Planes, trains and automobiles: Dissecting infra’s role on property recovery

Infrastructure projects implemented by the national government have dictated developers’ strategies over the past few decades.

These have since provided access to properties that could be redeveloped into mixed commercial, residential and industrial estates, and have helped the government bring economic opportunities in areas outside Metro Manila. Due to these public projects, business opportunities have spilled over to nearby areas such as Cavite, Laguna, Batangas, Pampanga and Tarlac.

Despite COVID-19’s disruption to the Philippine property market, Colliers recommends that developers continue maximizing the government’s plan of ramping up infrastructure development by implementing strategic landbanking in areas outside of Metro Manila as infrastructure should enable decentralization from the urban core to the provinces.

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Infra spending at 4.5% of GDP

Data from the Department of Budget and Management show that infrastructure spending reached P681 billion in 2020, down 23 percent from the P881.7 billion in 2019 as the government realigned funds for its COVID-19 response. Infrastructure spending accounted for about 4.5 percent of GDP in 2020. The government plans to spend at least P1.17 trillion in 2021 or close to 6 percent of the country’s economic output.

In our view, infrastructure plays an important role in reviving the Philippine property market. The completion of toll roads, cargo railways, subways and airports will play a crucial role in paving the proverbial road to recovery.

Airport projects driving property prices up north

The Bulacan Airport, also known as the New Manila International Airport, will cover 2,500 hectares of a planned 12,000-ha township.

It will have an initial capacity of 100 million passengers a year which could expand to 200 million passengers. The airport is likely to be completed by 2025.

The New Clark International Airport, located 80 kilometers northwest of Metro Manila, will have a new terminal building that can handle up to 8 million passengers annually. In our view, the expanded and modernized airport is likely to further buoy Pampanga’s stature as a property development hub in Central Luzon.

Railways unlocking land appreciation potential

The expansion of Metro Manila’s railway system should unlock underutilized areas for township developments. Developers with significant office and condominium stock in the northern part of Metro Manila will likely benefit from the Metro Rail Transit Line 7 (MRT-7) as it is directly connected to the project’s North Avenue station. Mega Manila subway is another project that we see raising land values.

Other major projects in the pipeline include the North-South Railway which should benefit commuters from and further raise land and property prices in northern and southern Luzon.

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Roads improving access to townships

Other infrastructure projects that will likely drive major office and residential developments around Metro Manila are the BGC-Ortigas Link Bridge, Estrella-Pantaleon Bridge and the Skyway SLEx Extension.

The projects’ completion should further raise the established business hubs’ attractiveness as outsourcing locations as they improve the mobility of employees.

Colliers Philippines believes that infrastructure implementation will play a pivotal role for the long term growth of the country’s economy. We see its positive multiplier effects spilling over to property.

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Article was originally published in Inquirer and written by Joey Roi Bondoc.

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