent of a condominium development which tend to be high-rise buildings. Foreigners looking to extend their stay or live permanently in the country can apply for a Special Resident Retirement Visa (SRRV) from the government. Aside from being able to buy an apartment, holders of the visa can lease a land parcel or a house and lot. For more information on the SRRV, go to the Philippine Retirement Authority Website at: www.pra.gov.ph
● Ownership of land
Under the constitution of the Philippines, ownership of land is reserved for Filipino citizens. Dual citizens and former Filipino citizens can own private land, but are subject to certain limitations under the law. Foreigners cannot own private land but can lease it.
● Leasing
Overseas nationals or international corporations can lease land for up to 50 years. This half-century period can be renewed once for a maximum of 25 years. An overseas national can rent a lot and at the same time legally own the house on the rented land.
Source: KMC MAG Group’s “Investment & Country Guide for Philippines 2015”
INTERNATIONAL HIGHLIGHT
Metro Manila’s newest launch combines luxury with affordability.
The Vantage at Kapitolyo
50 West Capitol Drive
Type: Condominium
Developer: Rockwell Primaries
Unit Mix: Studio, one-, two-, and three-bedroom units.
Facilities: Adult pool, kiddie pool, lawn play area, courtyard, function room, fitness studio, meeting room, fitness studio deck.
Nearby Key Amenities: University of Asia and the Pacific, St. Paul Pasig College, Estancia mall, EDSA Shangri-La mall, SM Megamall, Holy Family Parish Church, The Medical City.
Expected Completion: 2020
Starting Price: 3.6 million PHP (S$108,821)
This high-rise condominium built by Rockwell Land’s subsidiary, Rockwell Primaries, is centrally located in Pasig City, making it a convenient commute to Metro Manila’s four Central Business Districts. Launched just this past week, the project has been priced affordably without stinting on the premium lifestyle it offers.
The project comprises two towers with a mix of units, ranging from 312 sq ft to 980 sq ft. Prices start at 3.6 million PHP (S$108,821) and home buyers can expect their units to be completed and handed over in the later half of 2020.
Built on a half-hectare lot, the project comprises two retail levels, as well as a 7th floor amenity deck offering various facilities.
The Vantage sits in a prime location and caters to families, young professionals, and executives who will have easy access to the growing local food scene in the Kapitolyo area as well as key shopping malls, schools, offices and hospitals.
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