The real estate market plays a significant role in the Philippines’ Gross Domestic Product, making it a lucrative and crucial sector. The good news is that the Philippine real estate industry has been experiencing steady growth over the past few years, and the market is expected to remain stable in 2023.

While global real estate markets have suffered from recessions, slow economic recovery processes, and other factors, the Philippine market has remained unaffected. In fact, it has shown the opposite trend despite the slowdown of global events. Several factors, such as market trends, population growth, economic expansion, and infrastructure development, influence real estate development in the Philippines.

Therefore, it is vital for homebuyers and real estate investors to stay informed about industry forecasts and upcoming trends. Below are some predictions for the housing market in 2023. 

The State of the Real Estate Market in the Philippines in 2022

Let’s take a closer look at the Philippine real estate market in 2022 before delving into what we can expect in 2023. It was a year of transition, marked not only by changes in national leadership but also by the country’s efforts to move past the COVID-19 pandemic. As a result, the real estate sector saw a surge in demand across various segments, from condominium sales to mall space rentals.

In December 2022, Collier’s Philippine Property Outlook report revealed that demand for pre-selling condos in the first nine months of the year had already surpassed figures for the entire year of 2021. A total of 14,900 condominium units were sold between January and September 2022, compared to only 12,400 units in 2021. Of these, 28% were from the mid-income market, which offers condos priced between P3.2 million to P6 million. This market includes many Overseas Filipino Workers (OFWs), who are benefiting from the higher dollar exchange rates and seeing increased income.

Overall, the report projected a positive outlook for the Philippine real estate market, fueled by sustained demand from local and foreign buyers, increasing urbanization, and government infrastructure projects. It noted that the office and industrial segments were also expected to experience growth, driven by the BPO industry and e-commerce, respectively.

However, challenges remain, such as rising inflation and interest rates, as well as supply chain disruptions and material shortages that could affect construction costs and timelines. Nonetheless, the overall sentiment is optimistic, and real estate developers are expected to continue investing in new projects and expanding their portfolios in the coming years.

Philippine Real Estate Market Shows Signs of Recovery as Office, Retail, and Tourism Industries Improve in 2022

Throughout 2021, office, retail, and tourism industries all experienced improvements. After a prolonged slowdown due to the pandemic, demand for office space is finally returning to pre-pandemic levels. The losses incurred in 2020 and 2021, amounting to 181,3000 sqm and 273,100 sqm respectively, were offset by an estimated full-year gain of 140,000 sqm in 2022. This represents a 19.5% vacancy rate, which is a significant improvement.

In addition, both the retail and tourism industries are showing signs of a comeback. Malls have started to recover, with Colliers estimating the year-end retail vacancy space at 16%. Meanwhile, the tourism industry exceeded its target of 1.7 million foreign arrivals, hosting 2 million tourists as of November 2022. As a result, the hotel occupancy rate in Metro Manila reached 47% during the first half of 2022, surpassing the 44% recorded in the latter half of 2021. The resumption of MICE events (Meetings, Incentives, Conferences, and Exhibitions) played a significant role in boosting hotel occupancy and spending. The Department of Tourism reported that the Philippines generated P100.7 billion in tourist spending in the first nine months of 2022, dwarfing the P4.9 billion reported for the entire 2021.

Philippine Real Estate Developers Optimistic for 2023 Amid Strong Recovery in 2022

In an email interview with key officers of major Philippine real estate developers including Filinvest Land, Federal Land, Ortigas Land, Bria Homes, and SMDC, most agreed that 2022 marked a significant step towards recovery in the industry. The developers reported an unexpected increase in sales, especially from the OFW and international sectors, which contributed to the overall boost in the real estate market.

Moreover, many developers expressed their commitment to addressing the country’s housing shortage, which currently stands at around eight million units. Despite the challenges posed by the pandemic, the developers are keen on producing more housing projects to meet the growing demand.

According to the developers, Filipinos, particularly OFWs, looking to invest in the Philippine real estate market should take advantage of the favorable conditions in 2023. With the market showing signs of sustained recovery, now is a great time for investors to explore their options and take advantage of the opportunities in the industry.

External Factors that Could Impact the Philippine Real Estate Market in 2023

As 2023 begins, the hope is to maintain the positive momentum gathered from the previous year. The widespread availability of COVID-19 vaccines, the adoption of mask-wearing as a common practice, and increased awareness have all helped the Philippines mitigate the more damaging effects of the pandemic. In addition, the World Health Organization reports that around 90% of the world’s population is now considered resistant to the virus. This reduced COVID-19 threat has allowed both the government and businesses to resume their regular activities.

However, before we delve into the upcoming trends for the Philippine Real Estate Market in 2023, it is important to consider some external factors that could impact the industry.

