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Insight into Philippines Property Investment 2016 INSIGHTSERIES NEW & EXCLUSIVE
Insight into Philippines
Property Investment2016
INSIGHTSERIES
NEW & EXCLUSIVE
Insight into Philippines Property Investment 2016
01 Global property is back in vogue2016 is proving a strong year for global property investment. Investors have regained their confidence when it comes to overseas real estate, casting the net far and wide for the best property deals in the most lucrative locations.
JLL’s Global Market Perspective Q1 2016 emphasises the newfound positivity, noting the improvement in market fundamentals across all major global regions and property sectors. It follows a strong year for global investment in 2015. Although full-year transaction volumes were recorded as 1% shy of 2014’s volumes, the difference was due largely to the strength of the dollar, which JLL observe underplayed the true level of market activity. Considered at fixed exchange rates, the 2015 volume of US$705 billion would have been US$765 billion, a record-breaking 8% ahead of 2014 volumes and surpassing the 2007 peak of US$758 billion.
Global hotel investment was one area that particularly flourished in 2015, with trades topping US$85 billion. The figure represents 50% growth on 2014, marking 2015 out as the second highest year on record for hotel transactions globally. Confidence in the sector has carried through to
2016, with the JLL Global Market Perspective report observing, “With 2015 surpassing all expectations in terms of the amount of capital flowing into the hotel sector, we expect transaction volumes in 2016 to reach US$70 billion, marking the second-highest level of the cycle.”
As global property investment has come back into fashion, a range of locations have particularly caught investors’ interest. Traditional favourites like London have remained popular, while new areas – particularly in Asia – have also been commanding significant attention. According to a report in Foreign Affairs, economies in Southeast Asia attracted roughly half as much foreign direct investment in 2008 as China did. However, just four years later the two were on an almost level pegging, with Southeast Asia attracting $111 billion in 2012, compared to China’s $121 billion.
Countries such as the Philippines have become the stars of the global real estate investment resurgence, drawing in investors from around the world as confidence strengthens and investors seek to expand their portfolios with opportunities generating impressive returns.
Insight into Philippines Property Investment 2016
Market fundamentals are improving across all major
global regions and property sectors, and recent leasing
activity has surprised on the upside.
Source: JLL Global Market Perspective Q1 2016
100
80
60
40
20
0
US
$ B
illio
nsGlobal hotel transactions
Source: JLL Global Market Perspective Q1 2016
2014 2015
Insight into Philippines Property Investment 2016
02 The rise and rise of the Asian marketsAs investors increasingly seek out emerging markets, Southeast Asia is enjoying its time in the spotlight. The Association of Southeast Asian Nations (ASEAN) is formed of ten countries, which are home to some 620 million people. They have a young, talented labour pool and a burgeoning middle class that is enjoying the countries’ growing wealth.
In the past few years the ASEAN countries have experienced robust growth. In 2012 their combined GDP was more than $2.2 trillion, with many economists confident that the figure would double by 2020. The region’s five core countries (Thailand, Singapore, Indonesia, Malaysia and the Philippines) grew as fast as any other global regional grouping in the five years to 2014.
Foreign direct investment has been pouring in to Southeast Asia as a result of the wide range of excellent opportunities available in the ASEAN countries. In 2015, Asia Pacific enjoyed one of its most robust years for global hotel investment transactions and according to JLL’s Global Market Perspective Q1 2016, the area is projected to see volumes of US$8.5 billion in 2016.
The Philippines is an excellent example of the Asian response to growing global investment interest. The country is taking a proactive approach to tapping into global trends and trade routes, with Finance Secretary Cesar
Purisima pushing for ASEAN to be included in the Trans-Pacific Partnership trade agreement led by the US.
The strong economy of the Philippines is serving to further the country’s cause. Figures from the Philippine Statistics Authority show an 80.4% year on year upswing in the import of capital goods as at January 2016, while total merchandise imports jumped 30.8%, to $6.82 billion. Finance Undersecretary Gil Beltran has pointed to this as an indication of robust manufacturing ahead.
At the same time, the country has been substantially increasing its infrastructure spend in order to help maintain its investment grade rating, according to the Department of Budget and Management. From 1980 to 2009, average infrastructure spending was just over 2% of GDP. The 2016 infrastructure programme accounts for 5% of GBP, with spending in this area having risen from P165 billion in 2010 to P760 billion in 2016.
Investors are keen to buy into this strong financial climate, which offers an attractive combination of stability and healthy returns, with the Philippines showcasing the strength of the ASEAN countries as an emerging market worth of considerable global attention.
Insight into Philippines Property Investment 2016
On the back of one of the most robust years for Asia Pacific
in terms of [global hotel investment] transactions, the region is forecast to see volumes of
US$8.5 billion in 2016
Source: JLL Global Market Perspective Q1 2016
4
3
2
1
0
US
$ T
rillio
ns
ASEAN GDP growth
Source: JLL Global Market Perspective Q1 2016
2012 2013 2014 2015 2016 2017 2018 2019 2020
Insight into Philippines Property Investment 2016
03 Destination: PhilippinesThe Philippines is one of Southeast Asia’s most exciting investment prospects. Made up of more than 7,000 islands, the country is growing faster than any other east Asian country in terms of its population, which already numbers more than 100 million.
