Philippine developer Ayala Land banks on demographic dividend

Philippines' biggest developer says people aged 25 to 34 now account for up to 30pc of buyers

PUBLISHED : Thursday, 11 September, 2014, 6:01am
UPDATED : Thursday, 11 September, 2014, 6:01am

Ayala Land, the Philippines' biggest builder, said annual profit may increase by as much as 20 per cent in the next decade as faster economic growth and rising incomes boost office, shop and housing demand.

"More people are really buying earlier in their life," company president Bobby Dy, 51, said in Makati City. "People are now able to buy a condominium for the same price as amortising a car."

Rising remittances from the nation's 10.5 million citizens living abroad, an outsourcing industry that is expected to employ 1.3 million by 2016 and low interest rates have driven demand for home purchases. Ayala Land's second-quarter profit rose 25 per cent to 3.59 billion pesos (HK$632 million), a quarterly record.

The Philippine economy grew 6.4 per cent in the second quarter, among the fastest in Asia, and is poised to be among the world's five-fastest expanding until 2016, according to economists. The Southeast Asian nation is set to enter a "demographic sweet spot" from next year when a large portion of the population becomes employed, Philippine President Benigno Aquino said in February.

"Ayala Land has a good lock on the market for the middle to higher-income residential market," Rommel Rodrigo, a Manila-based analyst at Maybank ATR Kim Eng, said. The company had "the biggest share and is the preferred developer by home buyers in this segment because of its track record of quality and price appreciation".

A decade ago, people aged 25 to 34 who were buying Ayala-built houses selling for at least 2 million pesos accounted for only 5 per cent of the brand. But that age bracket now accounted for as much as 30 per cent of buyers, Dy said. The demographic dividend happens when most of a country's population is in the 15-to-64 working-age range. This increases productivity if supported by policies that promote health, family, labour and financial and human capital.

Developers including Ayala Land were vulnerable to economic and interest rate shocks, said James Lago, head of research at PCCI Securities Brokers Corp.

"Ayala Land is moving on the assumption that the market won't hit a bad patch or an economic shocker moving forward," he said. "Once things aren't rosy and mortgage payments change earnings could slow down for property developers."

More foreigners had been buying residential properties since last year, when rating companies upgraded the Philippines to investment-grade status, he said.

Increasing its land portfolio was a priority for Ayala, Dy said, with about a third of this year's 70 billion peso budget to be spent buying land.

It would take a look at the government's plan for the 35,000 hectare Clark Green City metropolis project in Pampanga province and decide whether to bid for some of the land. It might also consider bidding for contracts to reclaim 600 hectares of land from Manila Bay, Dy said.

"We will take a look at any land of a significant size," he said.