Huge overseas work force fuels new building boom in Metro Manila

A new building boom is sweeping across Metro Manila and surrounding areas, fueled by cash-flush overseas-based Filipinos looking to invest in retirement homes, industry experts say.

Overseas Filipino workers (OFWs), particularly in the United States where they number about three million, are "bullish on the Philippines’ real estate market," said the Foreign Affairs department which organized a successful property roadshow in New York in June. Another one is planned next year.

"The exciting prospects in the residential market are being boosted by rising demand from OFWs, improving affordability, low interest rates, and rising middle-class demand," according to a report by UBS investment bank.

Rising property prices are helping drive the surge of Philippine share prices to levels not seen since the mid-1997 Asian financial crisis, which was also the last time Manila rode the wave of real estate price increases.

Big property developers such as Ayala Land Inc. and Megaworld Corp. are reorienting their sales pitches to potential buyers abroad, aided by foreign roadshows organized by the government.

The main target is the increasingly wealthy diaspora of professionals, who are gradually replacing the construction workers and maids who made up the first wave of Filipinos to work abroad in the 1970s.

They remitted a record $10.7 billion through the formal banking system, with some estimates putting their actual earnings at least double that, fueling a consumption boom back home that is now spilling over to longer-term investments such as property.

About 31 percent of unit sales of Ayala Land, the country’s biggest developer, is now accounted for by OFWs, compared to about 25 percent last year, according to estimates provided by AB Capital Securities Inc.

"As Megaworld is known to be focusing on OFW clients, the strong remittances this year helped propel outlook on its revenue growth," said Ron Rodrigo of Unicapital Securities. Megaworld has set up sales offices in countries that host large concentrations of Filipino workers.

It saw its net profit rise 92 percent from a year earlier to P1.5 billion, or $30.2 million, in the nine months to September, driven by strong sales at its residential condominium projects.

Ayala Land meanwhile reported its net profit rose 7.5 percent from a year earlier to P820 million in the three months to September, boosted by brisk sales of its residential projects and rental revenue from its shopping malls.

Residential development accounted for 54 percent of company revenues.

"We expect earnings to accelerate in the medium-term as new gross leasable areas become available and development revenues are recognized due to construction completion," said Ayala Land president and chief executive Jaime Ayala.

The OFW-fueled property boom has also spilled over into other high-growth real estate segments such as shopping malls.

Earlier this year top shopping mall operator SM Prime Holdings launched the Mall of Asia, the world’s sixth largest mall by floor space, specifically targeting the OFW market filtering in from nearby Manila airport.

Prince Cruz, senior economist of research outfit Global Property Guide, said a 10.9 percent rise in condominium prices in 2005 and another 8.5 percent increase in early 2006 have helped drive the construction boom in the Philippines.

However, Cruz noted that property prices were still 50 to 55 percent below their peak in 1995, during a speculative bubble created by financial liberalization and economic reforms that attracted capital inflows.

But he said that because there are few limits on new construction, unlike in most developed countries, if supply rises faster than demand, prices could start falling again.

"Increased demand from foreigners could help. Some Asian economies are trying to invite retirees," he said in a report.

However, since foreign ownership of land is prohibited in the Philippines although they can buy condominium units, a phase-out of these restrictions would help drive demand. The restrictions however do not apply to Filipinos living abroad. — AFP