Visitor arrivals of 6 million seen possible in 2025

The Philippines can hit visitor arrivals of 6 million this year, even with its key source markets roiled by currency volatility, Leechiu Property Consultants said.

“I think the Philippines can still book 6 million visitors by year’s end, but of course there are risks,” said Alfred Lay, director for hotels, tourism, and leisure at Leechiu.

“Risks for this year are all mainly external, namely the uncertainty in the global economy, airline disruptions, and exchange rate volatility in our top source markets, which can both have positive and adverse effects,” he added.

The Department of Tourism reported that the Philippines booked 5.95 million visitor arrivals last year, well off its target of 7.7 million.

Mastercard Chief Economist for Asia-Pacific David Mann said that inbound tourism to the Philippines is recovering slowly compared to the outbound segment of the business.

“We have seen outbound spending rise 6% versus 2019, with the majority traveling to Japan, Korea, and Vietnam,” Mr. Mann said in a virtual briefing on Thursday.

“The inbound recovery has been a bit slower, at less than three-quarters (72%) recovered to 2019 levels, likely due to some of the slower recovery in the air capacity and reliance on long-haul markets,” he added.

He noted the slowdown in arrivals from Northeast Asia but added that visitors from Singapore, the US, and Australia, as well as overseas Filipinos, have been helping support the recovery.

The Philippines recorded 2.1 million visitor arrivals as of May 1, down 0.82% year on year.

South Korea, the top source market, accounted for 22.25% of arrivals, or 468,337, down 18% from a year earlier.

The other top source markets were the US, Japan, Australia, and Canada.

“While the dip in South Korean arrivals is notable, it’s too early to call it a lasting trend,” Mr. Lay said.

“Encouragingly, we’re seeing steady growth from the US, Australia, Japan, and parts of Europe — markets showing healthy demand that can help offset the shortfall,” he said.

However, he said the decline in arrivals “highlights the ongoing need for both the private and public sectors to continue improving our infrastructure and services.”

“The regional market is very competitive, and we need to keep adding more focus, resources, and funding to our tourism sector to ensure we stay relevant,” he added.

He said the opportunities in Philippine tourism still lie mainly in the domestic market.

Source: Business World

Resiliency and adaptability in the Philippine property market

According to recent reports from Leechiu Property Consultants, the economy, which showcases a gross domestic product growth rate of 6.3%, is a significant factor driving property demand in the Philippines. The said figure positions the Philippines as the second fastest-growing economy in the region, just behind Vietnam, which recorded a growth rate of 6.9%.

The country’s economic performance provides a foundation for sustained interest in the real estate sector. As the Philippines gears up to achieve upper-middle-income status by 2025, anticipated investments in the property market are expected to rise, reflecting growing confidence in the country’s economic prospects.

Investors and homebuyers alike are increasingly looking beyond Metro Manila to tap into the opportunities presented by these dynamic regions. The improvements in transportation infrastructure, such as new expressways and public transit systems, have made these areas more accessible and investor-friendly.

Stabilized demand amid declining launches

According to Colliers Property Market Report published for the third quarter of 2023, the demand for residential properties in Metro Manila remained tempered due to elevated mortgage rates. While the Bangko Sentral ng Pilipinas has initiated rate cuts, their immediate impact on consumer lending is limited.

Only 9,300 pre-selling units were sold in the first nine months of 2024, a 53% year-on-year decline. Colliers projects an annual average increase of 4,980 units in pre-selling take-up from 2024 to 2028, with a full-year growth of 6,830 units expected by the end of 2024.

Interestingly, there has been a growing preference for upscale and luxury units, which are now accounting for a larger share of overall pre-selling take-up. This trend reflects a shift in buyer profiles, as investors and high-income earners continue to fuel demand despite the economic headwinds.

Meanwhile, the supply in the Metro Manila condominium market remains constrained, with completions in the third quarter of 2024 amounting to just 830 units, bringing the year-to-date total to 9,860 units lower than the previously forecasted 11,290 units due to project delays.

The vacancy rate in Metro Manila’s secondary residential market increased to 17.4% in the third quarter of 2024, up from 17.2% in the previous quarter. The exit of Chinese Philippine Offshore Gaming Operators (POGOs) workers significantly contributed to this trend, particularly in the Bay Area.