Economy

The Asian Development Bank predicts that the Philippines will experience a slightly lower economic growth rate of 6.3% in 2023 compared to 6.5% in 2022. This forecast aligns with the estimates of the country’s Development Budget Coordination Committee (DBCC), which ranges from 6% to 7% for this year. Even with the lower projected growth rate of 6.3%, the Philippines.

Meanwhile, experts worldwide anticipate a continued slowdown in the global economy. The World Bank estimates that world economic growth will peak at 1.7% in 2023 and 2.7% in 2024. The factors contributing to the ongoing economic decline include rising inflation, higher interest rates, and decreased investment. Additionally, Russia’s ongoing conflict with Ukraine has disrupted the energy market and financial sector, further exacerbating the situation.

Inflation

The pandemic-induced supply chain problems continue to affect inflation, which is the rate at which prices increase. Fortunately, economic experts predict a lower inflation rate of 4.3% in 2023, down from 5.3% in 2022. This is in line with the range of 2.5% to 4.5% forecasted by the DBCC, reflecting the ADB estimate.

Despite the inflation concerns, there’s good news for the Philippine real estate market in 2023. Fitch forecasts a growth of 5.5% year-on-year in real household spending, which is 2% lower than the 2022 forecast of 7.6%. Nevertheless, experts predict that household incomes will outpace projected inflation rates, leading to increased consumer confidence and spending.

Real Estate in 2023: Insights, Forecasts, and Expectations

In the following section, we will explore the projections and expectations of industry experts and their implications for real estate investors, developers, and homebuyers in the current year.

• Philippine Real Estate Recovery Set to Continue in 2023

Commercial real estate had a successful year according to a report by Lobien Realty Group, with 21% of establishments and retail spaces in the National Capital Region (NCR) having an average lease rate of PHP1,150 per square meter. 

The property consultancy group is optimistic that the Philippine real estate market’s recovery will continue in 2023 after the economic adversities experienced during the pandemic. The report also highlighted growth in warehouse facilities, which experienced an 8.2% growth during the pandemic, largely due to the surge in e-commerce sales as physical retail stores closed amid fears of COVID-19 contraction.

• Real Estate Property Prices Set to Rise

Real estate property prices are expected to increase due to growing market demand, accelerating inflation rate, and consumer price index (CPI) in the country. In November 2022, inflation rate was recorded at 8 percent and increased to 8.1 percent in December of the same year. As of January 2023, the Bangko Sentral ng Pilipinas (BSP) reported a 8.7 percent inflation rate, which is 0.6 percent higher than December 2022.

Another factor contributing to the increase in real estate property prices is the rising interest rates. This trend is a result of growing demand for real estate properties, which makes it harder for borrowers to qualify for loans from banks.

• High Property Supply Expected to Continue

According to Colliers, a renowned property investment consultancy company, the growth seen in office leasing, pre-selling condominium demand, and hotel occupancies in 2022 will continue in 2023. This increase in supply can be attributed to the following sectors:

• Office: A positive net take-up for the office sector this year. This means that the supply of commercial spaces will be met with high demand and actual physical occupation by leading industries such as IT-BPM companies, legal, government, and engineering sectors. With this, Colliers encourages office developers to take advantage of this recovery in office leasing and build new office towers.

• Residential: The housing market predictions indicate that 5,600 new condominium units will be built this year, bringing the total number of units in Metro Manila’s major business districts to an estimated 166,400 by the end of 2024. As the residential market recovers, real estate developers are predicted to invest in sustainable and green features and integrate amenities such as large, open spaces and green areas.

• Retail: There’s an expected completion of 448,900 square meters’ worth of new retail spaces this year. They also anticipate a recovery in retail space absorption and an increase in mall consumer traffic, resulting in rents going up. Both foreign and local retailers are expected to occupy physical mall spaces as more shoppers return to malls as they did before the pandemic.

• Industrial: The new administration’s push for better industrialization will lead to a higher inflow of investments. To achieve economic growth outside the metro, the focus will be on the manufacturing sector, which will significantly benefit industrial parks in provinces like northern and central Luzon. Colliers reports that about 112 hectares of industrial supply will be available in the provinces of Laguna and Batangas.

• Hotel: Hotel occupancies are also expected to continue increasing in this post-pandemic setting. With eased travel restrictions and the resumption of classes and physical meetings, the hotel sector can expect more hotels to open and develop. The Department of Tourism has already exceeded its target of 1.7 million foreign arrivals and reached 2 million as of November 14, 2022.

   

• OFW Remittances to Continue Boosting PH Property Market

The role of Overseas Filipino Workers (OFWs) in driving the demand for residential real estate properties in the Philippines remains significant. Reports suggest that OFW remittances will continue to contribute to the growth of the country’s property market.

During the 31st anniversary celebration of the National Real Estate Association (NREA), Chairperson Emerita Marissa “Del Mar” Magsino emphasized the crucial role of OFWs as modern-day heroes and key drivers in the demand for residential property investments, particularly in the affordable to middle-income price segments.

