Is the real estate boom in Cavite realistic?
The construction boom in the Philippines continues well into 2015. It has the World Bank to issue a warning that the Philippines, together with three other developing countries experiencing the same phenomena, may be headed for a real estate bubbled that could seriously set back the burgeoning economies. The Bangko Sentral ng Pilipinas (BSP) has taken due note, but real estate developers do not appear to be worried. Major real estate develops continue to launch new development projects in and around Metro Manila.
One of the most notable real estate development booms is in Cavite. Investors are counting on the relative proximity of the province to Metro Manila and much lower property prices to make it the preferred location for real estate purchase for middle-income workers and families of OFWs. However, some experts believe that at the current rate of construction, there will soon be a glut in the real estate market, driving prices down. Is the real estate boom in Cavite realistic, then? Here are some factors to consider.
One of the biggest reasons that developers are scrambling to compete construction projects in Cavite is the planned infrastructure developments in the area. The most notable one is the extension of the LRT 1 line by 11.7 kilometers to Cavite, approved by the National Economic and Development Authority (NEDA) Board in February this year. The plan is to make the new endpoint of the line the Niog area in Bacoor, Cavite and projected to benefit about four million people currently residing in the southern areas of Metro Manila and Cavite.
Another major project in the works is the construction of a new international airport in Sangley Point in Cavite, which is scheduled for completion by 2025. It is slated to replace the Ninoy Aquino International Airport (NAIA) as the main hub for air transport. NAIA is ineligible for much needed expansion because of its location. The proposed site for the new airport will have no such limitations.
Changes in FDI policies
Some legislators are gunning for changes in the laws governing foreign direct investment (FDI) to encourage foreign investments in key areas in the Philippines. Currently, foreign entities cannot own property in the Philippines. Because Cavite already has industrial and commercial complexes existing or nearing completion, there is much speculation that investors would look favorably on the area to avoid the congestion of Metro Manila.
Even now, many global business process outsourcing (BPO) companies are putting up operations in key commercial complexes in the Cavite and Laguna area. While the influx of the young BPO employment pool into the area will increase demand for affordable housing in the area, foreign nationals will have more upscale requirements, justifying the development of luxury residents within easy reach of the commercial complexes.
The real estate boom in Cavite and other areas outside Metro Manila has financial experts nervously reaching for their newspapers and calculators, but there is little anxiety emanating from the real estate industry itself. Developers confidently expect the current demand to rise in the next few years, and they are putting their money where their mouths are. Only time will tell if such expectations are realistic.