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Manila Bulletin devider Business devider The Stock Market devider Growth in real estate sector seen in 3Q — Leechiu

Growth in real estate sector seen in 3Q — Leechiu

Published Oct 20, 2023 05:24 am

Real estate brokerage company Leechiu Property Consultants Inc. (LPC) said growth has been seen in the country’s real estate sector despite climbing interest rates.

The brokerage company, founded by real estate adviser David Leechiu, shared in its third quarter Philippine Property Market Briefing that “capital values in core Central Business Districts (CBDs) have remained resilient.”

It cited the transaction of a core Makati CBD for P1.5 million per square meter in the third quarter of this year.

Current Real Estate Investment Trusts (REITs) continue to attract investors with dividend yields ranging from 6.3 percent to 11.7 percent, attributed to its substantial discounts compared to initial public offering (IPO) prices.

The overall Philippine Stock Exchange (PSE) REIT market, excluding the energy sector REITs, has a combined total market capitalization of P190 billion across 2.236 million square meters with P85,000 per square meter.

The private firm explained that “investors not only benefit from discounted capital value but also enjoy professional management and high-quality tenancy that major developers attract.”

“While investors prefer fixed-income investments due to high key banking interest rates, the REIT market has stayed compressed, thereby allowing long term investors comfortable room for an upside once equities regain favor in the market,” LPC added.

In addition, the traffic portfolios of the top five real estate developers between 2018 and 2022 have also seen “consistent growth,” particularly in the expansion of malls and hotels.

Malls and hotels have been able to grow by 3.5 percent and 9.5 percent respectively despite the impact of the Covid-19 pandemic on the sector.

Property developers are also preparing to meet the rising demand for hotel rooms in anticipation of the 200 percent rise in tourist arrivals in the next five years, as projected by the Department of Tourism (DOT), said the LPC.

Moreover, developers are also “seeking higher returns to supplement the compressed returns in the office sector.”

LPC remarked that “economic conditions and supply and demand conditions may present challenges for the sector” in the short term.

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) is maintaining a 6.25 percent key policy rate, but adjusted its inflation projections from 5.6 percent to 5.8 percent in 2023, and from 3.3 percent to 3.5 percent for 2024, with inflation in 2025 expected at 3.4 percent. Due to the high inflation rates logged in August and September this year, the BSP may announce potential rate hikes this November.

However, LPC said real estate market activity may prosper as the BSP seeks to put inflation under control by the fourth quarter of this year.

“The mid to long term prospects for economic conditions and internal driving factors align with the overall upward trajectory of the Philippine real estate sector,” it said.

Established in 2016, LPC's brokers specializes in tenant and landlord representations, investment sales, general brokerage, research and consultancy, data analytics, and property valuation. The firm has leased more than two million square meters of office space and sold over P100 billion worth of real estate to date.

 

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