OBG talks to David Consunji, Chairman, DMCI Holdings

Interview: David Consunji

Which real estate market segments are likely to receive the most attention in the next 18 months?

DAVID CONSUNJI: Construction activity is expected to be strong in the near and medium term across all market segments. The tourism sector presents a significant opportunity to developers, as it remains a relatively untapped market in the Philippines. Certain areas, including Palawan and Bohol, are especially primed for growth, though firms must adapt their development models to their unique qualities.

The housing market appears especially strong and will likely dominate construction activity over the next few years. The luxury segment continues to receive significant developer attention due to relatively high profit margins, but moving forward most demand will be seen in the lower and middle markets.

The population of the Philippines has grown at a phenomenal rate over the past half-century, increasing from around 27m in 1960 to nearly 100m today. Housing developments have not kept pace with this increase. As rapid population growth is expected to continue for the foreseeable future with no signs of significant deceleration, the need for additional housing supply will continue to rise.

The Philippines is currently experiencing a very important stage of development in which home ownership is becoming available to a new market segment. This is an incredibly valuable change and should not be taken lightly by developers. Rapid growth in this new segment has precipitated a wave of sustained demand in low-cost and middle markets. Developers are working to meet this strong demand by planning and breaking ground on numerous future housing projects before the completion of existing works.

What has resulted is the uneven development of certain geographical areas in urban markets, driving up property development prices in places that have seen excessive growth. Meanwhile, other areas remained relatively untouched, which provides innovative developers with opportunity to acquire and develop land outside of these high-activity markets for a relatively much lower cost, providing lower prices for buyers as well.

What infrastructural and operational improvements need to be made to cater to an expanding and increasingly sophisticated market?

CONSUNJI: The Aquino administration has identified infrastructural development and improvement as a strong priority, with private-public partnerships (PPPs) set to play a defining role in these efforts. These PPP projects will be extremely important to the modernisation process, and significant interest has already been expressed by the private sector. As additional projects are formally announced, the strong trend of investment is expected to continue.

Due to the country’s unique geography, physical and economic connections between various areas and provinces have historically been quite limited. Repair and expansion of the country’s road network are severely needed and will comprise a large portion of PPP initiatives. Enhancement of the road network will lay the foundations for increased commerce and economic activity among the regions. Improved transport infrastructure will also allow for the transfer of skills and knowledge across borders, building capacity and capability locally while contributing to sustainable and inclusive economic growth in rural markets. These new, untapped markets will be increasingly important as Philippine property developers continue to expand.

What regulatory measures are being taken to ensure the quality of property development?

CONSUNJI: Efforts to improve efficiency and boost profit margins must not come at the expense of quality. The government certainly has a role to play in this regard through additional market regulations and increased oversight. However, some degree of self-regulation is also necessary and is the most effective method to ensure quality. The market will favour developers that are best able to balance quality and price.