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External Crises May Hamper Growth of PHL Residential Market

7/9/2015

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CRISES in the Middle East and the euro zone may gravely hold back growth in the residential-condominium market, Jones Lang Lasalle Inc. (JLL) Philippines Inc. Research Head Claro Cordero said.

Specifically, economic and political crises in these regions will have a direct threat to the livelihood and remittance capacity of overseas Filipino workers (OFWs) living in those areas, he said. OFW remittances are one of the main drivers of demand in this sector, Cordero said.

“Those with high probability of happening and with potential great ramifications for the sectors should, by our opinion, be addressed with a higher degree of priority,” he said.

The executive cited the recent crisis in Greece, saying that it shook the global economy and that it will affect the local property sector if the aftermath of the crisis endures.

“The impact on the Philippines may not be felt immediately, but since Europe is home to a significant number of overseas Filipinos, if the crisis continues, we’re likely to see some effects on the property sector,” he said.

But aside from the conflicts, other potential threats to the residential market in the country include its poor infrastructure and next year’s presidential elections.

The constant delay of public-private partnership projects could prevent the growth of the market in the long run because of “the inefficiency of the country’s infrastructure system,” Cordero said.

“In order to sustain the growth we are currently enjoying, the infrastructure system needs to be properly placed,” he noted. Also, the new leadership the country will be subject to in the next year bears negative effects on the residential market, as well, JLL Regional Director Lindsay Orr said.

“It probably will [slow down investments] because, typically, people have a wait-and-see mentality,” he said.

“It won’t mean foreign direct investments will dry up, but I think beginning 2016, there should be a slowing down.”

JLL reported that from more than $2 billion worth of foreign direct investments (FDI) in 2009, FDI dropped to a little under $2 billion at the outset of President Benigno Aquino III’s term in 2010.

The beginning of former President Joseph Ejercito Estrada’s term, however, met with a total of $2.2 billion worth of FDI in 1998, rising from some $1 billion in 1997.

FDI at the start of Arroyo’s term also increased to $0.6 billion in 2004 compared to 2003, but only slightly.

Orr said the reason for the slowdown is foreign investors are cautious of how the new leader will handle the country’s economic reforms, government spending, tax incentives, investment transparency and governance.

Risks such as the ongoing territorial issues with China, the “ever-lingering threat of natural calamities,” and Bangko Sentral ng Pilipinas’s (BSP) measures, which may curb residential demand, could also slow down the residential market, according to JLL.

However, amid these challenges are opportunities such as the integration of the economies of all the 10 member-states of the Association of Southeast Asian Nations as investors from Singapore, Malaysia and Indonesia are eyeing the Philippines for opportunities.
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“Global events are potential risks and opportunities for the residential market; however, our local economic outlook is expected to support the residential market,” Cordero said.


By:  Justine Anjanique P. Jordan / Special to the Business Mirror http://www.businessmirror.com.ph
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