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Philippines Real Estate Report Q4 2009 - Download this market

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Philippines Real Estate Report Q4 2009
Published on October 2009

                                                                                                               Report Summary

Low absolute levels of bank lending and the poor availability of finance remain common concerns when
considering the Philippines' real estate market. As we have often said in the past, financing has been the
main challenge even during good times, and even before the credit crunch lending rates were expected to
grow only slowly. Worldwide financial problems have obviously exacerbated this issue.
The Philippines is slowly emerging from the impact of the global financial crisis, with the effects evident
in falling levels of profitability in many of the country's real estate and construction companies,
especially those without regional or sectoral diversification.
However, the reaction of the authorities, which saw the central bank cut interest rates after the economy
shrank 2.3% in Q109 from the previous quarter, its worst contraction in 10 years, appears to be gaining
traction. The Bangko Sentral ng Pilipinas (BSP) reduced the overnight borrowing rate a quarter of a point
to 4.5% ' the lowest rate since May 15 1992 ' and the overnight lending rate by the same amount to
6.25%. It was the fifth rate cut since December that has lowered rates a total of 1.75 percentage points
(pps).
CB Richard Ellis (CBRE) reported that the property investment market was relatively inactive in Q109,
with local investors accounting for the majority of the small number of transactions. Investors are slowly
coming back to the table, although it will not be until Q110 that we will be able to estimate with any
confidence the level or sustainability of this recovery. Many deals in the current climate have been related
to occupational end-use. Capital values remain relatively stable, especially in the residential market.
Transactions and decision-making are reported to be very slow, although it should be noted there was
some pick up in Q209 from Q109, which in turn was slightly stronger than Q408. Developers are now
focusing on mid-range and affordable residential projects. They continue to lobby the government to
introduce tax exemptions for mass housing projects as part of a plan to revive the construction industry,
which is one of the main drivers of the economy. The run-up to the general elections next year may
complicate this lobbying process.
The office sector may have stopped slowing, but there are few signs of what one could describe as strong
growth. Growth has in the past been dependent on the Business Process Outsourcing (BPO) sector in
which the Philippines attempts to capitalise on the country's relative strengths in English language
capability to run call centres and similar outsourced activities. CBRE identifies this as the main demand
driver in the Metro Manila office market, and the downturn has resulted in surplus office space of
1.184mn ft2 in 2008 that has been carried over to 2009.




                                                                                                               Table of Content

Executive Summary ....5
Key Features Of This Report.........7
SWOT Analysis............8
Philippines Real Estate/ Construction SWOT ..... 8
Philippines Economic SWOT........... 9



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Philippines Business Environment SWOT......... 10
Real Estate Market Overview .......11
Key Projects.14
Construction Overview .... 14
New And Ongoing Projects, Residential Construction.... 14
Commercial Construction 15
Industrial Construction.... 16
Tourism Construction ...... 16
Major Projects... 17
Table: Philippines Major Infrastructure Projects........... 17
Real Estate Investment Trusts.....18
Introduction .. 18
Table: FTSE EPRA/NREIT Global Real Estate Index, Total Returns (US Dollar Terms) ... 18
Table: US REITs, Total Returns (US Dollar Terms)....... 20
Industry Finance Outlook............25
Global Outlook .. 25
Table: Loan Growth, 2006-2013 (% Change y-o-y) ....... 25
Table: Loan-To-Deposit Ratios, 2006-2013...... 27
Domestic Financing 30
Monetary Policy. 30
Table: Philippines ' Monetary Policy. 32
Industry Forecast Scenario ..........33
Table: Asia Pacific Housing Prices At A Glance (% change y-o-y).... 33
Table: Asia Pacific Office Rents, CBRE ........... 36
Table: Current And Forecast Office Rents, 2008-2014 (US$ per square metre per month). 37
Table Industry And Construction Data ............. 38
Macroeconomic Outlook.. 39
Table: Philippines - Economic Activity, 2006 ' 2013 ..... 41
Real Estate/Construction Business Environment Rating ........42
Table: Asia Real Estate/Construction Business Environment Ratings 42
Real Estate/Construction Business Environment Ratings .... 43
The Philippines' RECBER............. 43
Asia Pacific Project Finance Ratings . 45
Table: Design And Construction Rating ........... 48
Table: Commissioning And Operating Rating .. 49
Table: Overall Project Finance Rating............. 51
Risks And Limitations To BMI's Project Finance Ratings.... 51
Philippines' Business Environment..... 52
Introduction .. 52
Latest Developments ........ 52
Table: BMI Business And Operational Risk Ratings....... 53
Institutions .... 55
Table: BMI Legal Framework Ratings ............. 55
Infrastructure 58
Table: Labour Force Quality......... 60
Market Orientation .......... 62
Table: Asia, FDI Annual Inflows ... 63
Table: BMI Trade Ratings ............. 64
Table: Top Export Destinations..... 65
Operational Risk 66


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Company Monitor......68
EEI Corporation 68
First Philippine Balfour Beatty...... 70
Ayala Land Incorporation 72
Robinson's Land Corporation........ 74
Filinvest Land Incorporated .......... 76
Megaworld Corporation .. 77
Vista Land & Lifescapes Incorporation ............ 79
BMI Forecast Modelling.80
How We Generate Our Industry Forecasts ....... 80
Construction Industry ...... 81
Bank Lending 81
Real Estate/Construction Business Environment Rating. 82
Table: Weighting Of Indicators ..... 83
Project Finance Ratings Indicators .... 85
Table: Design And Construction Phase ............ 85
Table: Commissioning And Operating Phase ' Commercial Construction ...... 86
Table: Commissioning And Operating Phase ' Energy And Utilities . 87
Table: Commissioning And Operating Phase ' Transport... 89
Sources ......... 90




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