This week, Colliers Research provides insights on the construction of the second section of the NLEX connector project and its benefit to the property sector; the continuous increase of OFW remittances and how it further benefits the residential sector; and the bill amending the Public Service Act (PSA) to allow 100% foreign ownership in key sectors – a move that will potentially help boost economic recovery.
NLEX connector Sta. Mesa section breaks ground
The construction of the second section of the NLEX connector project has commenced. The three-kilometer section will flow between España and Sta. Mesa interchanges in Manila. The project, once completed, would improve accessibility to international airports such as NAIA and Clark. The NLEX Connector extends the expressway southward from the NLEX Harbor Link Caloocan Interchange and 5th Avenue/C3 Road and eventually connecting to the Skyway Stage 3. The NLEX Connector project is scheduled to be completed by the end of 2022 and is expected to serve at least 35,000 motorists daily.
In our view, the completion of the government’s infrastructure projects has the potential to raise property values, generate employment, and boost the attractiveness of provincial locations for integrated communities. In 2022, the Department of Budget and Management proposes to allocate PHP1.18 trillion (USD24 billion) for infrastructure projects, up from PHP1.17 trillion in 2021. Colliers believes that the property sector will likely benefit from the higher infrastructure spending as it will influence developers’ expansion plans beyond 2021. In the next 12 to 36 months, we see the completion of major infrastructure projects such as the NLEX–SLEX Connector, North–South Commuter Railway, MRT-7, and the Central Luzon Link Expressway. Once completed, we see these benefitting the provinces of Cavite, Laguna, Batangas, Bulacan, Pampanga, and business districts within Metro Manila.
October remittances highest in 3 months
Overseas Filipino worker (OFW) remittances reached its highest level in 3 months in October. Data from the Bangko Sentral ng Pilipinas (BSP) or central bank show that cash remittances in October 2021 reached USD2.8 billion, up 2.4% from USD2.7 billion a year ago. In 10M 2021, total cash remittances reached USD28.8 billion, up 5.4% YOY. The increase was driven by an uptick in remittances from land-based workers, which rose by 2.8% YOY to USD2.4 billion. The United States accounted for 41% of total remittances followed by Singapore, Saudi Arabia, Japan, and the United Kingdom. The central bank maintains its remittance growth projection in 2021 to 6% from 4%.
Colliers has noted that OFW remittances are among the primary drivers of residential demand in the country, particularly projects that are within the affordable to mid-income (PHP1.7 to PHP6 million) price segments. Despite Covid-19, we have observed a sustained take-up of horizontal units in key provinces, such as Cebu, Iloilo, Pampanga, Cavite, Laguna and Batangas. This is a result of higher demand for larger spaces and less dense communities. Aside from remittances, the economic rebound, ramped-up inoculation program, competitive mortgage rates, and completion of key infrastructure projects should also help stoke demand in the residential sector. Colliers recommends that developers continue offering innovative pricing schemes and promos to attract buyers.
The Senate approved on its third and final reading the bill amending the Public Service Act (PSA) to allow 100% foreign ownership (from the previous 40%) in telecommunications, airlines, and domestic shipping industries. The bill is one of the key reforms expected to help boost the economy’s recovery from the pandemic with the generation of more jobs, improvement in technology, and the modernization of services to the benefit of Filipino consumers.
In our view, the continued inflow of foreign investments is likely to support recovery in office, residential, and industrial segments post-Covid-19. Data from the Philippine Statistics Authority show that foreign investments reached PHP16.8 billion in Q3 2021, down 46% YOY. Colliers believes that the amendment of the PSA should strengthen the Philippines’ attractiveness for foreign investments. In our opinion, the enactment of the PSA should entice more firms to take up office space and support recovery in office leasing starting 2022. Meanwhile, other measures such as the Retail Trade Liberalization and the Foreign Investments Act should also be implemented to ensure that the Philippines remains on the investment radar of foreign businessmen.