OFW remittances fueling growth in real estate
MANILA, Philippines -- UP TO A third of the record-high foreign remittances sent home by expatriate Filipino workers is spent on real estate, making the current property market boom more durable than previous episodes, according to industry players and market watchers.
"Our rule of thumb is that 30 percent of all remittances end up in spending for the real estate sector, whether it is used to buy or property or spent on housing improvement," he said.
More importantly, the trend marks a significant departure from the pattern established in previous decades where the bulk of OFW remittances was spent on consumer goods, with little left for savings and investments.
In 2006, OFWs sent back to their local beneficiaries $12.6 billion through the banking system alone. The central bank estimates that this amount is even understated by an average of 30 percent because of funds sent home through informal channels.
At the low end, this means that as much as $4.2 billion in OFW funds were spent on the real estate sector last year--a figure that will rise further, given the central bank's expectations of as much as $14 billion in remittances for 2007.
"OFWs are really the main factor driving up this market," said Antonio, whose firm has launched several projects aimed at this cash-rich sector. "In our case, at least 50 percent of our sales come from OFW [buyers]."
For other firms, this level could go to as high as 60 percent of all sales, he said.
The trend has not gone unnoticed.
Large and small real estate developers are now investing heavily in wooing expatriate Filipino buyers. These include property blue-chip Ayala Land Inc., Megaworld Corp. and Robinsons Land Corp.
These firms embark on periodic sales tours in Europe and the US aimed at attracting Filipino buyers, some even setting up permanent sales offices in areas with high concentration of potential clients.
Indeed, the latest data from the National Statistical Coordination Board revealed that the property sector had recorded the fastest growth rate among various monitored industries in recent months.