Forecasts and predictions on the Philippine economy and real estate industry

from various industry experts and Colliers International Philippines.

Ten Predictions for 2014
Owing to the recent calamities that hit the country,
analysts have revised their GDP forecast for the
country.
The World Bank has lowered its outlook for 2014
from 6.7% to 6.5%. On the other hand, Nomura
and Citigroup are in unison in raising its GDP
forecast for 2014. Nomura adjusted their forecast to
6.7%, while Citigroup increased its outlook to 7.3%
from 6.9%.
Moodys Analytics also sees that The Philippines
continues to outperform and will remain one of the
worlds fastest growing economies in 2014.
Analysts cited that rehabilitation and reconstruction
efforts in areas hit by the calamities will spur
economic growth in 2014.
1. Philippine economic growth in 2014 seen at 6.5 7.5%

Forecasts made by: Nomura, World Bank, Citigroup, Moodys Analytics
Ten Predictions for 2014
2. Historically low interest rates to start climbing
due to tapering

Sources: Business World, Business Mirror, Barclays, BSP
Ten Predictions for 2014
The U.S. Federal Reserve has announced that they will
begin to taper its quantitative easing program in January
2014, as it reduces asset purchases by US$ 10 billion.
While the U.S. Fed has not decided to directly alter
interest rates, most analysts expect long-term interest
rates to gradually increase as the effects of tapering is
felt.
BSP Gov. Amando Tetangco has recognized that an
increase in local interest rates due to tapering is
possible, but some analysts such as Barclays believe
that the central bank will hold its interest rates until the
second half of 2014 due to the recent calamities.
An increase in interest rates will be felt in the residential
real estate sector, which has been very active due to
historically low mortgage rates.

The US dollar is anticipated to appreciate further against the Philippine peso.
Higher employment data reports and the tapering of the USD 85 billion asset
purchase program are seen as the main factors for the stronger dollar.
BDO predicts that the exchange rate will play between P43 and P44 levels until
1Q 2014 due to an improving US economy.
As a result of this, Manila will remain as the cheapest capital city to set up an
office in the Asia Pacific region.
3. US Dollar to strengthen further against the Peso

Forecast made by: BDO, Colliers International Philippines Research
Ten Predictions for 2014
Condominium development in Metro Manila had a
banner year in 2012, with approximately 52,000
units sold. However, 2013 has seen a slowdown in
takeups, largely due to the pullback of several
developers in launching new projects. HLURB
license applications for high rise development for
the entire country have fallen by 36% from January
to July 2013. Interestingly, sales takeup levels have
exceeded new launches in the first nine months of
2013, indicating that demand is still strong.
A possible increase in interest rates due to the U.S.
Federal Reserves tapering will have an downward
impact on residential sales, as mortgages would be
less accessible. Condo investors may also be
dissuaded once banks start offering higher deposit
rates.
End-2013 levels are expected to be at around
45,000, with similar numbers seen in 2014.

4. Metro Manila condominium launches to remain at
conservative levels
Forecasts made by: Colliers International Philippines Research
Ten Predictions for 2014
Worsening traffic congestion in Metro Manila has
made the metropolis more unlivable. While the
economic impact of traffic is estimated at P140 billion
in wasted gasoline, productivity and medical issues,
the intangible cost such as lost time spent with loved
one is incalculable. Climate change has also brought
about more periodic flooding, which typically brings
life in the city to a standstill.
Because of this, Transit Oriented Developments are
seen to be more popular, as these developments
allow people to live near mass transit that would
easily bring them to and from work. Several
developments that have access to light rail stations
have proven very successful.
Mixed use developments and townships in or close
to central business districts (CBDs) would also
continue to be popular because of this shift in
lifestyles.

5. Transit Oriented Development (TODs) to continue as
successful development formats

Sources: JICA, Colliers International Philippines Research
Ten Predictions for 2014
The BPO industry continues to absorb most of
the new office supply being developed.
The Business Process Association of the
Philippines (BPAP) estimates that by the end
of 2013, the industry would employ a total of
960,000 workers nationwide. This translates to
a demand for office space of about 2.8 million
sqm.
Despite a substantial amount of new office
space being developed in the next three years,
vacancy rates are still seen to be low because
of the continuous strong demand.
Expansions will continue in the Next Wave
Cities where labor pools are sustainable.



6. BPO industry to keep driving the Office sector

Forecasts made by: BPAP; Colliers International Philippines Research
Ten Predictions for 2014
The emergence of Metro Manila, and to a
lesser extent Metro Cebu, as non-stop, 24-hour
cities is mainly due to the growth of the BPO
sector. With employees working the night shift,
support services such as restaurants and
convenience stores should also be available for
this emerging niche market.
The emerging casino district known as Pagcor
City will also drive the transformation into a 24-
hour city, promoting entertainment and tourism
in the Manila Bay Area.
Because of these trends, public services such
as traffic management and security should also
be active day and night.

7. Metropolises transforming into 24-hour cities

Forecasts made by: Colliers International Philippines Research
Ten Predictions for 2014
Prediction made by: Colliers International Philippines Research
The Philippine manufacturing sector saw a resurgence in 2013 as some
manufacturing outfits decided to locate in the country, reviving an industry that
has been in the doldrums since the Asian Financial Crisis.
Rising labor costs as well as growing regional territorial disputes have
prompted some manufacturers to move out of China and seek more
hospitable locations in Southeast Asia.
More industrial park development is seen in Calabarzon as well as in the
Angeles-Clark area.
A weaker Philippine Peso will benefit exporters and drive up manufacturing
activity even further.
8. Industrial property sector to accelerate growth
Ten Predictions for 2014

Prediction made by: PPP Center, Colliers International Philippines Research
One of the criticisms on the Aquino
government is that the rollout of the public-
private partnership infrastructure programs
have been painfully slow.
The governments PPP Center have recently
announced that they are now targeting to
award 15 new PPP projects before the end of
Pres. Aquinos term in 2016. Seven of these
projects should be completed by the time the
President steps down.
Some of the projects that are anticipated to
have a direct impact on real estate
development are the Cavite-Laguna
Expressway and the LRT-1 extension
projects, which are seen to promote suburban
development south of Metro Manila.
9. More Public-Private Partnerships until 2016

Ten Predictions for 2014

Colliers repeats this trend first mentioned in
2013, as extraordinarily strong typhoons and
earthquakes continue to be the new norm.
Residential developments that are located in
safer districts would be in high demand,
especially those in areas with a low risk of
flooding and storm surges and far from fault
lines.
Architectural and structural design will lean
towards those that would not only withstand
these natural calamities, but would also
minimize the buildings impact on the
environment that leads to these calamities in the
first place. The tenets of green building will be
valued more than before.
10. Homebuyers to continue seeking safer and higher
ground
Prediction made by: Colliers International Philippines Research
Ten Predictions for 2014
Thank You
Romeo Arahan
Research Analyst
Research & Advisory Services
Main +632 888 9988 ext.4030
Fax +632 845 2612
Email romeo.arahan@colliers.com
Julius Guevara
Director
Research & Advisory
Main +632 888 9988 ext.4024
Fax +632 845 2612
Email Julius.Guevara@colliers.com