Why prices seem to be increasing

Economics, as generally defined, is the study of how to effectively utilize the scarce resources left available to us in order to satisfy unlimited human wants and needs. While this is an entirely large field of study that economists have devoted their entire lives to, and still with no widely held consensus on what the most efficient way to utilize resources is, we need only concern ourselves with a specific aspect in this study, which is land.

The simplest explanation one can offer in terms of why land sells for a much higher price than any other commodity and why it seems like a mad scramble to the finish line can be boiled down to this -- until science can find a way to create more land than what is currently available, it will not cease to be one of the most fought-over and prized commodities because everyone needs and wants it, but there is only so little to go around.

As laid out in a report by Colliers International Philippines, topping the sales figures for real estate in 2018 is looking to be quite a challenge due to the dearth of available developable land in Metro Manila. Keeping this fact in mind gives us some insight to  understand why it would seem like all the major development and real estate corporations are in a race to expand out into the other previously looked-over regions of the Philippines and get their hands on any plot of land that they can in order to develop it and expand their properties onto it; this can be seen in the construction of condominium markets outside the traditional CBDs like Makati, Bonifacio Global City, and Ortigas.

For example, Ayala Malls has recently broken ground and is constructing Ayala Malls Manila Bay along Macapagal Blvd., its first foray into an area that overtook Ortigas last year as the third largest submarket for condominiums. Continued developments and industrialization of previously ignored locations such as Bulacan, Cebu, Clark, Davao, Laguna, and Tagaytay has shifted the focus from (for the most part) the familiar urbanized Metro Manila and onto a race to lay claim to the other regions out there in the Philippines. It’s beginning to look like a Monopoly game with everyone trying to buy up all the property on the map, but it then begs the question: why the sudden rush?

Increasing Prices?

Many have said, including those that live around the Pasay and Parañaque area, that the reason these areas (Macapagal Blvd. in particular) are being developed much more rapidly than other land developments is the recent influx of Chinese mainlanders that have taken residence here and become commonplace in the everyday life of the surrounding locals. In areas such as Pasay or Parañaque, one is sure to find a number of Chinese restaurants and supermarkets that seem to have popped up out of thin air. These establishments where Chinese nationals can be found purchasing supplies or ordering food might be a slightly more complicated ordeal for Filipinos, due to the obvious language barrier. While the Philippines' relationship with China is tense as of press time and the increasing number of Chinese people in the Philippines is starting to tide people over onto the side of anxiety, in the midst of all this uproar, there is a silver lining that a few have begun to take advantage of -- and if one were more prudent -- could serve as a solid investment opportunity that may net sizeable gains.

For instance, with legal offshore gaming operators (more commonly referred to as POGOs) starting to grow and looking for properties in areas such as Cavite, Pampanga, and Laguna, these Chinese owners and workers will continue to serve as players in our local real estate market.

Some landlords have already been able to increase prices on the properties they own as the Chinese are willing to pay a premium for accessible and convenient living space as they stay here; as it stands, a two-bedroom unit in SixSenses (located in Macapagal Blvd.) can fetch a price of Php 120,000 a month if rented out to a group of Chinese nationals. If the influx of these mainlanders continues, we can be assured of a continued influx of business as well in the areas where they choose to make their abode. The buying power they possess should be a boost to the economy and livelihoods in those areas. Malls are already adapting to this, putting up directions and signs in Mandarin while also making themselves available for payment through the Chinese’ preferred online payment methods, Alipay and Wechat.

Reports have also come in that informal shopping areas such as Divisoria, Quiapo, and tiangge areas such as Greenhills have been able to raise prices due to the mainland Chinese and their willingness to splurge a bit more than their Filipino counterparts. These may not seem like groundbreaking discoveries at the moment, but they can be interpreted as signs of a trend to come, given the government’s apparent “friendly” policy with Xi Jinping and his country’s own stiff relations with the international community at large.

Currently in its 8th year of strong economic growth and still one of the most rapidly rising markets in Southeast Asia, the Philippines’ residential property market is still performing relatively well, but the uncertainty will always loom with a situation as volatile as the Philippines. Rising interest rates and inflation, along with general uneasiness over the implementation of the second package of the TRAIN program may dampen the growth as Filipinos are less incentivized to go out on a limb and invest in personal real estate, more so than they already are. The rising tide of foreign investments and populations coming into the country and looking for spaces to rent out or reside in permanently can serve as a spur for more entrepreneurial locals to take advantage of the situation however they may see fit. In the rat race to provide for yourself and your family, we should be wise to strike first on home soil.