The islands provide some of the richest biodiversity on the planet, ranging from stunning beaches and tropical rainforest teaming with wildlife. The natural beauty of the islands attracts visitors from around the globe. Flights head into the main base of Manila’s Ninoy Aquino International Airport, which served some 36.7 million passengers in 2015. Mactan-Cebu International airport is also an increasingly popular route into the Philippines, with passenger numbers increasing 14% in 2015, from 6.8 million in 2014.
The Philippines are a popular holiday destination thanks to their incredible offering in terms of island-hopping potential and beautiful beaches. In January 2016, the country earned an estimated P21.94 billion from tourism activities, with the biggest spenders coming from Korea, followed by the USA, Japan, Canada, Australia, China and the UK. Tourist arrivals grew 13.2% year on year according to the latest economic indicators from the Department of Tourism.
Visitors are drawn to the islands’ unique charms from around the world. In-month international arrivals topped the 500,000 mark for the first time in January 2016, reaching 542,258 – an impressive increase since the 411,064 visitors received in the same month in 2012, according to the Philippines Research and Statistics Division.
As well as tourism, services (particularly business process outsourcing) and manufacturing (particularly electronics) are important industries to
the Philippines. The country a middle power that is moving from a largely agricultural economy to that of a newly industrialized country, which is generating opportunities not only for the Filipino population but also for investors from overseas. According to a study by HSBC, the Philippines will be the 16th largest economy in the world by 2050.
The Comprehensive National Industrial Strategy is an ambitious plan that covers manufacturing, services and agribusiness, with the goal of positioning the country as a regional powerhouse by 2022. Trade Secretary Adrian Cristobal Jr explains,
“CNIS links the manufacturing sector with the agricultural and services sectors. In the process, forward and backward linkages will be strengthened, supply chain gaps will be addressed and the industries’ participation in the global and value chains will be deepened.”
The Philippines is home to the headquarters of the Asian Development Bank and is an important regional financial power. The country also plays an important role on the world stage. It is a founding member of the United Nations, the World Trade Organization, the Association of Southeast Asian Nations, the Asia-Pacific Economic Cooperation forum and the East Asia Summit. According to the Global Competitiveness Index of the World Economic Forum (2014-2015), the Philippines has moved from position 65 to position 52 (out of 144 countries) in just two years, in recognition of the pace at which the country is growing and developing.
Insight into Philippines Property Investment 2016
20
12
20
13
20
14
20
15
20
16
600k
500k
400k
300k
200k
100k
0k
International arrivals
Source: Philippines Research and Statistics Division
The CNIS’ promotion of the big five industries – manufacturing,
agribusiness, tourism, infrastructure and logistics, and IT-BPM – will bring us closer to our goal of sustaining high-level growth, creating more and better jobs, economic
transformation, and shared prosperity for all.
Trade Secretary Adrian Cristobal Jr
Insight into Philippines Property Investment 2016
04 Philippines property market insightsFrom residential property to hotel accommodation, real estate in the Philippines is thriving. It’s a trend that is in line with most markets across the region, according to JLL, with stable increases in prices and rents making the Philippines an attractive prospect for investors around the world.
According to the Global Property Guide, the Philippines’ residential property market has been performing ‘spectacularly,’ with prices of luxury homes enjoying a particular upswing. Demand for homes is strong and residential real estate loans shot up by 25.9% year on year in Q1 2015 according to the country’s central bank, Bangko Sentral ng Pilipinas.
The real estate market (and many other sectors) was positively impacted by President Benigno (Noynoy) Aquino III’s good governance and anti-corruption campaign. The strength with which the campaign was conducted impressed the international investment community and was a key factor behind soaring confidence levels. Between Q3 2010, just after the president’s election, and Q4 2014, property prices in the Philippines rose by 42.2%. During the year to Q2 2015, they rose by 6.61% – the fourth fastest rate in the world, according to the Global Property Guide Q2 2015 Investment Analysis.
The Colliers International Philippines Research and Forecast report for Q4 2015 highlights the pace at which the real estate market is growing. On the residential side, 2015 saw three new condominium buildings add 1,581 new units to the country’s supply. The second half of the year also saw the addition of some 1,739 hotel rooms, while average occupancy rates increased to
70%. Land value appreciation also sped up towards the end of the year and further growth (between 4% and 5% in all major central business districts) is projected for 2016.
Rising visitor numbers and the Philippines’ hosting of the Asia-Pacific Economic Cooperation (APEC) meetings and summit in 2015 have highlighted the country’s need to provide high end hotel accommodation. Plans are in place to add some 5,300 keys to the Philippines’ room stock in Metro Manila during 2016 according to Colliers International, as a result of rapidly increasing demand.
Not only is demand from overseas visitors rising, but domestic demand for hotel and leisure accommodation and services is also expected to continue to increase as a result of the Philippines’ growing middle class.
