8 Trends to Affect Housing Purchases

By: Tessa R. Salazar
Philippine Daily Inquirer

Buyers make or break projects. What factors, therefore, would influence buyers’
demand for housing in the future? What obstacles will affect the real estate purchases
of Filipinos? Here are 8 trends to look out for to determine the industry forecast:

1 Overseas Filipinos’ financial status vis-à-vis global economic concerns. Claro dG.
Cordero Jr., Jones Lang LaSalle Leechiu’s head of research, consulting and valuation,
said the recent uptake in real estate purchases has primarily been demand driven.
Hence, the less than optimistic recovery of the US economy and the spiraling debt
concerns in the  Eurozone may affect job security in these areas and may affect the earnings of overseas Filipinos which have helped finance these purchases.Enrique Soriano, Ateneo program director for real estate and senior adviser for  Wong+ Bernstein Business Advisory, agreed that there has definitely been pressure on overseas Filipinos.
“Absolutely depressed economies in Europe and North America are creating jitters to
the local property market. OFs are sending less money as a result of limited
opportunities in the host countries. In one study, the growth of OF remittance has
declined to single digit levels, with Middle East and Europe declining by 15 percent and
North America exhibiting a big drop of 40 percent in remittances. Only Asia continues
to remain robust, exhibiting double digit remittance at 12 percent,” Soriano said.
Julius Guevara, Colliers International’s associate director for valuation and advisory
and head of consultancy and research, said that “if the economic conditions in Europe
and the United States continue to deteriorate, thereby exacerbating the slowdown in
China, then there would be an effect on remittances in some way.” Colliers International is a global real estate services.
Guevara added: “However, as was seen during the global financial crisis in 2008 where
remittances were steady despite a slowdown, then we could also expect the same
resiliency. In times of trouble, Filipinos abroad have no qualms taking second or even
third jobs just to meet their financial obligations back home.”
Victor Asuncion, CBRE executive director for global research and consultancy, said
OFs are “resilient amid the lingering global economic crisis.”
“If they lose their job, they may still be redeployed in other countries, or could consider starting a business in the Philippines. Ultimately, the motivation of OFs to go abroad is to afford buying their lifetime dream of their own house and lot, send all their kids to school to earn a degree and have a decent life.”

2  Population/demographic movements at home .Cordero revealed that another
interesting trend which may affect the future real estate environment, primarily the
housing market, is the impending change in the demographic makeup of the local
population.
“As seen in the case of Japan in the 1990s and the United States of late, the
introduction of various measures to disrupt the demographic pattern (through various
measures such as population control and incentives for delaying births) has contributed to the slump in housing demand.”
Guevara said the Philippines will not be experiencing the same situation as Japan with
regard to population.
“If you look at a tornado graph of the age distribution of our population, you will see that this is weighted heavily on the younger age set. So, in terms of demand for housing, we see that this will be sustained due to a rising population, whether this be through housing purchases or rentals,” Guevara said.
Asuncion said “the close to 100-million population of the Philippines is the ‘unique
selling proposition’ of the Philippine housing market. Population control in its broadest
sense is not expected to influence the persistent housing backlog of the country.”
Soriano said the “Draconian policies apply to countries that are considered ‘statist’
economies. The Middle East, Japan, Singapore and China are classic statist
economies and can unilaterally make or unmake real estate demand via regulatory
initiatives from adjusting interest rates to carving vast tracts of land and convert them to cities to accommodate the migration of workers.”

3 Major policy shift on land due to calamities. “In the Philippines, we have yet to
experience major policy shift in land and demographic movements. The only exception would be when government uses its regulatory and police powers to isolate areas prone to earthquakes and flash floods,” Soriano said.

4 OFs’ preference for high-rise apartments. Soriano observed that with the increasing
population rate in the Philippines, in particular the close to 17 million people in the
expanded National Capital Region, people are currently purchasing affordable condos
in Metro Manila because of the proximity and the orientation of OFs that have
experienced living in high-rise apartments in their host countries.

5 Affordability, prevailing market conditions and interest rates. Asuncion said that the “affordability of the property, given the prevailing market conditions, prevailing interest rates enable the buyer to avail of cheap bank loans to amortize the purchase.”
Soriano said other factors affecting purchases in real estate include the demographics,
economy, interest rates and government policies. Similarly, interest rates would have a
major effect as a decline in interest rates encourages more people to purchase the
property.

6 A “bloom or gloom” general economy. Asuncion observed: “In the case of the
Philippines now, confidence from local and foreign investors is strong and encouraging.
This results to more investments and more demand for real estate to conduct business. A stable economy translates to a stable employment.”

7 Fluctuations in government policy. According to Soriano, inconsistencies in
government policy and implementation can also cause a decline in confidence in the
real estate sector.

8 Function/purpose of buying. Asuncion said buyers’ purpose to buy properties—either
for their own use or for business—can affect the pattern of real estate purchases in the
Philippines.