x Abu Dhabi, UAEFriday 21 July 2017

UAE's Filipino expats feed building boom

Filipinos across the Emirates are being targeted by big developers at home bidding to build more than 150,000 new units over the next four years.

Property developers are increasingly looking to the remittances of the Filipino diaspora in the Arabian Gulf to fund the construction of thousands of new apartments. AFP
Property developers are increasingly looking to the remittances of the Filipino diaspora in the Arabian Gulf to fund the construction of thousands of new apartments. AFP

Filipinos across the Emirates are being targeted by big developers at home bidding to build more than 150,000 new units over the next four years.

Ayala Land, the largest property developer in the Philippines, plans to open its first office in Dubai next month aimed at so called balikbayan, or returning Filipinos. Other property companies have hired teams of sales agents in the Emirates to sell off-plan condominiums in projects such as the 56-floor Trump Tower Manila.

Property developers are increasingly looking to the remittances of the Filipino diaspora in the Arabian Gulf to fund the construction of thousands of new apartments.

"The goal of every Filipino expat in the Middle East is to work and have something back home when they retire to support their families," said Sherwin Lim, the Middle East group leader at Ayala Land. "Already, a big portion of Ayala Land buyers are from overseas, and this grows by the year."

The influx of cash from expats buying homes is funding a building boom that has helped the peso to become one of Asia's best-performing currencies in the first half of this year - rising by almost 5 per cent this year to reach a four-year high against the US dollar.

But it is also stoking fears of a property bubble as developers step up their overseas marketing.

The currency appreciation has prompted the government to tighten rules on capital inflows. Under the new system, banks will need to demonstrate investments in special-deposit accounts are from residents rather than foreigners.

The country's economy grew by about 6.4 per cent in the first quarter, leading its South East Asian neighbours. Such growth is encouraging developers to build towers with typically long construction periods tailored towards the balikbayan buck.

Remittances from overseas account for about 10 per cent of the economy in the Philippines. They rose 5.4 per cent to US$4.8 billion (Dh17.62bn) in this year's first quarter compared with the same period last year, according to central bank data.

Improving growth prospects at home have encouraged more property investment in the country by expatriate Filipinos, such as 26-year-old Christopher Tongco, from Cagayan de Oro in the south of the country. The newlywed has been living in Dubai for just a few months but already he and his wife have decided to take the plunge to get their foot on the property ladder at home.

They paid the equivalent of about Dh400,000 (US$108,908) for a two-bedroom apartment in Manila built by Century Properties, the developer behind the planned Trump Tower in Manila.

"We are taking a risk, yes, but we went with a credible real estate developer," Mr Tongco said.

Many of the developments currently under construction are being marketed with names borrowed from some of the world's most exclusive addresses, with campaigns that are reminiscent of those adopted by Dubai property companies during the height of the boom that ended in late 2008 when prices started to tumble.

While much of the residential construction under way in the Philippines is being sold off-plan, analysts are downplaying the risk of a speculative crash.

"It is not like other Asian markets in the 1990s where bubbles happened," said Alex Pomento, the head of research at Macquarie in Manila. "It can take four years for a building to be completed, and there is a low cash outlay."

He said high transaction costs involved in selling off-plan properties on the secondary market were an effective deterrent against "flipping" - the speculative practice of buying property in a rising market with the sole intention of selling it on again soon afterwards for a profit.

Flipping was blamed for the sudden collapse of property prices in the Emirates four years ago, when homes lost more than half of their value.

An estimated 154,000 new units will be built in the Philippines between this year and 2016 - or about 30 per cent more than the 118,000 units completed between 1999 and last year.

scronin@thenational.ae