Happy New Year! What tidings await the Philippines real estate market in 2023? Will the momentum created in 2022 carry over this year? Or, will market forces conspire to determine that 2023 is the year the market begins another descent into madness?
Owning a home remains one of the most important life goals a person can have. Nothing beats the feeling of arriving at your own doorstep after a hard day’s work. Unfortunately, every new year produces more and more Filipinos even as the country’s lands remain the same size. Add the fact that the most desirable locations are either filled up or priced beyond the means of most Filipinos. In between, the Philippines real estate market and its many local developers remain optimistic that the dream of having every Filipino own a home can still come true.
Meanwhile, the work-from-home experiment’s status as the main mode of work is nearing its end. With most companies already reopened, many workers are back at the office again. However, this frenzy of activities related to the return to normal work underscores a few important realities. First, the pandemic is still much in play and COVID-19 is still far from over. So any headway gained during 2022 can still go under in a blink of an eye. Second, the economy remains precarious on a global level.
2022: The State of the Philippine Real Estate Market
Before we look into predictions for the Philippine real estate market in 2023, let’s take a deep dive into what happened the previous year. In a nutshell, 2022 was a transition year. The shift isn’t just about the change in national government leadership. Last year also solidified the push to move from the COVID-19 pandemic. As a result, the Philippine real estate sector experienced a boost in everything from condominium sales to mall space rentals.
According to Collier’s Philippine Property Outlook published last December 2022, demand for pre-selling condos during the first nine months already outpaced figures for 2021. Colliers reported that buyers snapped up around 14,9000 condominium units between January and September 2022. Meanwhile, only 12,400 units were sold for the entire 2021. About 28% of these units come from the mid-income market, which sells condos at the price range between P3.2 million to P6 million. This market includes many Overseas Filipino Workers (OFWs), many of whom are generating increased income due to the higher dollar exchange rates.
Office, Retail, and Tourism All Reported Improvements from 2021
Meanwhile, demand for office space continues to return to pre-pandemic levels. Colliers reported that office space take-up actually went down due to prolonged shutdowns during the first two years of the pandemic, which resulted in the losses of 181,3000 sqm in 2020 and 273,100 sqm in 2021. Thankfully, the start of the reopening movement last year will help close 2022 with an estimated full-year gain of 140,000 sqm, or 19.5% vacancy.
In additional, both the retail and tourism industries also reported signs of a comeback. Malls started flourishing in 2021 but ramped their activity a year later. Colliers estimated the year-end retail vacancy space at 16%. Meanwhile, tourism exceeded its target of 1.7 million foreign arrivals as the country hosted 2 million tourists as of November, 2022. As a result, Metro Manila’s 47% hotel occupancy in the first half of 2022 overshadowed the latter half of 2021’s 44%. The resumption of MICE (Meetings, Incentives, Conferences, and Exhibitions) events helped boost hotel occupancy and spending. In fact, the Department of Tourism gleefully reported that in the first nine months of 2022 alone, the Philippines generated P100.7 billion in tourist spending. This dwarfs the paltry P4.9 billion reported for the whole of 2021.
Major Developers Agree that 2022 Reopened the Philippine Real Estate Market
Major Philippine real estate developers agreed with the assessments that 2022 made inroads toward recovery. Most reported an unexpected but pleasant increase in sales, especially coming from the OFW and international sector. In addition, many developers remain keen in producing more developments in order to fill the current shortfall of around eight million housing units. This is according to an email interview conducted by Ohmyhome to key officers of developers such as Filinvest Land, Federal Land, Ortigas Land, Bria Homes, and SMDC. Most also agreed that if Filipinos, especially OFWs, are looking for the best time to invest in the Philippine real estate market, then 2023 is a great time.
Factors Influencing the Philippine Real Estate Market in 2023
At the least, 2023 hopes to maintain the momentum gathered in the previous year. The widespread availability of COVID-19 vaccines, the accepted practice of wearing masks outside homes, and increased awareness all helped the Philippines counter the more damaging effects of the pandemic. It also helped that around 90% of the world’s population are now deemed resistant to the virus, according to the World Health Organization. The reduced COVID threat allowed both government and businesses to resume their normal activities.
Before we share the upcoming trends for the Philippine Real Estate Market in 2023, let’s revisit a few external factors that can affect the industry.
The Asian Development Bank foresees the Philippines to register a slight lower economic growth rate of 6.3% in 2023 versus 6.5% in 2022. The ADB’s growth prediction remains in line with the country’s Development Budget Coordination Committee (DBCC), which issued an estimate between 6% to 7% this year. Even at the lower estimates of 6.3%, the Philippines
Elsewhere in the world, experts foresee the continued slowdown of the global economy. The World Bank estimates world economic growth to peak at 1.7% for 2023 and 2.7% in 2024. Heightened inflation, higher interest rates, less investment all play a major role in the continued slide toward recession. It also doesn’t help that Russia continues to wage war with Ukraine, disrupting the energy market as well as the financial sector.
Inflation, the rate at which prices increase, remains a lingering effect of the supply chain problems caused by the pandemic. Thankfully, economic experts also foresee a lower inflation rate this year at 4.3%, which is point lower than 2022’s 5.3%. Meanwhile, the DBCC also agrees with the consensus range between 2.5% to 4.5% in 2023, which reflects the ADB estimate.
However, there remains good news for the Philippine real estate market in 2023. Fitch forecases real household spending to grow by 5.5% year on year this year, which is 2% lower from the 2022 forecast of 7.6%. However, experts also expected the growth of household incomes to outperform projected inflation rates. This can lead to increased consumer confidence and increased spending.
