By Christine Joyce S. Castañeda
CONSTRUCTION STARTS, based on approved building permits, rose 3.6% year on year in the fourth quarter of 2017, led by nonresidential projects, according to preliminary data released by the Philippine Statistics Authority (PSA).
Building permits rose to 33,445 in the fourth quarter, up from 32,282 a year earlier.
The projects were equivalent to 7.742 million square meters of space and were valued at P81.698 billion, down 0.91% from a year earlier.
“Based on historical trends, the approved construction permits usually increase during the fourth quarter. This increase is attributed to investor confidence encouraged by high demand, [the] 2% annual population growth, [and the] expanding middle class and equity investments in property,” said Monique Cornelio-Pronove, chief executive officer at Pronove Tai International Property Consultants.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), concurred, “a growing economy may mean growing demand for both residential and nonresidential construction activities.”
“This 3.6% increase is expected of an economy that has been growing beyond 6% in the last 11 quarters,” he said.
PSA data showed that shoring up demand in the fourth quarter were nonresidential projects, which saw a 23.2% increase to 4,903 new building permits.
Agricultural-type buildings rose 51.1% to 281 permits issued in the fourth quarter followed by commercial-type buildings (25.9% to 3,129); “other nonresidential” buildings (22.5% to 109); industrial buildings (14.2% to 554); and institutional buildings (12.8% to 830).
Commercial-type buildings make up the bulk of the number of new nonresidential projects at 63.8% in the fourth quarter.
For nonresidential construction, the average cost per square meter was 3.5% lower at P9,299 due to declines in the average cost per square meter of industrial (-12.8%) and commercial (-7.7%) buildings.
On the other hand, residential construction projects — which make up 70.84% of the total approved construction permits last quarter — saw a 4.3% decline to 23,693. The decline was brought about by residential condominiums (-46.6%); apartments/accessorias (-10.2%); single-type houses (-3.5%); and duplex/quadruplex (-4.0%).
Among residential construction projects, single-type houses had the biggest share of new permits at 85.1% or 20,168.
The value of these residential projects likewise declined 12.41% to P41.583 billion in the fourth quarter of 2017 from P47.476 billion in the same period in 2016.
Additions to existing structures rose 30.1% to 1,149. Combined number of alterations and repairs of existing structures also rose 38.8% to 3,700.
Region IV-A (Calabarzon) — immediately south of the National Capital Region (NCR) — topped the number of approved building permits with 7,292 or a 21.8% share. Coming in second was Central Luzon with 3,611 or 10.8% followed by Central Visayas (8.4%), NCR (7.8%), and Davao Region (7.7%).
Ms. Cornelio-Pronove said the increase in the number of nonresidential projects was due to the government’s push for food sufficiency, which affected the value of agricultural buildings; the increase in household consumption spending; and higher tourism arrivals.
“[T]he government is strongly pushing for farmers and businesses in the agriculture sector to improve facilities [in order to] boost the harvest of rice, banana, and other products,” she said.
Commenting on commercial establishments, Ms. Cornelio-Pronove said that the increase was most apparent in the retail market with more small-to-medium sized enterprises cropping up.
“The Philippines’ consumerism is among the most active in Asia at an estimated 60% of the 105 million population capable of buying basic to lifestyle goods,” she said.
Meanwhile, Michael L. Ricafort, economist at Rizal Commercial Banking Corp., noted the increase in infrastructure projects from more foreign direct investments and offshore gaming outsourcing companies that led to the pickup in manufacturing activities and increased demand for office space.
“Some commercial/retail/mall/office space developers have also expanded in fast-growing cities/localities outside Metro Manila,” he added.
The data “may reflect the sharp increase in residential condominium projects in recent years that led to some glut/oversupply in the middle market. As a result, some developers have adjusted downwards the new upcoming supply,” Mr. Ricafort said.
“Limited land for residential development in Metro Manila may also be a factor. Some of the expansion for residential projects have been outside Metro Manila. Higher interest rates in recent months may have also dampened demand for financing for both residential developers and end-users,” he said.
Sharon Joy Roset-Saclolo, associate director of Jones Lang LaSalle (Philippines), Inc.’s (JLL) Research, Consulting and Valuation Advisory Services, said: “The increase in nonresidential construction permits may be attributed to the shift in the strategy of real estate developers to focus on long-term assets with recurring income.”
Going forward, the analysts were optimistic in the coming quarters.
“The construction market is seen to benefit from the government increased funding on the development of railways, airports, seaports, roads and bridges across the country. These public [infrastructure] projects would then spill over to the construction of buildings or structures led by the private sector or individuals as key cities and municipalities would benefit from the infrastructure developments,” Ms. Cornelio-Pronove said.
For her part, JLL’s Ms. Roset-Saclolo said: “The growth rate of construction projects from 2017 to 2018 is expected to be stable since there is continuing interest from both boutique and major developers to invest in real estate, especially in commercial assets.”
UnionBank’s Mr. Asuncion shared the same assessment, “With the economy expected to grow further, I expect construction activity to increase even more.”
“With the government’s plan of fiscal expansion and increasing infrastructure development, I see a faster pace of growth for nonresidential construction related to commercial, industrial and institutional building-types over residential construction, that I think will also post a fast growth trajectory concentrated more outside of the usual centers,” he said.