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Traditional Demand Drivers Stoke Property Amid Slumping GDP

The Philippines’ Q2 2019 GDP growth was the slowest in four years due to the delayed 2019 national budget implementation and public construction decelerating due to its ban leading up to May 2019 elections. We see ramped up construction in H2 2019 as the government catches up on its spending plan. In the current economic climate the opportunity is for developers to expand their office, residential and hospitality footprints outside Manila. Developers should seize this opportunity to build more offices in key hubs outside Manila, and acquire land parcels near soon-to-be expanded regional airports. Hoteliers should continue facilitating intra-Asian demand, by implementing mobile payment platforms popular with Chinese and Korean tourists.


GDP TO PICK-UP IN H2 AFTER SLOWER H1

The Philippines’ GDP grew by 5.5% in Q2 2019, the slowest since the 5.1% posted in 2015. The government attributed the slower-than-desired growth to the delay in passing the 2019 national budget, El Niño phenomenon, the ongoing trade war between the United States and China, and the ban on public construction activities a month prior to the May 2019 senatorial elections. Colliers is optimistic that economic growth will pick up for the remainder of the year as public construction restarted following the midterm elections and full implementation of the national budget. We see this having a positive impact on the property segment. Public construction contracted by 27% in Q2 2019, but was offset by a 23% rise in private construction, which accounts for about 70% of the country’s construction sector. This indicates strong appetite for office towers, residential condominium, malls, hotels, and industrial parks throughout the country. If the contraction of public construction persists for the remainder of 2019 it is likely to become a growing concern among developers as public projects such as roads, bridges, and airports should help decongest Metro Manila and raise land and property values outside the city. The public projects also help dictate the long-term plans of developers.

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Joey Bondoc

Associate Director

Research

Manila

Prior to joining Colliers in March 2016, Joey worked as a Research Manager for a research and consutancy firm where he handled business, political, and macroeconomic analysis. He took part in a number of consultancy projects with multilateral agencies and provided research support and policy recommendations to key government officials and top executives of MNCs in the Philippines.

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