A BMI Research report showed that the Philippine residential property market would attract more investors in the future, while an S&P analyst ruled out the possibility of a real estate bubble.
The BMI report showed that public and private investments would drive growth for residential and non-residential segments. It expects the country to be among the fastest growing markets in Southeast Asia, with an annual average of 9.8% by 2026.
More than 30,000 residential construction permits in the second quarter of 2017 helped drive growth for the market, according to BMI. Compared to previous years, this represented a 24% increase and may continue to take place in the future due to affordable housing initiatives. The government’s support for resolving a housing backlog of 5.7 million homes serves as an example.
Home prices in Metro Manila and the National Capital Region will remain strong. Hence, the sector will attract more investment activity. These developments led BMI to predict an average of 10.3% growth for the residential segment between 2018 and 2026.
Rentals vs Purchases
The home price growth may be a boon for property investors, but it indicates trouble for buyers as it could make it more difficult to find lower-priced properties. Some buyers have already turned to nearby provinces such as Cavite, where there are several mixed-use developments. These projects provide urban-style facilities such as a community center. Lancaster New City Community Center in Imus serves as an example.
However, many Filipinos choose to rent homes. This trend affects property prices that have become “frothy,” due to more rentals than outright purchases, according to Ivan Tan, S&P director for financial institution ratings. Still, Tan said that a real estate bubble remains unlikely at the moment.
The BMI report highlights the investment potential of the country’s residential property market. However, certain steps such as adding more affordable homes should be done to curb rising prices.