Chinese investment integral to Philippine property market, as friendly diplomatic relations, offshore gaming add to appeal

Louise Moon

Chinese buyers are now integral to the Philippine property market, local developers say, with improved diplomatic relations and an offshore gaming industry encouraging mainland Chinese investors to put money in and immigrate to the southeast Asian country.

“The Philippine market has been strong with the Chinese community because ties between the Philippine government and the Chinese government, with our new president [coming in], are actually very good,” said Brian Plazo, Territory Head (Asia Pacific 2) of Philippine developer Megaworld Corporation. What better ties entail “is new business for the Philippines”, he added.

About 24 per cent of Megaworld’s sales last year were to Chinese buyers, according to Plazo, raking in 6 billion pesos (US$118 million) for the developer.

“Last year was one of our highest years, and a great contribution [was made by] our Chinese buyers,” he said, on the sidelines of a property conference organised by Uoolu, a cross-border real-estate transaction platform, in Beijing recently. Megaworld was starting to run out of inventory as a result, he added, and planned to launch more projects in the third quarter of 2020 to cater to Chinese demand.

According to Uoolu, the Philippines was the third most popular destination for property investment by Chinese buyers, following Thailand and Japan.

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SM Development Corporation (SMDC), the residential arm of shopping centre operator SM Prime Holdings and the Philippines’ most valuable real-estate company, sold 40 per cent of its properties to Chinese investors last year for 118 billion pesos, according to Ismael Taib, manager of the company’s Chinese business relations section. And investment from Chinese buyers could reach up to 150 billion pesos this year, to account for about 50 per cent of total sales, said Taib, who said mainland investors were “very active” and “very helpful” in snapping up inventory from SMDC.

The company plans to launch 50,000 more units this year across three or four projects, in response to growing overseas demand. SMDC charges foreigners a premium rate that is 5 per cent higher than local prices, Taib said. A typical 32-square metre unit will cost an overseas buyer 7 million pesos.

Cebu-based real-estate developer Primary Homes said Chinese buyers accounted for 20 per cent of sales last year, even though it does not advertise in mainland China. And this number could rise by another 10 per cent to 15 per cent in 2020 according to a modest estimate, Stephen Charles Liu, the company’s president, said.

“Two years ago, we thought it was more of a wild card purchase, maybe one or two [Chinese buyers] showed up. Now, one group comes in and buys 100 units,” Liu said. Primary Homes is aiming to build 1,000 more resort condominium units this year, following 800 last year, with some tailored to its Chinese clients’ needs.

Chinese investment in Philippines’ real estate sector picked up in 2016, after President Rodrigo Duterte took office, the developers say. After years of frosty relations, predominantly over issues in the South China Sea, Duterte went out of his way to nurture friendly ties with Beijing. In 2017, the Philippines signed up to China’s Belt and Road Initiative. The 71km Subic-Clark Railway Project, for example, is to be funded and built by Chinese companies this year.

Offshore online gaming has played its part, after the Philippines became the first Asian country to license it also in 2016. Philippine nationals are not allowed to play on these gambling platforms, which are only for foreigners.

By mid 2019, an estimated 100,000 to 250,000 Chinese nationals were working for gaming operators, according to the Philippines Amusement and Gaming Corporation. Gambling is illegal in China.

“There are a lot [more] business processing outsourcing companies coming in, compared with the past five years. There are also some gaming operators now playing a big part in the Philippines. These are mainly coming from the Chinese market,” said SMDC’s Taib. “Because of these industries in the Philippines, there is a demand for workers’ dormitories, [as well as] housing, offices, for these industries. We see the demand and we supply it.”

High occupancy rates are pushing up rents and further encouraging real-estate investment. “The rental yield is very high and occupancy rates are doing very, very well for the past two-to-three years, especially in Makati, in Metro Manila,” said Megaworld’s Plazo. “These are the main [central business district] areas, where Chinese businesses are growing at the moment.”

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Rents charged by Megaworld rose by about 150 per cent to 200 per cent last year, he said, and that they were only expected to continue upwards in 2020.

The developers said they had caught on to the trend and were starting to tailor their property volumes and styles to Chinese tastes.

“They are particular. The Chinese want some commercial areas nearby. Restaurants, groceries where they can buy and do their own cooking, which I didn’t see in the other foreign markets,” said Primary Homes’ Liu. “The Chinese want a lot of people – if the place has a lot of occupancy, they want to buy it.”

(Corrects interviewee’s name and title to Megaworld International’s Territory Head (Asia Pacific 2) Brian Plazo in story that first published on Jan. 15.)

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