The infrastructure buildup that will be undertaken by the Duterte administration under the “Build, Build, Build” (BBB) program would boost the local real-estate sector as more Filipinos would be encouraged to purchase property.
According to Colliers International Philippines Valuations and Advisory Director Paul Vincent Ramirez, the promised infrastructure buildup could further open new areas where real-estate properties can be built.
“The planned infrastructure projects nationwide, if implemented, will unlock the potential in different areas across the country,” Ramirez told the BusinessMirror.
He added that continuous remittances from overseas Filipino workers (OFWs) would boost the residential sector, while the business-process outsourcing (BPO) sector will take-up available spaces in business districts.
“Residential take-up still continues to be strong and is keeping pace with the previous year. For the office market, BPO, gaming and traditional office locators are the key drivers. While OFW remittances will still help prop up the residential sector,” he added.
In Metro Manila Ramirez said the office market will be driven by a mix of tenants, previously dominated by BPOs, including gaming and traditional office locators, as these are taking up more of the available office spaces.
Earlier the country’s economic managers identified the 75 flagship infrastructure projects under the BBB program. The National Economic and Development Authority Board is planning to approve 18 more flagship infrastructure projects this year.
According to Socioeconomic Planning Secretary Ernesto M. Pernia, out of the 75 flagship projects, 18 projects costing a total of P462.74 billion have been approved by the Neda Board since the President Duterte assumed office.
For 2017 the government targets to spend P847 billion on infrastructure projects in all regions to meet the infrastructure spending-to-GDP ratio of 5.3 percent.
Based on a report released by Colliers International in August, among the segments that will benefit from the government’s infrastructure thrust is property development. It added infrastructure implementation, with decentralization, will help spur the growth of office, residential, retail, industrial and hotel and leisure segments.
“Over the near to medium term, we see the Philippines sustaining robust growth on the back of the government’s infrastructure and decentralization push,” the report read.
It added that the continued expansion of BPOs in Metro Manila will also help increase employment opportunities, which should boost demand for more worker-accommodation units in the country’s capital.
Colliers International said a significant part of the $31 billion in remittances projected to be sent in by OFWs this year, will be set aside for Filipinos’s housing requirements.
As for the reduction in estate taxes proposed by the Department of Finance (DOF), Ramirez said the flat rate of 6 percent may encourage more Filipinos to go through the process of transferring titles instead of avoiding it.
“The issue with the current estate taxes is that some heirs of properties delay or forgo the transfer of ownership of the estate because of prohibitive estate taxes,” he added.
The DOF, as part of its Comprehensive Tax Reform Program proposed a flat rate of 6 percent on both donor’s and estate-tax rates, which currently range from 5 percent to 30 percent.
“With the new scheme, this may encourage heirs to go through the process of title transfer. If the 6 percent is applied, transfer of property ownership will be more affordable, which will ease the financial burden of the bereaved families,” Ramirez said.
This may then allow the government to have a more comprehensive data on title ownership, which will make properties more marketable.
As long as there are no major increases in property-tax rates, the Philippine real-estate sector would remain stable, according to Ramirez.
“If property taxes are consistently applied, and if there are no major increases, it neither hampers nor benefits the industry. It is an accepted fact that almost all property owners pay property taxes,” he said.
The lowering of estate and donor’s taxes is among the features of House Bill 5636, or the Tax Reform Acceleration and Inclusion Act, that was approved on third and final reading on May 31 by the House of Representatives.