Colliers: Property sector remains resilient in Q2

CEBU, Philippines — The property industry remains poised for continued growth despite the slower economic growth in the second quarter, property consultancy firm Colliers International said yesterday.

"Amid the slower growth, the property sector remains resilient with major segments such as office, residential, and leisure poised for record-high demand and supply in 2018," Colliers said.

For one, Cebu has one of the rising real estate sectors, buoyed by commercial, office and residential demand.

The Philippine economy grew by 6 percent in second quarter, slower than the 6.6 percent in first quarter.

"There are initial concerns about the country’s property sector overheating. But the central bank has been implementing measures to temper inflation and quell overheating concerns," Colliers pointed out.

The real estate consultant urged the government to implement policy reforms to make economic growth more inclusive and supportive to the thriving property market.

These reforms, it said, include the continued granting of both tax and non-tax incentives to ensure that the Philippines retains its stature as an attractive destination for outsourcing and industrial locators, and relaxation of foreign ownership restriction in key sectors such as construction to address delays in the completion of projects.

Colliers believes that aside from a highly-skilled labor pool, incentives granted to BPOs and industrial locators are among the Philippines’ advantages over its regional peers.

"In our opinion, the government’s push to build key infrastructure projects and promote other provinces as viable investment hubs should foster a more inclusive and sustainable economic growth over the next three to six years, and this should benefit the property segment," the company said.

Certain challenges are also seen potentially affecting the property market.

Rising interest rates could dampen low to mid-income residential demand over the next 12 to 24 months.

Aside from surging land values in major business districts like Cebu, Colliers attributes the slowdown in condominium launches in the first half to developers’ concerns surrounding increasing interest rates.

On August 8, the central bank raised policy rates by 50 basis points, the most aggressive hike since the global financial crisis in 2008.

"We believe that a volatile interest rate environment should entice local developers to be more open to partnering with foreign firms to develop horizontal and vertical residential projects," it said.

Another challenge is the persisting private construction delays due to the acute shortage of skilled workers and ramped up implementation of public infrastructure projects. The resiliency of the construction sector is supported by the 17 percent growth in the purchases of construction equipment and machinery.

Colliers also sees the uncertainty surrounding the implementation of the second package of Comprehensive Tax Reform Program as another risk.

"The measure proposes to reduce corporate income tax rates and rationalize tax and non-tax perks granted to foreign investors. This compelled a number of manufacturing investors to wait-and-see, resulting in a 38% drop in foreign investment pledges in 1Q2018," it said. (FREEMAN)