Page last updated at 04:13 Asia/Manila, Monday, 03 November 2014 PH
One of the reasons why I maintain that economic growth can be sustained at 6 to 7% annually GDP-wise whoever is elected as next President of the Republic of the Philippines is the predictable rise of the remittances from Overseas Filipino Workers (OFWS) of 5 to 6% annually for at least the next decade. Already at $26 billion (including undocumented remittances) today, this figure will soon exceed $30 billion annually and, together with the earnings from BPO/KPO, account for almost 20% of the Philippine GDP within the next five years. These two sources of both foreign exchange earnings and employment have the greatest multiplier effects on the rapid growth of consumer-oriented industries, including consumer durables and housing.
I am glad that in the non-deal investment road show that I will be leading in key Spanish cities in early October (closely following the visit of President B. S. Aquino III to Madrid on September 15 and 16) I have been provided with abundant information by one of the most knowledgeable business men about the OFW remittances and their impact on the Philippine property market. I am referring to Mr. Bansan Choa , Chairman and CEO of I-Remit, Inc., one of the leading remittance enterprises in the country, competing head on with the giant banks and remittance companies, both domestic and foreign. Mr. Choa has a comprehensive view of both the remittance business and the real estate sector because of his active participation in banking (as Director of the Sterling Bank of Asia, a savings bank) and as a former member of the Professional Regulatory Commission, the body that regulates the practice of real estate brokers in the Philippines. Mr. Choa has joined previous road shows that I have led in both Europe and Asia.
In the paper that he sent me, entitled Real Estate, Remittance and Retirement, he cited a report by the Urban Land Institute and Pricewaterhouse-Coopers which ranked Metro Manila as the fourth top real estate investment destination in Asia-Pacific, behind Tokyo, Shanghai and Jakarta. The top real estate companies such as Ayala Land, Rockwell Federal Land and Megaworld, are cashing on in the increased interest of outsiders to invest in the Philippine real estate sector by aggressively marketing the high-end real estate products in Singapore, Hong Kong, and key U.S. and European cities. Among domestic buyers, Mr. Choa believes that buyers are still expected to continue to invest in real estate because there is a real shortage for housing in the Philippine market, particularly in medium and low-cost segments, unlike during the 1997 East Asian crisis when most buyers were speculators. Today, the buyers are those actually occupying the units themselves. The backlog is forecasted to reach about 5.6 million units by 2016. The demand for new units is fuelled by increasing new households with the growing Philippine population, which officially hit 100 million last July 2014. The demand is particularly high from medium- and low-income wage earners, especially among the families of OFWs and BPO workers.
Preliminary construction statistics issued by the Philippine Statistics Authority reveal that approved building permits for the first quarter of 2014 to be at 29,468. This represents an increase of 20.8 per cent compared to the same quarter in 2013. Residential-type building projects moved up by 17.1 percent during the same period while the number of non-residential construction projects rose 15.2 percent. Comparing the demand for and supply of housing units, housing need totalled 1.93 to 2.2 million units during the period 2008 to 2010. The annual supply rarely exceeded 200,000 units, showing a big disparity between potential and effective demand. As of May 2012, it is estimated the total housing backlog reached 1.373 million, an estimate that does not take into account factors such as the capacity to pay and the direction of housing production, i.e. whether these go into socialised, economic, public, low-cost, mid-end and high-end units. If these factors are considered, housing demand currently stands at 3.9 million including those who cannot afford to acquire units, with surpluses at the high-end and medium cost segments and deficits in the low-cost, economic, and socialised categories.
Mr. Choa feels that the factors that will come into play in addressing the housing need involve affordability or capacity to pay, the current policy framework on housing and the financing programs. It is obvious that the vast majority of OFW households belong to the low- and mid-income segments in the housing sector. There should be a special effort of policy makers in the housing industry, the real estate developers, and the banking industry to tailor housing programs to the OFWs who can be a sustainable source of demand for housing units for many years to come. Mr. Choa is in the best position to influence these programs, being active in the remittance, banking and real estate sectors. Together with the Sterling Bank of Asia, Kabalikat ng Migranteng Pilipino, Kabalikat ng OFWs, and the Philippine Retirement, Inc., I-Remit embarked on a global campaign to promote financial literacy among the OFWs. In these educational programs, OFWs are advised about investment decisions such as those related to buying a house, starting a small business or investing in financial assets. For comments, my email address is email@example.com.