Philippines property boom or bust?

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Land prices have risen considerably in Asia, and the Philippines is no exception, even if the country is no laggard. Even if the USA, Japan and EU are weak, the Asian and Latin American economies are still pretty robust, and at the end of the day, these economies can be expected to drive most global growth for the next 5-10 years. So what can we expect?

1. Lower interest rates. There are economists talking of the US treasury rate on 10-year bonds falling to 1%. This does not surprise me. The implication I suggest however is greater in those countries which are not overly indebted, i.e. Asian countries. I'm expecting a property boom, and you can expect this wealth growth to feed into consumption, before the USA and EU rejoin the party. Also expect Western investment in Asian property. The driver for this will undoubtedly be yields. Consider that Philippine rental yields are very attractive at 8.62%. Indonesia is less attractive for personal investors, because of regulatory issues, but even Indonesia might appeal with future reforms. Certainly the Philippines looks like the best market, for reasons like their 18-mth 'extended' stay on a tourist visa. In fact they are higher than they were several years ago, highlighting the fact that income growth is outpacing construction in these uncertain times. 

                                     Source: Trading Economics.

2. Strong fundamentals for the Philippines with high commodity prices, high remittances and of course the strong business outsourcing market. 

3. Improving governance - We have yet to see much change here. There is a top-down push for anti-corruption, i.e. The sanctioning of the Chief Justice and former President Arroyo, but this might well just be a changing of the guard, rather than heralding the end of corruption. 

Indoubtedly global debt levels have topped out, but don't for a moment think that this boom is over as long as 70% of the global population is liberalising. This is the Industrial Revolution...that one in the 17-18th century was a baby in some respects. This is just as significant. In fact, we might even expect political reform before the end of it. More realistically, I'd expect such reform because of a 2030s crash...but that's a long time off. 

Andrew Sheldon NZ Property Guide Philippine Real Estate Guide Foreclosed Japan Guide Applied Critical Thinking, Strategy, Integrity Investments SheldonThinks