OFWs again keen on real estate

Overseas Filipino workers (OFWs) are again keen on using their hard-earned money to lease a house or purchase a permanent dwelling for their families back home, according to a study.

Lamudi’s study titled “The Outlook Quarterly: A Wrap-Up of the Philippine Housing Market in 2Q2022 (Second Quarter of 2022),” showed the reemergence of this trend since the last quarter of 2021 as the economy has reopened and the situation gradually has returned to normalcy.

Of all the OFWs looking for homes, those based in Singapore were most interested in condominiums and houses for sale.

Condominiums and apartments accounted for the biggest share of leads on Lamudi, with listings in lower price categories attracting more than a third of total inquiries for both potential buyers and renters. Over half of the listed residential properties for sale on the platform were priced P6 million and below.

In terms of commercial properties for rent, majority of the leads came from the world’s largest service outsourcers, such as the United States and Australia, from April to June.

Even though Singapore’s property hunters topped the residential segment, its vibrant start-up scene and multinational-locators, together with Japan, an established source of industrial, retail and education interest in the country, have both entrepreneurs and professionals wanting to invest in commercial real estate market as well.

Other interested foreign tenants for commercial spaces here were Canadians, South Koreans, British and United Arab Emirate nationals.

They prioritized office and retail spaces the most, followed by related commercial properties such as buildings, warehouses, service offices, and co-working spaces.

“These trends all tell the same story: that the Philippines is headed towards greater heights as the economy reopens in the post-Covid era. More and more developed countries are undoubtedly setting their sights on building a Philippine base, which means that the domestic real estate market is expected to be busier than ever,” said Lamudi Philippines Country Head Anurag Verma.

Location-wise, OFWs based in the Middle East—Dubai, Doha, Riyadh, Abu Dhabi—and Singapore showed high interest for properties in Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) during the period in review.

Most of Filipino migrant workers come from this region, with half of them bound to central Arab areas, per 2020 data of the Philippine Statistics Authority. Majority of them originated from Cavite and Batangas.

Houses and then land gained most pageviews from Middle East-based property seekers. Close to 50 percent of all leads from East Asian property seekers were for properties located in the National Capital Region (NCR).

Other than cities in NCR, provincial areas, such as the hilly Baguio and Tagaytay, agricultural town of Naguilian, La Union and coastal Lapu-lapu, Cebu were the preferred destinations for OFW and North and South American markets for both leisure and retirement. Sub-categories such as house and lot, townhouse, ‘residential lot, beach house and agricultural lot attracted foreign property seekers.

Metro Manila cities, particularly Taguig, Makati and Quezon City, followed by Cebu and Cavite got most of the leads from South and Southeast Asian (excluding the Philippines) countries. Expats and students from these neighboring countries may be looking into housing as they take on new onsite work or start a new school year here.

Meanwhile, Makati was the most searched by Europe-based seekers looking into the Philippines. This may be driven by expats and investors from the Western continent searching for accommodations as well as interest from the OFWs working there.

Source: Business Mirror

Mapped: Which Countries Have the Highest Inflation?

Mapped: Which Countries Have the Highest Inflation Rate?

Inflation is surging nearly everywhere in 2022.

Geopolitical tensions are triggering high energy costs, while supply-side disruptions are also distorting consumer prices. The end result is that almost half of countries worldwide are seeing double-digit inflation rates or higher.

With new macroeconomic forces shaping the global economy, the above infographic shows countries with the highest inflation rates, using data from Trading Economics.

Double-Digit Inflation in 2022

As the table below shows, countless countries are navigating record-high levels of inflation. Some are even facing triple-digit inflation rates. Globally, Zimbabwe, Lebanon, and Venezuela have the highest rates in the world.

As price pressures mount, 33 central banks tracked by the Bank of International Settlements (out of a total of 38) have raised interest rates this year. These coordinated rate hikes are the largest in two decades, representing an end to an era of rock-bottom interest rates.

Going into 2023, central banks could continue this shift towards hawkish policies as inflation remains aggressively high.

The Role of Energy Prices

Driven by the war in Ukraine, energy inflation is pushing up the cost of living around the world.

Since October 2020, an index of global energy prices—made up of crude oil, natural gas, coal, and propane—has increased drastically.

Compared to the 2021 average, natural gas prices in Europe are up sixfold. Real European household electricity prices are up 78% and gas prices have climbed even more, at 144% compared to 20-year averages.

Amid global competition for liquefied natural gas supplies, price pressures are likely to stay high, even though they have fallen recently. Other harmful consequences of the energy shock include price volatility, economic strain, and energy shortages.

“The world is in the midst of the first truly global energy crisis, with impacts that will be felt for years to come”.

-Fatih Birol, executive director of the IEA

Double-Digit Inflation: Will it Last?

If history is an example, taming rising prices could take at least a few years yet.

Take the sky-high inflation of the 1980s. Italy, which managed to combat inflation faster than most countries, brought down inflation from 22% in 1980 to 4% in 1986.

If global inflation rates, which hover around 9.8% in 2022, were to follow this course, it would take at least until 2025 for levels to reach the 2% target.

It’s worth noting that inflation was also highly volatile over this decade. Consider how inflation fell across much of the rich world by 1981 but shot up again in 1987 amid higher energy prices. Federal Reserve chair Jerome Powell spoke to the volatility of inflation at their November meeting, indicating that high inflation has a chance of following a period of low inflation.

