Philippine Markets Newsletter

PH Monday Macro: The real estate sector is far from its glory days of recent years, but it isn’t particularly concerning either

November 14, 2022

Third quarter 2022 GDP numbers turned out better than expected, continuing the positive growth we’ve been seeing since Q2 2021. In fact, GDP growth since Q2 2021 has been better versus the recent years before the pandemic.

While we wait for Philippine corporates to release their Q3 2022 earnings, we’ll take a look at one industry that’s constantly been in the spotlight since POGOs (Philippine offshore gaming operations) started leaving the Philippines.

Philippine Markets Newsletter:
The Monday Macro Report
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The Philippine real estate industry had enjoyed record growth prior to the pandemic. Residential and office buildings alike saw prices rise thanks to the growing demand.

A part of this growth came from the POGOs, which started expanding their operations in the country in late 2016. This meant an increase in both office space and residential unit demand as more Chinese nationals relocated for work in the country.

However, with a myriad of cases related to the POGOs since right before the pandemic, the Philippine government is looking to shut down the industry and ban it from operating in the country. That has caused concern for Filipinos, not just the tens of thousands of Filipinos currently employed in POGOs, but also the real estate developers banking on POGOs’ spending to bounce back from the recession.

According to a local property consultant, the Philippines could lose up to $200 billion annually if POGOs were to leave. This is losses from office space, condominiums, and even the retail industry such as restaurants and supermarkets.

Other property managers are less concerned about this—from previously occupying 12% of total leasable office space in the country, POGOs now take up only 5% of the market share. That means even if they were to fully exit the country, the real estate sector will find a way to bounce back in a few years.

We take a look at how the real estate industry has been faring so far in this pandemic.

Unsurprisingly, with lockdowns, logistics issues, and an exodus from the business districts, returns for the sector suffered in 2020-2021.

Though the sector is currently doing better in terms of performance, it will take some time to return to pre-pandemic levels, especially given the demand headwind mentioned above.

What we’re also seeing is real estate developers are taking this opportunity to expand their portfolios, completing construction work that paused in 2020. However, the rising cost of raw materials for construction will continue to put pressure on their bottom-line results.

So while the sector is yet to recover from the demand losses, it is unlikely that it will crash even as POGOs leave the country.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful.

Stay tuned for next week’s Monday Macro report!


Angelica Lim
Research Director
Philippine Markets Newsletter
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