Philippines real estate will likely see benefits as a result of the ‘Brexit’ vote in the United Kingdom.
In its World Research report for Q2, real estate firm Savills noted that there will be considerable uncertainty moving forward, brought about by the U.K.’s decision to leave the European Union.
As the global economy witnesses increased volatility, the Philippine economy was able to stand firm and remain relatively unharmed.
Savills noted that as expected, the sound macroeconomic fundamentals cushioned the market reaction in the country.
The equity market barely witnessed any movement after the vote and in the bond market, the 10-year yields compressed by 35 basis points during the referendum date, but bounced back to 4.4 percent the day after along with the currency that has strengthened against the dollar as the appetite for emerging markets picked up.
Despite Brexit’s minimal impact in the financial markets, it is still possible to experience some disturbance in the mid- to long-term as there is still some exposure to U.K..
In 2015, the U.K. was the third largest foreign direct investments (FDI) contributor in the country with a 20 percent share of the total net flows.
Given the country’s already low levels of investments, a further decline in FDIs will reduce the inclusivity and sustainability of the current growth momentum.
That said, the relaxation of Philippines real estate foreign ownership restrictions is needed now more than ever as it could mitigate this risk, particularly amid the increasing flow of investments to emerging markets.
However in terms of other indicators, the U.K. exposure is not significant.
Foreign trade levels are not likely to witness any major shifts because the U.K. is not one of the main trade partners. Likewise the backbone of the current economy, Overseas Filipino Workers (OFW) remittances, are not expected to face any significant decline.
Last year the U.K. was the fifth largest sender of OFW remittances, accounting for around 6 percent of the total inflow.
Although the expected weakening sentiment in the U.K. job market might decelerate the flow of remittances, the decline may only be minor as majority of the OFWs in the U.K. are employed in the nursing or caregiving sectors which are crucial to the British economy regardless of its state.
Furthermore Savills said it believes that Brexit will open opportunities, particularly in the Philippine real estate sector.
While most of the office markets may see downside risks from the weakening global growth, Savills sees the Philippines’ office market has only upside risks.
Amid similar circumstances and uncertainty post-GFC, the country’s office market witnessed increasing demand from the outsourcing industry as companies underwent cost-savings programs and transferred nonessential roles to cheaper locations.
Should the Brexit materialize and its repercussions become extremely negative on global growth, Savills believes the strong fundamentals of the Philippines real estate and its economy will alleviate the risks or even bring about a positive shock.