On the rental front, recovery remains sluggish. In fact, residential rents grew marginally by 0.2% quarter-on-quarter (QoQ) and are expected to rise by 1.0% year on year by the end of 2024. Annual growth is forecasted at 2.1% from 2024 to 2028, with rental rates returning to pre-pandemic levels by the second quarter of 2028.

Capital values for residential properties grew by 0.5% QoQ in the third quarter of 2024, with an annual growth projection of 2.1% for the year.

One of the key elements sustaining demand in the residential market is infrastructure development, particularly in areas outside Metro Manila. Provinces such as Cavite, Laguna, and Batangas have emerged as focal points for growth, benefiting from enhanced connectivity and ongoing urban development projects.

Decline in office market growth

The office market experienced its first negative net take-up since 2021, recording a net absorption of -33,000 square meters (sq.m.) in the third quarter of 2024. This contraction was driven by the vacated spaces of POGOs following the government’s ban, coupled with rightsizing among outsourcing firms.

Notably, the vacancy rate in Metro Manila rose to 18.5% in the third quarter of 2024 from 18.3% in the previous quarter. However, demand for office space in the provinces outperformed Metro Manila, with provincial transactions accounting for 23% of total office deals during the period. Cebu and Davao emerged as key hot spots, with substantial leasing activity from outsourcing firms.

New office supply remained limited, with only 9,500 sq.m. completed in the third quarter of 2024. For the first nine months, total completions amounted to 176,400 sq.m. — a 47% drop compared to the same period in 2023. Colliers attributes this decline to construction delays, muted pre-leasing activity, and high vacancy rates in certain submarkets.

While average rents in Metro Manila declined by 0.6% QoQ, primary central business districts (CBDs) like Makati, Fort Bonifacio, and Ortigas demonstrated resilience with marginal increases. In contrast, secondary markets are likely to experience further rental declines.

Despite challenges, traditional firms drove demand in Metro Manila, accounting for 53% of transactions during the first nine months of 2024. Banking institutions, government agencies, and flexible workspaces were among the key contributors to this segment.

Shift to leisure-oriented developments

According to Leechiu Property Consultants, the full recovery of hotel, tourism, and leisure segment to pre-pandemic levels is projected by 2026, as the government and private developers invest heavily in infrastructure and accommodations.

Nationwide, the private sector has committed to 158 new hotel projects, totaling 40,084 rooms, generating P250 billion in investments, and creating 57,000 jobs.

Luzon accounts for 50% of the total pipeline, with key projects in Clark and Metro Manila. Visayas comes next with significant developments in Boracay, Mactan Island, and Panglao; while Mindanao contributes 8% of the pipeline, with notable projects in Davao City, Cagayan de Oro, and Siargao.

In response to tepid demand in Metro Manila, developers are shifting focus to leisure-oriented projects outside the capital, according to Colliers. Golf communities are gaining traction as lifestyle-oriented investments. These projects, priced between P175,000 and P590,000 per square meter, report take-up rates ranging from 43% to 100%.

Surge in retail demand

Colliers highlighted that mall operators are strategically refreshing retail spaces to entice more visitors and extend their dwell time, particularly in the run-up to the festive fourth quarter. In the third quarter of 2024, 104,800 sq.m. of retail space was absorbed, with food and beverage (F&B) brands leading the charge.

Expansion by foreign retailers, including brands from the home furnishing and personal accessory sectors, further amplified demand.

The market also saw the delivery of 86,900 sq.m. of new retail space during the quarter, including prominent developments like Opus Mall in Quezon City and expansions of SM City Caloocan and SM Bicutan.

On the other hand, developers are increasingly focusing on redeveloping existing malls to align with consumer demands for more immersive and experiential spaces.

Retail rents exhibited modest growth due to the influx of new supply, with a QoQ increase of 0.2%. Premium rents were observed in business hubs and malls with low vacancy rates.

Vacancy rates improved slightly to 15.1% in the third quarter, driven by robust retailer take-up. By yearend, vacancy is projected to inch up to 15.3% as new supply comes.

Source: Business World