While the Federal Reserve projects U.S. inflation to fall closer to its 2% target by 2024, the road ahead could still get a lot bumpier between now and then.

Source: Visual Capitalist

What’s new with Philippine investment incentives

2022 has ushered in several changes to the Philippines: a new administration, the winding down of the COVID-19 pandemic, and updates to the country’s investment incentive strategy.

Investment incentives are government concessions meant to attract inbound capital.

Taking advantage of these incentives is integral to strategic business optimization.

From the relaxing of foreign equity restrictions, to the 2022 Strategic Investment Priority Plan, to environmental laws and more, entrepreneurs should be aware of every opportunity to decrease the cost of doing business in the Philippines.

ENCOURAGING FOREIGN EQUITY

Foreigners have been gradually given more freedom to invest. They may enter industries previously exclusive to Filipino citizens, subject to reciprocal treatment. Instead of dreading competition, organizations should use this opportunity to seek more funding for their operations.

Amendments to the Public Service Act limited the activities that are considered public utilities, namely the distribution of electricity, transmission of electricity, petroleum and petroleum products pipeline transmission systems, water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems, seaports, and public utility vehicles. This effectively removes from the “public utility” classification the domestic shipping, railways and subways, airlines, expressways, tollways, and transport network vehicles services, among others. These can now be fully owned by foreigners.

Telecommunications and other vital services are subject to safeguards for critical structure and the reciprocity rule. On the other hand, the amended Retail Liberalization Act grants foreign enterprises the right to invest in retail trade businesses with a minimum paid-up capital of P25 million. If it owns more than one physical store, the investment per store should be at least P10 million.

If successful, these equity market liberalizations could lead to increased foreign direct investment (FDI). A higher FDI means an improved exchange rate for the peso.

Furthermore, investment incentives can also be used to boost job creation as well as job quality. The latter is crucial amid rising underemployment rates.

For example, the amended Foreign Investments Act of 1991 lets foreigners invest in micro and small Domestic Market Enterprises (DMEs) with a minimum paid-up capital of $100,000.00. The DMEs should either involve advanced technology; or be endorsed as startup enablers; or directly employ at least 15 Filipinos, with a majority of its employees being Filipino citizens. This has been amended from the previous requirement of at least 50 direct Filipino employees.

AN OVERVIEW OF THE 2022 SIPP

To effectively implement the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, Memorandum Order No. 61 was issued to approve the 2022 Strategic Investment Priority Plan (SIPP). It grants investment incentives to entities registered as Registered Business Enterprises (RBEs). RBEs are categorized as either Export Enterprises (EEs) if 70% of their output is directly or indirectly exported, or as DMEs if the situation is otherwise.

The regulatory power of investment incentives can be observed in the following aspects of the SIPP and the CREATE Law:

Export Enterprise vs. Domestic Market Enterprise. To address the trade deficit, EEs get additional benefits over DMEs. EEs get VAT incentives and have the option to avail of either a 5% tax on their gross income earned, in lieu of all national and local taxes, or Enhanced Deductions (ED) for 10 years following the end of the income tax holiday (ITH) period. Meanwhile, DMEs have no VAT incentives, and can only avail of the ED for five years after the lapse of the ITH period.

Provincial benefits. The period to enjoy the benefits of the 2022 SIPP depends on both the kind of RBE (whether DME or EE), as well as the location of the registered project or activity. Following the push towards rural development as embodied in the Balik Probinsya program, the CREATE Law gives longer ITH periods to RBEs operating outside of the National Capital Region and other metropolitan areas.

Priority activities in the tier system. The administration aims to create a self-sufficient Philippines. Thus, longer benefits are granted to industries such as agriculture to promote food security, healthcare to better withstand future pandemics, power to reduce reliance on imported fuel, and higher tier activities. 

PUSHING FOR A GREEN ECONOMY

The right of Filipinos to a balanced and healthful ecology goes hand-in-hand with the need for economic development. Hence, the current administration’s socioeconomic agenda includes the pursuit of a green economy. It is willing to compensate sustainable, eco-friendly businesses through investment incentives under the Renewable Energy (RE) Law, as implemented by Revenue Regulations (RR) No. 07-2022.

Under the RE Law, RE developers may avail of a seven-year ITH. Afterward, the developer is to pay 10% corporate tax on taxable income, provided that the resulting savings are passed on to end-users in the form of lower power rates. They may also avail of the incentives under the CREATE Law, e.g., four to seven years of ITH, depending on location and industry tier, followed by five years of Enhanced Deductions. The main consideration in determining which incentive to apply for is the time-bound incentives under CREATE Law which is not applicable under the RE Law.

In addition, the Philippine Green Jobs Act of 2016 promotes the creation of “green jobs,” or employment which contributes to environmental preservation. Under RR No. 05-2019, businesses offering green jobs will be granted an additional deduction equal to 50% of the total expenses for skills training and research development. The law also provides that capital equipment that are actually, directly and exclusively used in the promotion of green jobs, may be imported free of taxes, though the government has not yet issued any implementing rules for this provision.

BALANCING INCENTIVES WITH SUSTAINABLE GROWTH

Investment incentives have been introduced by the government in a conscious effort to remain globally competitive. Granting incentives must nonetheless be balanced with sustainable growth.

Every concession comes with an equivalent benefit to ordinary Filipinos, either through employment opportunities or through eco-friendly communities. Companies have just as much to gain from investment incentives as their foreign counterparts and taking advantage of tax and regulatory benefits is integral to any business strategy.