This buoyant market is packed with opportunities for investors. Infrastructure spending is set to add to the opportunities, for example through the increased visitor capacity that will result from projects like the Boracay Airport expansion. From Q1 2017, the Caticlan regional airport will increase capacity from 1 million to 5 million passengers, as a result of a new runway being built to handle larger planes. With more airlines able to use Boracay Airport from 2017 onwards, airfares are expected to fall, as competition benefits passengers and the tourism industry alike. Yet another strand in the Philippines spectacular growth story!
Insight into Philippines Property Investment 2016
UP 42.2%
Between Q3 2010 and Q4 2014, property prices in the Philippines
rose by 42.2%.
Source: Global Property Guide Q2 2015 Investment Analysis
The Philippine residential property market continued to perform spectacularly, amidst
robust economic growth
Source: Global Property Guide
Insight into Philippines Property Investment 2016
05 Making the most of the PhilippinesInvestors looking to make the most of the Philippines would do well to examine the hotel and leisure industry. Islands such as Boracay and Carabao stand out as shining examples of the country’s potential.
Boracay Island is a popular tourist destination. It was voted the 2015 Best Beach in Asia by TripAdvisor, 2012 World’s Best Island Destination by Travel + Leisure, No.1 Destination for Relaxation and No. 3 Favourite Destination for Nightlife by Agoda.com.
Some 50,000 tourists were expected to arrive in Boracay over the course of 2016’s Holy Week – a significant rise from the 40,000 who visited during the same period in 2013. The island is known for its lively nightlife: live bands, fire dances and club nights ensure that tourists can enjoy their stay to the full, any time of day or night.
The lively pace of Boracay Island is counterbalanced by that of Carabao Island, just a 15 minute boat ride away. Calm waters gently lap at the powdery sands, while coconut palms sway softly in the gentle breeze. It’s the perfect balance and one that has proven to be a serious hit with tourists.
According to Kevin Wallace, managing director of Southeast Asia and Australasia at Plateno Group, the Philippines is the “world’s most promising hotel market.” Locations like Boracay and Carabao are set to experience significant growth.
Plateno’s luxury Portofino brand is set to bring its signature blend of elegance and exclusivity to the island later this year. With the government targeting 6 million tourists this year, according to Tourism Undersecretary Benito C Bengzon Jr, the hotel industry needs to grow its stock of high end rooms – and fast. As Plateno’s Kevin Wallace observes,
“There’s a big shortage of hotel rooms in this country and an even bigger shortage of branded rooms with a consistent quality.”
The Portofino Ocean’s Edge Resort is set to tackle the shortage head on. The private, 22,000 square metre plot enjoys an elevated hilltop position with stunning views over the white sands of its own private cove and the sparkling ocean beyond.
Offering boutique private hotel amenities, Portofino Ocean’s Edge Resort includes private beach and cove, cliff edge clubhouse with restaurant and bar, infinity pool, spa and wellness centre, beach bar, dive shop, private jetty and helipad.
With just 50% of the exclusive resort being released to international investors, Portofino Ocean’s Edge Resort looks set to be one of the Philippines’ most exciting investment opportunities this year.
Insight into Philippines Property Investment 2016
Carabao Island
Boracay
15 minutes by boat
Resort amenities
5 star private beachfront villa resort
10 cliff villas
26 studio villas
6 two bedroom villas
Private resort beach and private cove
Cliff edge clubhouse with restaurant and bar
Infinity pool, spa and wellness centre
Beach bar, dive shop, private jetty and helipad
Insight into Philippines Property Investment 2016
06 The opportunity – welcome to Portofino Ocean’s Edge ResortInvestors wishing to be part of the future of the Portofino Ocean’s Edge Resort can do so from as little as US$109,000 for a studio villa. Cliff villas are available for US$120,000 and two bedroom villas for US$272,000.
Not only does the development offer secure returns, but investors also have the opportunity to use the villa themselves for 14 days per year, with no restrictions around the time of year that they can stay.
10% interest is paid during construction and investors benefit from rental assurance at 10% net per year. The first year’s rental is paid in advance on completion and there is guaranteed developer buyback at 120% in 2020, offering a return on investment of 70% across the five years.
The purchase process is simple – investors pay a reservation deposit of US$1,000. 50% of the payment is due within 28 days of the reservation date, with the remaining 50% due on practical completion. Completion is schedule for September 2016.
For further details on investing in the Portofino Ocean’s Edge Resort and being part of the Philippines’ bright future, contact the Property Frontiers team today.
Investment Fast Facts
Villas priced from US$109,000 to US$272,000
10% interest paid during construction
Rental assurance 10% net per year
First year rental paid in advance on completion
Guaranteed developer buyback 120%
14 day unrestricted personal use per year
Insight into Philippines Property Investment 2016
Nothing in this document shall be regarded or taken as financial advice. The information contained on is not an invitation to invest and may not be relied upon in connection with any investment decision. Individuals should seek independent financial advice before making any investment decisions.
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INSIGHTSERIES
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