2013: THE YING AND YANG YEAR OF THE WATER SNAKE

Welcome the year of Water Snake 2013!

In year 2012, we experienced heavy rains, floods, destructions, as I predicted last January and February. In 2013, we shall see both “Fire & Rain”, likened to the song of James Tailor- “I have seen both fire and rain,” is our Ying and Yang.

Congressman Rodolfo Valencia and yours truly.

Congressman Rodolfo Valencia and yours truly.

Despite of the problems the country experienced in 2012, the Philippines recorded a highest economic growth in Asia in 2012 and is being considered as one of the new Tiger Nations of Asia. The Philippines gained international reputation for its emerging economy.

I have been critical about several policies of the Aquino administration. Some of these are the unfriendly attitude to business and foreign investment and capital. Example is the non-compliance to the tax incentives of the Real Estate Investment Trust Law.

Then, as economist, I am totally against the population control issue. Here, you have a situation where nations are experiencing  negative birth rates going into irreversible inverted pyramid of demographics where there will be more elderly in need of care and very few young productive workers to support these people in need and the economy. The examples of Japan, Singapore, France, Spain, and even China are suffering because of negative birth rates.

Another area where I am very concerned about is the Land Use Act which is anti-development and prejudices versus landowners, developers and would post major road blocks to economic growth, productivity, and urbanization.

Congressman Rodolfo Valencia, the principal author of Comprehensive Land Use Plan (CLUP), stated that “there has been an apparent delay by the local government units (LGUs) in the completion of their respective CLUP as mandated under Resolution 43 adopted by the House of Representatives, in compliance with the provisions of RA 7160 (the Local Government Code) and other pertinent Executive Orders.”

He added that many LGUs encountered compliance difficulty due to lack of appropriate fund source to finance the expensive and fussy preparation of the CLUP, a tool for development and a means to mitigate the effects of natural calamities.

“It is a document that guides, directs and regulates the physical development of a territorial area, identifying the allocation, character and extent or areas of land resources to be used for different purposes and incorporating, among others, protected environment and agricultural areas,” Valencia said.

Recently, Deputy presidential spokesman, Abigail Valte, said that land use is among the top priorities of President Aquino for 2013. Aside from it, the other priorities are the conditional cash transfer (CCT) and public-private partnership (PPP).

However, I salute and give credit to our President for his campaign against corruption, growth in poorer regions of the Philippines, and improving our economy on its track to become the 16th largest economy by 2050. One of the role model and example of the administration leaders are Finance Secretary, Cesar Purisima who was given the honors as Finance Minister of the Year by Euromoney and BSP Governor, Amando Tetangco who was honored as one of the world’s best central bankers by Global Finance Magazine.

I forecast that the Philippines will continue its growth in 2013 due to its booming services sector, increased government and consumer spending, and trust in the government’s transparency and effort to curb out corruption.

I’m optimistic that the Philippines will get its favorable investment grade in 2013 because of the Standard and Poor’s raising the outlook on the Philippines’ debt to positive due to improvement in governance and public finances. Upgrading the investment grade would mean more investors will invest in the country and further improve the already emerging economy.

The National Economic and Development Authority (NEDA) is projecting an economic growth of 6% to 7% in 2013 and 6.5% to 7.5% in 2014. This record clearly shows the economy is on the right path.

Socio-economic Planning Secretary, Arsenio Balisacan stated that the real estate and housing sector will be one of the government’s key priority sectors in 2013. Others are tourism, BPOs, logistics, electronics, agribusiness, and ship-building.

Like the other real estate professionals and consultants, I believe that the real estate industry will flourish in 2013 due to booming BPO industry, increased tourist arrivals, strong remittances, and harmonized with a healthy investment, low interest, and improving economy. These are the drivers for the real estate boom to 2013 and I believe, too, that the bubble will not develop in 2013.

Manila, which is being considered as an attractive investment site to property investors, will continue its property boom in 2013. The other regions will also benefit like Manila because investors, local and foreign, are keen to invest in our beautiful island where tourists’ arrival is on the rise.

The construction sector is also expected to grow robustly in 2013 due to the onset of major public infrastructure projects and additional boost from private construction. It is believed that the construction sector will grow in the average of 7.5% per annum between 2013 and 2016.

The challenge now for the real estate professionals is on how to cope with the extraordinary success of the real estate industry and how to maintain its run to 2013 and beyond. The country is experiencing real estate boom, unlike years ago when the Philippines is not in the real estate map of investors.

Upcoming condminium supply from 2013-2019 as presented by Victor Asuncion.

Upcoming condminium supply from 2013-2019 as presented by Victor Asuncion.

RESIDENTIAL

Like the international property managers, I also see that in 2013, developers will focus on the mid-income residential market. This reflects the demand from the growing population of families and young professionals. High-end market demand will also be sustained in 2013.

I forecast that we still experience a strong demand in real estate in urban centers, particularly near universities and colleges. Developers are now open to pocket projects that contribute to urban renewal.

