This week, Colliers Research provides insights on GlobalSource Partners’ projected GDP growth for 2022 and its positive effect on the real estate sector, and OFW cash remittance hitting record high in 2021, which bodes well for the residential sector.
PHL economy seen to grow by 6% this year but still vulnerable to pandemic disruptions
GlobalSource Partners expects the Philippine economy to expand by 6% this year, faster than its previous projection of 5.5% growth. However, the forecast is lower than the Philippine government’s target of 7% to 9%. The market research firm noted that among future risks include new variants of the Covid-19 virus and the Ukraine–Russia crisis. The Philippine economy grew by 5.6% in 2021 after contracting by 9.6% in 2020. For 2023, Global Source is projecting an economic growth of 5.5%.
The Philippines’ vaccination rate against Covid-19 is improving and this has been resulting in greater consumer and business confidence throughout the country. Office space deals improved by 18% in 2021 as tenants firmed up back-to-office plans, while average prices of new residential launches reached record-high last year. Operators of major malls in the country reported that consumer traffic is slowly reverting to pre-pandemic level and this should benefit retailers, eventually resulting in greater absorption of physical mall space. Colliers believes that the country’s economic expansion will have a positive effect on the property market. Developers should continue looking for developable parcels of land within and outside Metro Manila and maximizing the availability of vital infrastructure projects that will be completed in the next 12 to 24 months such as MRT-7.
Cash remittances hit record high in 2021
Overseas Filipino worker (OFW) remittances reached a new record-high in 2021, reflecting improvement in the global economy amid the pandemic. Data from the Bangko Sentral ng Pilipinas (BSP) or central bank show that cash remittances reached USD31.4 billion in 2021 (PHP1.6 trillion), up 5.1% from USD29.9 billion (PHP1.5 trillion) in 2020. In December alone, remittances reached USD3.0 billion, the biggest inflow in 2021 or since the USD2.9 billion in December 2020. Remittances typically surge in December as OFWs send more money during the holidays. The United States accounted for 40% of total remittances, followed by Singapore, Saudi Arabia, Japan, and the United Kingdom. The BSP expects cash remittances to grow by 4% in 2022.
Based on our Q4 2021 Residential Survey, about 58% of respondents consider buying house-and-lot or lot-only units in the province as their next residential investment. Colliers has observed that OFW remittances are among the primary demand drivers in the horizontal market, particularly projects that are within the affordable to mid-income (PHP1.7 to PHP6 million) price segments. As of the end of 2021, we have observed sustained take-up for horizontal units north and south of Luzon, including Pampanga, Tarlac, Bulacan, Cavite, Laguna, and Batangas, where projects are between 86% to 97% sold. Colliers recommends that developers look at the viability of launching more horizontal projects in these key provinces. Developers should also continue offering innovative and flexible payment terms to attract potential investors.