Brokerage firm Colfinancial.com sees a slowdown in the property sector in 2016 after years of robust expansion.
The online brokerage firm noted this is particularly true in the residential market.
“Take-up sales of residential properties continue to grow annually. However, the pace of growth has been slowing down since 2014 given the high base effect,” it said.
“This year, we expect growth to remain slow as take up sales in 2015 remain substantial. Aside from high-base effect, as risk to growth this year is the slowing growth of OFW remittances,” it added.
Colfinancial.com noted that in the first 10 months of last year, remittances from overseas Filipinos increased by only 3.7 percent to $20.6 billion from an average of around 7 percent in the past five years.
This should a big consideration in the property market, according to the brokerage firm, given that the average contribution of OFW sales to take-up sales is around 31.5 percent.
“Another possible, albeit small, risk to demand is higher interest rates. Local bond yields have increased following the rate hike by the Federal Reserve of the United States in December of 2015 and
expectations of more rate hikes,” Colfinancial.com said.
“However, according to our banking analyst, lending rates are not expected to mirror the increase in bond yields due to ample liquidity conditions and intense competition among banks. Moreover, the Federal
Reserve has repeatedly said that the rate hike cycle will be slow,” it added.
Colfinancial.com said any increase in lending rates will be very small and not enough to significantly dampen demand for real estate.
The brokerage firm also assured that the risk of a glut is low.
“For the first nine months of 2015, takeup sales of leading property developers outpaced launches. This indicates that sales are not primarily driven by new launches and that there is enough demand to
absorb developers’ existing inventory. This also indicates that developers are disciplined enough to continuously monitor the demand- supply situation and are careful not to flood the market with supply,” it
said.
The office space segment meanwhile continues to benefit from the good prospects of the business process outsourcing sector.
“The depreciation of the peso last year also gives international companies greater incentive to move backroom operations to the Philippines,” it added.
Colfinancial.com said the growth in demand will be able to absorb incoming supply.
“According to Colliers, office supply will grow at a CAGR (compounded annual growth rate) of 8 percent from 7 million sq uare meters in 2014 to 9.5 million sqm by 2018. Meanwhile, IBPAP (Information
Technology Business Processing Association of the Philippines) expects the BPO (business process outsourcing) sector to have 1.3 million full-time employees by 2016, up by a CAGR of 14 percent from 1 million in 2014,” it said.
“Even if growth rate of full-time employees drops to half in 2017 and 2018, we believe it will still be enough to fill the incoming supply,” it also said.
Colfinancial.com meanwhile said outlook for the commercial leasing segment remains positive as retailers continue to expand, creating demand for retail space.
“The improvement in the economy is also resulting to an increase in the number of casual dining outlets. Economic growth and stability has led to the increase in the frequency of people dining out rather than
eating at home, thus creating demand for more casual dining outlets. This serves as a big driver of demand for commercial space,” it said.
“With this in mind, we expect vacancy rates to remain low and same store/ mall sales to remain on an upward trajectory,” Colfinancial.com added.
By ALBERT CASTRO/January 14, 2016/http://www.malaya.com.ph/business-news
The online brokerage firm noted this is particularly true in the residential market.
“Take-up sales of residential properties continue to grow annually. However, the pace of growth has been slowing down since 2014 given the high base effect,” it said.
“This year, we expect growth to remain slow as take up sales in 2015 remain substantial. Aside from high-base effect, as risk to growth this year is the slowing growth of OFW remittances,” it added.
Colfinancial.com noted that in the first 10 months of last year, remittances from overseas Filipinos increased by only 3.7 percent to $20.6 billion from an average of around 7 percent in the past five years.
This should a big consideration in the property market, according to the brokerage firm, given that the average contribution of OFW sales to take-up sales is around 31.5 percent.
“Another possible, albeit small, risk to demand is higher interest rates. Local bond yields have increased following the rate hike by the Federal Reserve of the United States in December of 2015 and
expectations of more rate hikes,” Colfinancial.com said.
“However, according to our banking analyst, lending rates are not expected to mirror the increase in bond yields due to ample liquidity conditions and intense competition among banks. Moreover, the Federal
Reserve has repeatedly said that the rate hike cycle will be slow,” it added.
Colfinancial.com said any increase in lending rates will be very small and not enough to significantly dampen demand for real estate.
The brokerage firm also assured that the risk of a glut is low.
“For the first nine months of 2015, takeup sales of leading property developers outpaced launches. This indicates that sales are not primarily driven by new launches and that there is enough demand to
absorb developers’ existing inventory. This also indicates that developers are disciplined enough to continuously monitor the demand- supply situation and are careful not to flood the market with supply,” it
said.
The office space segment meanwhile continues to benefit from the good prospects of the business process outsourcing sector.
“The depreciation of the peso last year also gives international companies greater incentive to move backroom operations to the Philippines,” it added.
Colfinancial.com said the growth in demand will be able to absorb incoming supply.
“According to Colliers, office supply will grow at a CAGR (compounded annual growth rate) of 8 percent from 7 million sq uare meters in 2014 to 9.5 million sqm by 2018. Meanwhile, IBPAP (Information
Technology Business Processing Association of the Philippines) expects the BPO (business process outsourcing) sector to have 1.3 million full-time employees by 2016, up by a CAGR of 14 percent from 1 million in 2014,” it said.
“Even if growth rate of full-time employees drops to half in 2017 and 2018, we believe it will still be enough to fill the incoming supply,” it also said.
Colfinancial.com meanwhile said outlook for the commercial leasing segment remains positive as retailers continue to expand, creating demand for retail space.
“The improvement in the economy is also resulting to an increase in the number of casual dining outlets. Economic growth and stability has led to the increase in the frequency of people dining out rather than
eating at home, thus creating demand for more casual dining outlets. This serves as a big driver of demand for commercial space,” it said.
“With this in mind, we expect vacancy rates to remain low and same store/ mall sales to remain on an upward trajectory,” Colfinancial.com added.
By ALBERT CASTRO/January 14, 2016/http://www.malaya.com.ph/business-news
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