How is Cebu going post-election?

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It’s June of 2016, but the real estate season is just starting. With the election over, buyers and sellers in Cebu are exhibiting much more activity. There is a lot of positive sentiment surrounding the incoming Duterte presidency.

But all is not well in Manila as 2016 is shaping up to be the most challenging year since 2009, with massive oversupply issues clogging up the pipeline. Buyers are naturally wary of the rocketing vacancy rate and there is expected to be a 10% decline in new development take-ups this year alone. As we have previously said, this isn’t really a “bubble” per se, but simply the natural result of over-construction, which has been occurring since 2014. Developers have now begun delaying the completion of projects to 2019, when the oversupply issue is expected to be corrected.

How does this affect Cebu? As we all know, real estate is a hyper-local asset and the slow down in real estate in Manila has not dampened the positive investment sentiment for the Philippines. As a result, Cebu has received much of the spillover attention. Cebu City has now risen to the 7th best destination for the BPO industry globally, and it is this massive growth in the BPO sector locally that has provided a strong baseline level of demand. While vacancy rates are still at 25%, they have steadily fallen since 2009, 3% this year from 28% in 2014/15.

GDP has rebounded strongly in the 2Q of 2016 to 6.4% from 5.6% in the previous quarter in the Philippines with Cebu outperforming the rest of the country strongly at 8.9% growth (although the official target growth is up to 11.9%, which points to a lot of upside in the economy).

Despite challenges in the real estate market, both here and in Manila, Cebu is set to weather them solidly, with a strong economic environment and baseline demand. It’s a good time to re-enter the market.

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