Upcoming Predictions and Trends for the Philippine Real Estate Market in 2023
All in all, the mood surrounding the Philippine real estate market in 2023 remains generally optimistic. Guita Saenz-Resurreccion, Sales Group Head of Federal Land, said that their company noted an increase in unit purchases during the first nine months of 2022, which already outpaced their totals for the previous year. Meanwhile, Bria Homes’ COO, Estrellita Tan, reported that the trend to move into less-populated areas that are conducive for remote work helped drive up property prices to new levels.
All developers also hoped that real estate’s forward momentum in 2022 will continue to propel the industry to greater heights this year. In addition, the following trends are foreseen to develop further beginning in 2023:
Trend 1: Increased Infrastructure and Transportation Projects will Create Demand for More Residential Developments in Central and South Luzon
The national government continues to ramp up efforts to improve major transportation and infrastructure hubs. These projects aim to decongest Metro Manila roads while allow provincial centers to grow into urban centers themselves. Within the next three years, the LRT-1 Cavite expansion, MRT-7, Cavite-Laguna Expressway, and North-South Commuter Railway, are also scheduled for completion. In addition, the upgrading of the Clark International Airport to take on more daily passengers can help move people and businesses to Pampanga and outlying provinces. These new transport hubs aim to ease the daily commute of suburban workers in and out of Metro Manila as well as make the outlying provinces more accessible.
Many developers already made a headstart developing numerous residential projects in Cavite, Laguna, Bulacan, and Pampanga. These include the likes of SMDC’s Zeal Residences in Camona and Avida’s Aldea Grove Estates in Angeles.
Trend 2: The Rise of Revenge Spending will Increase Demand for Mall Space and Benefit Mall Operators
Despite current inflation fears, many households continue their spending ways into 2023. The prolonged time spend indoors and the lack of travel options left many families idle for the last few years. With the economy rising, many are resorting to revenge spending, and buying far more than the average Filipino spends regularly.
This increase in spending didn’t go unnoticed by mall operators and retail shops. As early as 2022, many began opening their doors in full during mall hours. From 40% capacity in 2021, malls are now reporting between 85-90% occupancy in the first nine months of 2022. With households expected to increase their spending power this year, so many will continue with the revenge spending binge. Add the continued arival of foreign retail, lifestyle, and dining brands into the country. As a result, malls should expect to fill out their available retail spaces for lease within 2023.
Trend 3: With More Tourists Expected to Arrive, Expect an Increase in Hotel Stays and Tourist Spending
Colliers estimates that by 2023, an additional 3,900 hospitality rooms will be open to accommodate the projected influx of travelers. Within the next three years, more foreign-branded hotels will be opening their doors to receive tourists targeting the Philippines. This includes a concentrated effort to open new hotels in key business districts. They include developed areas such as the Bay Area, Makati, and Ortigas.
What does this mean for local real estate? For developers, this means heightened efforts to build mixed-used condominium units that can also serve as timeshare hotels or condotels. For homeowners, 2023 marks the opportunity to invest in condotels units or repurpose their residences into AirBNB units
Trend 4: Rise of Industrial Parks to Support the Revival of the Industrial Sector
Last June, the Department of Trade and Industry (DTI) reported that foreign businesses pledged more than P500 billion in investment between 2023 and 2024. These investments will go into supporting the current administration’s drive to revive the country’s industrial sector. Developers are now busy creating and developing new business parks. This is especially applicable to areas benefiting from improved transportation systems.
Developers are anticipating an increase in business activities in Central and South Luzon, Visayas, and Mindanao. Apart from spearheading the creation of industrial parks, developers are also launching residential clusters in nearby areas. OFWs and other Filipinos interested in investing might want to check developments targeting industrial park professionals and executives alike.
Trend 5: More Offices in More Provinces
This year also foresees the continuation of Metro Manila’s decongestion. In fact, Colliers remarked that many outsourcing firms as well as major local companies are rethinking their business continuity strategies. Many realizing that remote work is the future way to do business, many are tapping local talent to fill in their various positions.
Initially, the decentralization of business from Metro Manila means a scramble to develop office buildings and centers in key provinces. However, the move also spawned a similar move to fill the demand for residential homes. This is especially true in alternate key provinces such as Iloilo, Pampanga, and Baguio.
Trend 6: The Demand for SOHO and Green Initiatives
With remote work now an option for many workers, new homebuyers are rethinking their needs before buying property. Many now require small office, home office (SOHO) options when considering a home or condo unit. If the pandemic flares up again, or if the office still allows remote work, homeowners want their workspaces ready. This led to the rise in popularity of residential workspace-friendly condominiums and units that allow the addition of lofts.
In addition, the worldwide movement for green initiatives intensifies even as global warming continues to rear its ugly head. Millennial and Gen-Z homebuyers are at the forefront in insisting for residential green homes that consume less energy and pose a lesser threat to the environment. With utilitiy and fuel costs remaining high in 2023, smart homebuyers would actively look for developments that support their choice for a greener and more sustainable environment.
The Philippine Real Estate Market in 2023: Nowhere to Go but Up
The numbers and trends suggest that 2023 will deliver the goods for the real estate sector. The reopening of the country to local and foreign businesses, plus the anticipated increase in purchasing power, can push a return to the country’s pre-pandemic prosperity levels. Continued improvements in the economy, infrastructure, and transportation all promise to increase the country’s attractiveness to investors. No industry offers more potential than the real estate market in 2023.
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