Manila Market Intelligence June 29, 2020

june292020

DOLE: Remittances may dip 30-40%

NEWS

Department of Labor and Employment (DOLE) Secretary Silvestre Bello III stated that they are expecting a 30% to 40% decline in Overseas Filipino Worker (OFW) remittances in 2020. In 2019, OFW remittances reached more than USD33.5 billion (PHP1.68 trillion). In early June 2020, DOLE already noted that at least 341,000 OFWs have been affected by the pandemic. The Bangko Sentral ng Pilipinas (BSP) or central bank also recorded a 10.9% drop in remittances in February 2020, down to USD2.62 billion (PHP131 billion) from USD2.94 (PHP147 billion) in January 2020. Overseas Workers Welfare Administration (OWWA) Administrator Hans Cacdac noted that the agency projects to spend an additional PHP4 billion to 5 billion (USD200 billion to USD250 billion) for the remainder of 2020 to support repatriated OFWs.

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RESEARCH VIEW

In 2020, Colliers projects a softening of demand for the residential sector given the potential drop in OFW remittances. We expect projects under the affordable (PHP1.7 million to PHP3.2 million or USD34,000 to USD64,000) and mid-income segments (PHP3.2 million to PHP5.9 million or USD64,000 to USD118,000) to be affected as remittances partly fuel the demand for these condominiums. The slowdown of demand will likely lead to Metro Manila secondary market  vacancy peaking at 15% in 2020, up from 11% in 2019. We recommend that developers offer flexible payment packages to attract investors that are looking to buy units at a lower price. Residential owners looking to upgrade should also take advantage of low mortgage rates.

DTI pursues 159 investment leads, sees rebound

NEWS

Department of Trade and Industry (DTI) Secretary Ramon Lopez said that the department is pursuing a total of 159 investment leads to choose the Philippines as host country for manufacturing operations. According to Sec. Lopez, about 24 existing business leads are relocating from China and were being targeted by the Board of Investments (BOI) pre-COVID. Meanwhile, about 135 firms are Chinese and non-Chinese firms, which include about 16 Wuhan-based companies that were affected by the pandemic. These firms are mostly into the manufacture of electric equipment and appliances, auto parts, machinery, medical devices and optical lenses. Sec. Lopez added that a Japanese firm is also considering a location in Northern Luzon and is expected to hire at least 10,000.

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RESEARCH VIEW

Data from the Bangko Sentral ng Pilipinas (BSP) or the central bank showed that Foreign Direct Investment (FDI) inflows dropped by 14.2 percent to USD1.7 billion (PHP) in Q1 2020 from the USD1.9 billion (PHP) in the same period last year. The central bank added that most of the investments were channeled into the manufacturing, administrative support service and real estate industries. With significant investments coming from the manufacturing sector, Colliers believes that this will likely result in higher absorption of industrial space and warehouses. However, the lingering concerns on the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) will likely compel locators to take a wait-and-see stance. In our opinion, the recovery in industrial demand hinges on the pace of recovery of the local and global economies as well as the ability of the government to resolve tax reform uncertainties.

CLI’s H1 housing sales up 20% despite lockdown constraints  

NEWS

Cebu Landmasters Inc. (CLI) saw a 20 percent increase YOY in reservation sales in 1H 2020 despite the COVID-19 pandemic affecting the property development sector. CLI said that they sold about PHP3.4 billion worth of homes (over 1,500 units) in Q2 2020, where most of the sales came from their Visayas and Mindanao projects. This brought their 1H 2020 reservation sales to PHP6.2 billion from the PHP5.2 billion in the same period of last year. CLI also said that it only has about 10 percent of its residential units available in its inventory as of the end of May 2020, compelling them to launch more projects in the future and meet the rising demand for residential units.

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RESEARCH VIEW

The robust reservation sales recorded by Cebu Landmasters partly reflects  a stable demand for economic (PHP580,000 to PHP1.7 million) and affordable (PHP1.7 million to PHP3.2 million) residential units in the VisMin region despite the COVID-19 pandemic. Colliers believes that these segments will likely continue to drive demand and entice Overseas Filipino Workers (OFWs) to purchase units. In our opinion, the government-projected recovery in 2021 should entice developers to expand their residential footprint across the country. We also expect developers to continue acquiring parcels of land in key Visayas-Mindanao areas such as Iloilo, Bacolod, Cebu and Davao to capture the rising demand from residential investors and end-users.  To continue capturing demand, Colliers encourages developers to offer flexible payment terms to complement the low mortgage rates offered in the market.

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Joey Bondoc

Senior Manager

Manila

Prior to joining Colliers in March 2016, Joey worked as a Research Manager for a research and consutancy firm where he handled business, political, and macroeconomic analysis. He took part in a number of consultancy projects with multilateral agencies and provided research support and policy recommendations to key government officials and top executives of MNCs in the Philippines.

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