Where is the Philippines in the real estate cycle?

Prof. Augusto B. Agosto
22 February 2019


One of the concise definitions of the real estate cycle is offered by The Royal Institution of Chartered Surveyors in its 1994 publication on Understanding the Property Cycle: ‘‘Property cycles are recurrent but irregular fluctuations in the rate of all-property total return, which are also apparent in many other indicators of property activity, but with varying leads and lags against the all-property cycle.’’(Pyhrr, Roulac and Born, 2010).

In the past 30 years, at least 2 cycles can be observed and end up in crisis, the 1997 and the 2007 crisis. However, each cycle occurred in different economic environment. By looking back, we can learn not only of its description and duration but also its magnitude,  characteristics and methods of preventing a crisis.

The Philippines is now at the peak of expansion stage of the real estate cycle. How will it last, it will surely be based on the ability of the stakeholders to control and prolong the period. How it happen and why it happen is the topic of this article.

Studying real estate cycle is not only important for appraisers in determining the prevalent types of assignments but it is also important for the investors. Knowing the stages of real estate cycle will guide the them in making informed decision in every real estate transactions.

Lessons from history

Similar to other economies, the Philippine property sector is highly cyclical and is susceptible to periods of expansion, decline and a subsequent crash and price correction. Real estate cycles were prevalent in the ’80s during and after the Marcos era, and during the Ramos administration in the ’90s which saw the Asian Miracle, which was followed by financial crisis of 1997. The 2007 global financial crisis has shown the powerful links of housing and the economy.

The adoption of liberalization policy on selected industries under the Ramos administration resulted to the expansion and entry of more firms engaged in key industries such as telecommunications, interisland shipping, and banking. This development had a positive effect on office space absorption. The office sector was greatly affected by the regional and global economic meltdowns, particularly during the 1997 Asian financial crisis and the global financial crisis of 2007-2008.

The 1997 Asian Financial Crisis was primarily driven by speculation. In concluding remarks of his thesis on 1997 Asian Crisis and Real Estate Cycle, Dr. Sopon Pornchokchai posits that excessive speculation on housing units leads to over-investment by the developers who are responding to unrealistic and unsustainable demand levels and thereby disrupting market equilibrium.

From 1990 up to the 1997 Asian financial crisis, a gradual property boom arose and was relatively dominated by open-market and medium cost projects. But toward 1998 and throughout the market slump, socialized housing projects outpaced other developments, due to support from the government (Ortega, 2016).

In the graph shown, we can observed the land values in the biggest market in Metro Manila- Makati and Ortigas. The expansion in real estate peak in 1997 and the crisis brought down the land values lower than the pre-Asean Crisis.

However, the real estate sector has been growing since the early 2000s due primarily to rising household incomes and an unmet demand for housing. Mainly driven by remittances from overseas Filipino workers (OFWs), the housing sector has been on an upswing, dipping only momentarily during the global financial crisis of 2007. The market started to pick up again, with all segments of the residential property market experiencing significant growth. But socialized housing radically picked up by the mid-2000s.

In the office segment, from the bitter experience, the development community in the country learned the necessity to quickly turn off the office supply tap. That was adequately demonstrated in 2010 when after ramping-up office supply to 480,000 sqm in 2008 and 523,000 sqm in 2009, completions fell sharply to 203,000 sqm in 2010 as projects were deferred or outright cancelled.

During the global financial crisis of 2007 ,  the office market in the country have experienced 8 percent vacancy rate, while in the recovery period of 2011-2012 vacancy rate was 4 percent.

The boom in the 90s was short, lasting for only five or six years. Interest rates were 20-30% those years. Today, the boom is 17 years old and has benefited the economy so much yet interest rates are only at 5%. The collapse in interest rates and the money coming from overseas Filipino workers has impacted the lives of many, they are the key driver of the economy and real estate industry.

Where are we in the cycle?

The Philippines has emerged as one of the fastest-growing economies in the region in recent years. With an average growth rate of 6.2% per year from 2010 to 2018—even reaching 7.1% in 2013—Philippine economy continue to expand and real estate industry capitalize the momentum.  Both in the residential and non-residential property type posted growth alongside with the vibrant economy. Developers are taking on the underserved industrial warehousing. Data from the Philippine Statistics Authority show that the contribution of the Industry sector to the Philippine’s Gross Domestic Product (GDP) has been steadily rising in the past 5 years. Hospitality industry continue to increase its accommodation inventories with ever increasing tourist arrivals.

