This week, Colliers Research provides insights on the signed General Appropriations Act of 2022 and its role in buoying the country’s post-pandemic economic recovery; the Davao City condominium market; and PEZA pushing for the lifting of ban on new ecozones in Metro Manila and how it will benefit the office sector.
Duterte signs P5-T budget into law
President Duterte has signed into law the P5.024-trillion national budget for 2022. The country’s economic managers believe the appropriation will play an important role in lifting the country’s economy. The national budget represents close to 22% of the gross domestic product (GDP). It is 10% higher than the P4.506-trillion allocation in 2021.The government said about 20% of the 2022 budget will go to capital outlays, including infrastructure expenditures. The Education department will receive the largest allocation followed by the Department of Public Works and Highways. The 2022 national budget is the country’s largest to date.
Colliers believes that the implementation of the national budget will play an important role in buoying the country’s economy post-pandemic. The infrastructure allotment should ensure that public projects are built across the country. The roads, airports, and seaports lined up by the national government should support the recovery of the property sector beyond 2022. Colliers believes that continued infrastructure implementation will dictate the strategies of national developers over the next 12 to 24 months. This should also complement the decentralization push of the government and create more economic opportunities in the countryside.
Davao condominium market remains upbeat
Vista Land’s Camella Northpoint (located in J.P. Laurel Ave., Bajada, Davao City) continues to be bullish in the condominium market as it recently turned over its fifth building. Several units have already been turned over to owners of the 30-storey condominium project. Buyers are mostly overseas Filipino workers (OFWs) and foreign investors either for end-use or units-for-rent. Vista Land is set to launch two new residential projects in Davao City located in the areas of Buhangin and Lanang.
Colliers believes that Davao City is a key residential hub due to its competitiveness and potential for economic growth. Results from the 2020 Cities and Municipalities Competitiveness Index showed that Davao City ranked as the second most competitive city across the country next to Manila. From 2017 to 2019, the average annual take-up of condominiums in the city reached 5,300 units, up from 2,500 units from 2014 to 2016. In our opinion, residential recovery will likely hinge on increased OFW remittances, improved office leasing and the completion of key infrastructure projects in the next 12 to 24 months such as the Mindanao Railway and the Davao City Bypass Road.
The Philippine Economic Zone Authority (PEZA) said it will recommend that the next administration lift the ban on the creation of new economic zones in Metro Manila to attract more investments. The Duterte administration issued Administrative Order (AO) no. 18 in June 2019, which banned the establishment of new economic zones in the national capital region. The administration issues AO 18 to attract more investments in the countryside. However, some industry observers noted that the ban would not automatically result in more regional investments. Most ecozone locators are business process outsourcing (BPO) companies. These firms initially invest in Metro Manila before opening shop in urban areas outside the capital region.
The creation of more economic zones in Metro Manila should entice more outsourcing firms to open shop in the capital region. In our view, this should support the absorption of more office space in Metro Manila. Colliers believes that greater transactions should eventually lead to rental recovery in the capital region. Despite the implementation of work-from-home arrangements, outsourcing firms continue to take up office space. Increasing office space transactions within and outside Metro Manila point to an office market recovery beyond 2022.