The Duterte administration’s “Build, Build, Build” (BBB) program promises to usher in a “golden age” in infrastructure buildup in the country to boost the economy and subsequently improve the lives of Filipinos as the Chief Executive promised in his campaign sorties in 2016.
However, almost two years after President Duterte assumed power, the construction industry sector is yet to experience the fulfillment of that promise, or even just half of it.
A company executive has noted that the Duterte administration only has a handful of big-ticket projects to boast, while real-estate prices continue to soar by the day.
Waiting game
“The TRAIN has been completed, hopefully the ‘wait’ is finally over and the ‘build’ will start,” a company executive said, referring to the first phase of the Tax Reform for Acceleration and Inclusion, or TRAIN, law that took effect early this year.
Thus, as companies wait for the machines to actually dig the ground, many investors are instead putting their money into real estate.
“They have so much liquidity, and they don’t know where to put it. We all thought that once we signed the documents [for the infrastructure deal], that’s it, the project will be started. But until now we’re still waiting,” the executive said.
Land sellers’ market
In the Philippines, only a few companies can carry out these big-ticket projects, with the likes of the Ayalas, the Sys of the SM group and Aboitiz, along with the companies headed by businessman Manuel V. Pangilinan.
Ayala Land Inc. and the SM group, for instance, are rushing to acquire parcels of land for development in the reclaimed area of Entertainment City in Parañaque, as both ride on the tourism windfall of the huge integrated resort-casinos in the area.
A new Ayala mall will rise at the Aseana City complex adjacent to Pagcor Entertainment City, while the SM group is reportedly shopping for available land in the area, possibly the Ashmore property that sits right across Solaire Resort and Casino. The Wenceslao group, a construction firm, is also rushing to complete its Aseana City.
According to Isidro A. Consunji, chairman of construction firm DMCI Holdings Inc., land prices will be skyrocketing over the next five or six years, and that prices already went up some five times in about six years in places like Pasig, Mandaluyong, Mall of Asia (MOA) in Pasay and Bonifacio Global City (BGC).
“That’s good if you are selling land. But if it’s your raw material, then you will have problems because I think the price increase is too high,” Consunji said.
DMCI is not as big compared with Ayala Land and SM Prime Holdings Inc., but it is in the business of property development since the 1980s, focusing on the residential part of the sector and not much into township.
Consunji said in some areas in BGC, prices are now selling at P1.3 million per square meter and, in the MOA area, the price is at P300,000 per square meter.
“It’s just unbelievable pricing. That [MOA area land prices] is expensive since you have to spend a lot on your foundation and then there’s a maximum height ceiling [of between 45 meters and 65 meters],” he said.
Double-whammy effect
According to Frederick Rara, research and consultancy manager of property broker KMC-Savills, there may be a double-whammy effect of the depreciating peso and rising oil prices on the prospects of the real-estate industry in the country.
Add to that the effect of the TRAIN and the possibility of a rate increase by the Central Bank as inflation rate rises.
“In theory, all of that are dampers [of real-estate industry growth]. But we don’t know what will happen on the ground, it’s still a matter of price,” he said in an interview.
Rara explained rents are increasing at an average of 10 percent to 15 percent, and if construction costs rise by about 10 percent, developers still have the incentive to build even more.
“In the real estate, we’re all derivatives here. We’re still following what the market is doing. Let’s say, for now, they’re willing to buy even at higher rates,” he said.
With the government’s BBB program, the real-estate industry may face another challenge, this time on the possible manpower shortages.
Manpower factor
Public Works Secretary Mark A. Villar said the government is embarking on a massive hiring program—especially for technical people—that will be called “Jobs, Jobs, Jobs,” or JJJ.
“We’re still working with the DOF [Department of Finance], we’re working with other agencies, the BBB team, in order to undertake matching with jobs. We are already looking for people. We are recruiting and we are aggressive in recruitment. We will have the Jobs, Jobs, Jobs program for matching,” Villar said. The program will be launched in May.
Villar revealed that the JJJ will cover Filipino professionals in the country and abroad, and recognized that the government would be competing with private employers, including salary rates, to get the required number of skilled people to improve the implementing agencies’ absorptive capacity.
“The cost of labor will go up…but many will be coming back from overseas. Before, I was in [the] housing [sector], and our engineers were going abroad. Most of them are still abroad. But, if the salary here would be competitive, even if not as high, they will come back. That will become the dynamic,” he said.
At the moment, protecting its pool of manpower is one of the trade secrets of many property developers.
Semirara Mining and Power Corp., for instance, has to peg the salary of some of their skilled workers—or those who operate huge trucks to haul coal from its site on Semirara Island in Antique—on overseas rates, and in dollars, to prevent their workers from leaving the Philippines.
These workers are being poached by other mine sites mainly in Australia and other parts of the world.
The same is true for the likes of Wilcon Depot Inc. for its container truck drivers, whose pay starts at $1,000 at the minimum.
8990 Holdings Inc., a developer of mass-housing projects all over the country, also felt the shortage of workers even before President Duterte came into power.
“And with Digong’s [Duterte’s] Build, Build, Build program, the scarcity of labor will be even more felt,” former 8990 president Januario Jesus Gregorio B. Atencio said.
Image credits: Nonie Reyes