INVESTMENTS

Property Sector amidst Decentralization Thrust

PRIME Philippines Research & Advisory Group • May 06, 2020

 The saturation of Metro Manila has long been an issue in the country as Metro Manila alone accounts for almost 40% of the Philippine’s economic activity. Undoubtedly, the COVID-19 pandemic is underscoring the disadvantages of having our talents, resources, and projects heavily concentrated in one area. In the attempt to mitigate further ramifications stemming from the clustering of activities in Metro Manila, various initiatives have been proposed by the government. These initiatives include the issuance of Administrative Order 18, which puts the processing of applications for new ecozones in Metro Manila under moratorium; and the recently proposed Balik Probinsya program, which is a long-term program encouraging workers in Metro Manila to return to their provinces for work, and businesses to relocate or expand their operations to provinces. Given the significant input of real estate activities and investments to the national economy, future plans in the property sector can contribute a lot to decentralizing commercial development.

Although a great deal of real estate projects are still located in Metro Manila, expansion to the provinces has already been seen as an opportunity by many developers. Aligned with the decentralization initiative of the government, various players in the property sector have started large-scale township developments outside Metro Manila as the congestion of development within NCR becomes more apparent and as the opportunity for developing emerging areas catering to the growing demand in the real estate market increases. 

Based on a survey conducted by PRIME Philippines to real estate investors, among the three major island groups, Luzon remains to be the most preferred location for property acquisition and expansion, followed by Mindanao and then Visayas. Within Luzon, 35% of the investors identified CALABARZON under their expansion priority, while 21% of them are interested in Central Luzon. Investor interest in CALABARZON is primarily driven by the region’s healthy residential and industrial markets. These sectors are seen to be thriving in the region due to the spillover of growth from Metro Manila as well as the presence and proximity of ports. The rise of townships in the region, which are mostly located in Cavite and Laguna, is allowing further commercialization in the region and paves way for its position as a location for alternative business hubs outside Metro Manila. For the case of Central Luzon, although it trails behind CALABARZON in terms of investor interest, it still continues to attract real estate investments primarily due to the presence of economic zones and an international airport. 

Acquisition interest in Mindanao, based on the conducted survey, shows that 18% of the respondents are likely to push through with their acquisition. Meanwhile in Visayas, 44% responded that they are on hold or are unlikely to proceed with property acquisition, although 26% expressed likelihood of setting it in motion.

A straightforward element that investors consider in choosing locations for their projects is the condition of infrastructure in those areas. Most real estate developments are banking on the infrastructure plans in different provinces as these improve livability, boost accessibility and increase land values. Without necessary groundwork in place, provinces are seen to confront challenges in attracting real estate investments.

In working towards decentralization of growth and development, unexpected hurdles are sure to be present. While there will be obstacles, real estate practitioners are challenged to endure as they identify and latch on opportunities. As more investors look into expanding outside Metro Manila, real estate hotspots will emerge.

Tags:
PRIME Philippines, metro manila decentralization, real estate, sentiments amid COVID-19, balik probinsya program, decentralizing commercial development, COVID-19
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