In the residential real estate price index released quarterly by the Bangko Sentral ng Pilipinas, we can observe the continued growth of housing prices in the country since 2016. Condominium unit posted a higher price in 1Q 2016 however it was outpaced by Duplex type pricing in the Q1 2018. It was followed by townhouse and single detached/attached house. The data only shows the limited supply of the duplex type and flooding of condominiums  inventories in the market with an average monthly take-up of  23.21 in Metro Manila. The take up for condominium units in the secondary market covering major business districts is sustained by demand from foreign and local professionals working in central business districts (CBDs). As of 1st Half 2018, about 30,000 units have been taken up in the preselling sector. However the delivery of at least 7,300 units in 2nd Half 2018. Manila Bay, Fort Bonifacio, and Rockwell will likely account for 84% of new units in 2H 2018.

Due to scarcity of land, property values in different submarket in Metro Manila  posted a big an increase sans land development in the area. Based on the data published by Leechiu Property Consultants, land values in major Central Business districts in Metro Manila increases from 13%-40% in 2016 to 2017, while the increase in 2017-2018 ranges from 13% – 46%.

Land Values in CBDs (In Philippine Peso/sq.m.)
Business District 2016 2017 2018
Arca South 210,000-280,000 250,000-280,000 300,000-350,000
Bay City 198,000 250,000 350,000-450,000
BGC 360,000-900,000 480,000-1,200,000 480,000-1,200,000
Filinvest City 120,000-280,000 144,000-365,000 309,000-473,000
Makati City 300,000-800,000 400,000-1,000,000 400,000-1,200,000
Ortigas 200,000-350,000 250,000-400,000 250,000-400,000
Source: LPC

In Metro Manila, the overall vacancy rate in office market stood at 4% in Q3 2018, slightly down from the previous quarter of 4.5% according to Knight Frank. Meanwhile, in the residential condominium vacancy is down to 10.6% from 10.8% in Q3 2018.

Overseas Filipino Workers (OFW) remain as an economic growth driver as remittances for the first eleven months of 2018 remitted a total of $29.1 billion, 2.9 percent higher than the same period last year. These figures were augmented by the Business Process Outsourcing or BPO,  as of June 2016 the number of establishment involved in BPO is 851 with an employee of 575,600 (Businessworld, 8/7/2018). Also, one of the major driver of the demand for real estate is tourism. Data from Department of Tourism posted an increase of 7.7% in tourist arrival in 2018 compared to its level last year.  Growth in tourism significantly benefited real estate. The hospitality industry continues to grow and attracted foreign brands to setup their presence in the country or partner with the local businessman in building one.

The prices in real estate, vacancy rate and land values mirrors the present situation and the position of the country in the real estate cycle. It is now at the peak of expansion stage of the real estate cycle. How will it last, it will surely be based on the ability of the different stakeholders to control and prolong the period. We may have the OFWs which makes us resilient to crisis, however it is a cycle. There is boom and also bust.


The demand for housing from the local populace is glaring. We have the current housing backlog of 5.7 Million  all over the country. The number of renters present in the urban areas will always be a potential market for any real estate developer and provider in this segment.

The present thrust of the Duterte Administration on building infrastructures in different parts of the country will greatly help to unlock land values in different cities and municipalities. Infrastructures will help spur the growth of different segments in real estate market like office, residential, retail, industrial and hotel and recreational.  Also, the creation of the Department of Human Settlement and Urban Development by the Duterte Administration will pin hope to the millions of Filipinos for the provision of housing needs and planning the development both in urban and rural areas.

Real estate in the country will continue to grow and help the nation in spurring economic development, not only in the cities but also in the countryside.


Ortega, Andre Arnisson. Neoliberalizing Spaces in the Philippines
Ballesteros, Marife.     The Dynamics of Housing Demand in the Philippines
Ballesteros, Marife.     Land Use Planning in Metro Manila and the Urban Fringe: Implications on Real EstateMarket
Pornchokchai, Sopon. Rethinking Real Estate Cycles, Bangkok, 1997-2007
Philippine Statistics Authority website
Various news clippings