I see the strong demand for residential developments in 2013 particularly near the offices and BPOs. And with the strong residential sector, it will make Filipinos as homeowners rather than renters.

Household consumption and demands will also remain robust in 2013, especially with construction boosting its growth.

Despite of the fears of bubble developing in the residential sector, particularly in condominiums, I believe that it won’t happen in 2013. The residential market will see no sign of slowing down in 2013. It will remain robust.

OFFICE

BPO sector has seen its high growth this year and will continue next year because of the improving Philippine economy. For other office spaces aside from BPO, it also has a great year as more and more international firms are relocating to the country, in which foreign investors branded as the “New darling for investments.

I also see more American and European companies investing in the office sector in 2013 and beyond.

BPO revenues are expected to grow to $16B in 2013, on its road to achieve its 10% – 15% growth in 2016 in which the BPO industry is expected to register an annual growth rate of 20%. By 2016, it is expected that it will garner $25B.

Statistics on Residential sector as presented by Mr. Claro Cordero of Jones Lang La Salle Leechiu.

Statistics on Residential sector as presented by Mr. Claro Cordero of Jones Lang La Salle Leechiu.

TOURISM

I see a robust growth for tourism sectors in 2013 because of the high and increasing tourist arrivals prompted local and foreign hotel, recreation, amusement, and resort developers to invest in the country.

High tourist arrivals recorded by the Department of Tourism leads to investors to invest in tourism in the country. The planned PAGCOR Entertainment City, the opening of international brands such as Hyatt, Fairmount Raffles, and Movenpick and Park Inn, and the relocation of previous hotel operators Sheraton, Mercure, and Novotel are a proof that the tourism industry will be bullish in 2013.

I also predict that the real estate companies will commit billions of pesos on hospitality CAPEX for 2013.

For 2013 and beyond, will be good news for tourism sector. The urbanization of Metro Manila, such as the acquisition of FTI by Ayala Land, would create new hotel micromarkets.

I also mentioned that even though the medical tourism industry is having a challenging time, it will take a positive step next year if the real estate developers will heed the call of Retirement Healthcare Coalition to build retirement villages with complete facilities rather than offer just sleeping quarters to attract the silver market.

President Aquino welcomes Family Mart, Ltd., President and CEO,Junji Ueda. FamilyMart will soon launch in the Philippines under the ownership of Ayala Corporation, Rustan's Group and Itochu.  Aside from retail and commercial, Itochu is also into construction industry.(Photo source: www.interaksyon.com)

President Aquino welcomes Family Mart, Ltd., President and CEO,Junji Ueda. FamilyMart will soon launch in the Philippines under the ownership of Ayala Corporation, Rustan’s Group and Itochu. Aside from retail and commercial, Itochu is also into construction industry.
(Photo source: http://www.interaksyon.com)

RETAIL AND COMMERCIAL

Sales and leases will remain strong in 2013 because of the demand for more commercial and retail spaces, the spending of the Filipinos and expansion of malls, supermarkets, and other retail and commercial centers.

One of the examples of a bullish retails sector is SM Malls. In 2012, they opened another mall in China- SM City Chongqing and several malls in the provinces- Olongapo City; Consolacion, Cebu; San Fernando, Pampanga; General Santos City; and Lanang, Davao Oriental. Robinsons Malls is also on a bullish run with its latest offering, Robinsons Magnolia.

Supermarkets will continue to expand in every community and thus, creating a competition with traditional market place or “palengke”.

INDUSTRIAL

Industrial sector is slowly becoming a bright spot for the Philippine Real Estate industry. I agree with what Roque Sorioso stated that manufacturing companies are now moving to the Philippines.  Manila was adjudged as a real estate investment destination this year and the country was named as “New darling of investment.” With this, I see the industrial sector to improve in 2013.

One of the big reasons is that the increasing high labor cost in China makes Japanese and Korean companies to consider shutting down their plants there and moving to the Philippines. These companies are expected to have very little difficulty in this transition as they already have extensive experiences with working in the Philippines and have established communities across different parts of the country.

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The Manila Real Estate Board with Congressman Rodolfo Valencia.

Other reasons is that it is a part of the trend showing investors turning into secondary markets and emerging cities like Manila in search for returns, the country’s young and English-speaking workforce, low labor cost, and that the Philippines’ economy is on the right track.

Per PCCI report, the commercial and industrial chamber is projecting a growth of over 10% in exports and manufacturing industry. Our economic backbone is starting to mature with small and medium size industries and the buildup of entrepreneurs who are fast growing to be world class and globally competitive.

Economic zones in the Philippines are also expanding, making it to catch the eyes of foreign companies. More real estate developers are developing new economic zones so running out of economic zones is not an option.

Improved manufacturing in the country can be seen by 2014 because the global economy is expected to recover during that span and the Aquino government will focus on the needs of the manufacturing companies, especially the infrastructure, in order to attract them to invest in the country.

For me, manufacturing is one of the future pillars of the economy and real estate. If the government can properly provide the needs of the companies, then manufacturing will become another booming industry and will benefit the real estate.

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