2023 Philippine Real Estate Market Predictions and Trends

The outlook for the Philippine real estate market in 2023 is optimistic, with developers hoping to continue the forward momentum of the industry in 2022. 

Federal Land’s Sales Group Head, Guita Saenz-Resurreccion, reported an increase in unit purchases during the first nine months of 2022, surpassing the previous year’s totals. 

Estrellita Tan, Bria Homes’ COO, attributed the rise in property prices to the trend of moving into less-populated areas conducive to remote work.

As the industry moves forward, several trends are expected to gain further traction in 2023:

• Central and South Luzon to See Increased Demand for Residential Developments due to Infrastructure and Transportation Projects.

The Philippine government is actively enhancing major transportation and infrastructure hubs to decongest Metro Manila roads and promote growth in provincial centers. The completion of projects such as the LRT-1 Cavite expansion, MRT-7, Cavite-Laguna Expressway, North-South Commuter Railway, and upgrading of the Clark International Airport are expected within the next three years. These transportation hubs aim to improve the daily commute of suburban workers in and out of Metro Manila and increase accessibility to the outlying provinces. 

As a result, many developers have already begun building residential projects in Cavite, Laguna, Bulacan, and Pampanga, including SMDC’s Zeal Residences in Camona and Avida’s Aldea Grove Estates in Angeles.

• Revenge Spending Phenomenon to Boost Demand for Mall Space and Benefit Mall Operators.

Despite inflationary pressures, many households are expected to continue spending heavily in 2023. After spending a significant amount of time at home and being unable to travel for the past few years, many families are eager to indulge in revenge spending, splurging far more than they typically would.

This increase in consumer spending has not gone unnoticed by mall operators and retail shops. As early as 2022, many began opening their doors fully during mall hours. Malls have reported between 85-90% occupancy in the first nine months of 2022, up from 40% in 2021. With households expected to increase their spending power this year, revenge spending is likely to continue, and the continued arrival of foreign retail, lifestyle, and dining brands in the country will help fill out available retail spaces for lease within malls by 2023.

• Anticipate a Surge in Hotel Occupancy and Tourist Spending with the Influx of Tourists.

According to Colliers, the projected influx of travelers will require an additional 3,900 hospitality rooms by 2023. As such, foreign-branded hotels will be opening in key business districts such as the Bay Area, Makati, and Ortigas within the next three years.

This presents an opportunity for local real estate developers to focus on building mixed-use condominiums that can function as timeshare hotels or condotels. Homeowners can also take advantage of this trend by investing in condotel units or converting their properties into AirBNB units.

• Expansion of Industrial Parks to Bolster the Revitalization of the Industrial Sector.

In June of last year, the Department of Trade and Industry (DTI) announced that foreign businesses have committed over P500 billion in investments from 2023 to 2024. These funds will support the current administration’s initiative to revitalize the country’s industrial sector. As a result, developers are actively working on new business parks, particularly in areas benefiting from improved transportation systems.

Developers are anticipating an increase in business activities in Central and South Luzon, Visayas, and Mindanao, and are thus launching residential clusters in nearby areas. Those interested in investing, including OFWs and other Filipinos, may want to consider developments targeting industrial park professionals and executives.

• Expansion of Offices into Provinces on the Rise.

This year will witness the ongoing efforts to decongest Metro Manila. According to Colliers, many outsourcing firms and major local companies are reevaluating their business continuity strategies and embracing remote work as the future of doing business. This trend is driving the demand for local talent to fill various positions, which is leading to the decentralization of businesses from Metro Manila. 

As a result, developers are rushing to construct office buildings and centers in key provinces. However, this development has also created a similar surge in demand for residential homes in alternative key provinces such as Iloilo, Pampanga, and Baguio.

• Growing Demand for Small Office Home Office (SOHO) Spaces and Environmentally-Friendly Practices.

As remote work becomes more prevalent, homebuyers are seeking out properties that cater to their needs. Many now prioritize small office, home office (SOHO) options, in case the office still allows remote work or if the pandemic flares up again. This has led to an increase in the popularity of residential units and condominiums that offer workspace-friendly layouts and even lofts.

Additionally, the demand for green initiatives continues to grow in response to the ongoing threat of global warming. Millennial and Gen-Z homebuyers, in particular, are pushing for residential properties that consume less energy and have a smaller environmental impact. With utility and fuel costs expected to remain high in 2023, smart homebuyers will be actively seeking out developments that align with their goals for a more sustainable living environment.

The Philippine Real Estate Market in 2023: Poised for Growth

Based on current numbers and trends, the real estate sector is expected to thrive in 2023. With the country reopening to local and foreign businesses, and an anticipated rise in purchasing power, the real estate market is well-positioned to help restore the country’s pre-pandemic levels of prosperity. Further improvements in the Philippine economy, infrastructure, and transportation are set to enhance the country’s appeal to investors. In 2023, the real estate market is poised to be the industry with the most potential for growth.

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