Looking at the year prior, many had expected that the Philippines’ real estate industry will continue its steady growth. With the significant development of the country’s economy despite the financial headwinds brought on by the pandemic, the Philippines’ real estate industry had retained the capacity to achieve a notable growth in revenue, especially in the country’s housing sector that was influenced by the market rebound and the boost in property investment opportunities for many Filipinos. Q1 forecast from 2022 predicted that 2023 will generate more revenue for the real estate industry, and with the H1 reports from top real estate and home improvement companies in the Philippines, these predictions were certainly brought to reality.
The Steady Rise Of The Philippine Real Estate Industry In 2023
The recent years experienced by the Philippine economy brought on significant changes in the country’s real estate sector. Despite the grim downturned arrow faced by many industries in the country, the local real estate industry continued to expand, as it was even acknowledged to show improvement in the housing market in 2022— a trend that currently persists in 2023 as reflected in COL Financial’s overview performance report of the major Philippine real estate developers for the first half of 2023. The period of improvement and stabilization of the Philippines’ real estate market is impressive, as it managed to tackle economic headwinds while preserving an upward profit trend in 2023.
However, an increasing economy and a recovering market are not the only factors contributing to the country’s remarkable real estate industry standing for the first half of 2023. Inflation may have triggered issues in various sectors of the local economy, but its predicted decrease from 7.6% to 6% by the end of the year is expected to induce a necessary halt in the interest rate hikes which can open the market to a wider audience and influence a rise in revenue as a result.
Image from Philippine News Agency
This, alongside the Philippines’ recovering GDP that managed to reach the 2022 prediction, are all contributing factors responsible for the steady growth of the country’s real estate industry.
Multiple economic factors posed positive effects on local real estate, and it can be construed that one factor is somewhat both an influence and a result of the other. However, this does not necessarily translate that one factor is required for another one to transpire– In fact, COL Financial reports that most major real estate developers in the Philippines have performed well in the first quarter of 2023 with an average net profit of 31.5 Y/Y even while the Philippine inflation rate continued it’s upward trend to 8.7%. It appears the profitability of the Philippine real estate industry persists, regardless of the drastic shifts in the local economy. A change brought on by the pandemic in the property preferences of Filipinos may have also contributed to the growth of the real estate market.
“…the shift to horizontal living spaces is no longer a pandemic fluke but has become the choice for many Filipinos,” stated Ovialand, Inc. president and chief executive officer Pammy Olivares-Vital in an interview with BusinessWorld.
This translates to more property buyers looking for spaces outside Metro Manila, which in turn expands and influences the growth of the country’s real estate industry.
Growing Real Estate Industry Fails To Boost Retail For Major Home Improvement Businesses – AllHome And Wilcon Depot’s Net Profits
Even as the country’s real estate industry continues to develop, many home improvement companies are experiencing significant decreases in revenue. Two major home improvement and construction supply retail giants AllHome and Wilcon Depot both experienced a downturn in profits in the first half of 2023. Manny Villar’s AllHome may have regained significant revenue comparable to the previous year’s performance, but considering the losses the business incurred in the year 2022, AllHome’s Y/Y earnings for the first half of 2023 declined by 23%.
Again, significant changes in buyers’ preferences have influenced the difference in AllHome’s fiscal performance. Both AllHome and Wilcon Depot report that the Filipinos’ desire to shift their attention to ‘revenge traveling’ and other leisure activities have significantly reduced their business income, especially as the current year introduced the lifting of major travel bans and pandemic restrictions loosened.
“There is a bit of revenge travel…discretionary spending is [moving] more toward this kind of spending at the moment,” said Wilcon president and CEO Lorraine Belo-Cincochan in a press media briefing.
However, AllHome expects to see development in their performance in 2023’s H2 and the company predicts that it can spill over to the first quarter of 2024.
On the other hand, Wilcon Depot, AllHome’s competitor, is seeing stagnant revenue growth on top of the 2.1% Y/Y drop it met on 1H23. Home renovation projects slowed down in the first half of the year, and Wilcon Depot reports that the influx of customers that visit their physical stores has significantly dropped as well. However, Wilcon and AllHome are not starting from the same base as Wilcon began the year with a 2022 net income of ₱3.85 billion with ₱33.57 billion in sales. The reduction of construction materials has also taken a substantial dip in 2023, reaching 1.5% in July compared to 7% in the same month the year prior.
Image from Philippine Statistics Authority
Top Philippine Construction Companies Performance As Of 1H23
The growth of the country’s real estate industry presented a positive influence on many major construction companies in the Philippines, although some notable businesses had significant drops in their net profit. Both Megawide and DMCI have either sustained or exceeded their income forecasts, with Megawide even slashing its 2022 net loss by 96% percent in just the first half of 2023. However, Yuchengco-led EEI Corp reported a net loss of ₱445.94 million, which appears to be a result of the company’s downward trend in revenue loss as the company also reported a 9.3% lower revenue in 2022 compared to the year prior.
The Philippine Real Estate Industry’s Evolving Landscape
According to Colliers, the country’s property market is expected to benefit from the 7.6% growth of the country’s GDP in 2022. While the economy is not predicted to maintain nor surpass this record, the Philippines is still seeing a steady improvement in its economy, and the local real estate industry is expected to expand as the market grows. The real estate industry in the Philippines continues to adapt to changing preferences and shifting economies. But with the consistent effort of the local government in improving local infrastructure and the development of more residential areas to accommodate an increase in demand, the local real estate industry should continue its steady growth.
References
- Bilyonaryo. (2023, May 24). AllHome’s Q1 results fall short of expectations despite profitability return. Bilyonaryo. Retrieved August 23, 2023, from https://bilyonaryo.com/2023/05/24/allhomes-q1-results-fall-short-of-expectations-despite-profitability-return/property/
- Camus, M. R. (2023, June 19). Wilcon Depot sees muted sales growth in 2023. Inquirer Business. Retrieved August 23, 2023, from https://business.inquirer.net/406283/wilcon-depot-sees-muted-sales-growth-in-2023
- Mioten, E. (2023, February 27). Real estate’s prospects and opportunities in 2023. BusinessWorld Online. Retrieved August 23, 2023, from https://www.bworldonline.com/special-features/2023/02/27/507330/real-estates-prospects-and-opportunities-in-2023/
- Philippine Star. (2023, May 25). Megawide slashes net loss in Q1 | Philstar.com. Philippine Star. Retrieved August 23, 2023, from https://www.philstar.com/business/2023/05/25/2268743/megawide-slashes-net-loss-q1
- Philippine Star. (2023, July 28). Wilcon profit drops slightly in 6 months | Philstar.com. Philippine Star. Retrieved August 23, 2023, from https://www.philstar.com/business/2023/07/28/2284280/wilcon-profit-drops-slightly-6-months
- Sanchez, M. (n.d.). Philippine Property Recovery Expected to Persist in 2023. Bria Homes. Retrieved August 23, 2023, from https://www.bria.com.ph/articles/philippine-property-recovery-expected-to-persist-in-2023/
- Soberano, P. (2023, April 29). 2023 Real Estate Market Trends for Q2 Onwards. Crown Asia. Retrieved August 23, 2023, from https://www.crownasia.com.ph/news-and-blogs/lifestyle-blogs/selected/2023-real-estate-market-trends-for-q2-onwards
- Toriano, K. (2023, June 15). Philippine housing market shows resilience and growth. Asia Property Awards. Retrieved August 23, 2023, from https://www.asiapropertyawards.com/en/philippine-housing-market-shows-resilience-and-growth/
