Now is best time for real-estate investment trusts in RP: Angara

SEN. Edgardo Angara foresees the Philippines’ Real Estate Investment Trusts riding the crest of the wave amid bright prospects for REITs in Asia which, he noted, has outperformed similar investment instruments in other parts of the world.

Addressing the 2nd Annual REIT Pacific Philippine Summit at the New World Hotel in Makati on Tuesday, Angara asserted that “the timing for REITs in the Philippines has never been as favorable as now.”

The senator added that the influx of remittances from Overseas Filipino Workers, the boom of tourism, and the growing number of off-shoring businesses in the country “all contribute to the strong real estate industry we have today.”

He pointed out that while the US remains the largest REIT market in the world at the end of 2009, Japan introduced REITs into its market as early as 2001, which spurred the introduction of REITs to other developed countries in Asia like South Korea, Hong Kong, Taiwan, and Singapore.  Malaysia and Thailand then followed in 2003 with their respective REIT offerings.

Angara cited reports that the market capitalization of REITs in Asia posted a 34.5-percent year-on-year growth at the end of 2009, with Japan being the biggest market at USD29.5 billion at the end of 2009 (according to a report of CB Richard Ellis, 2010). In all of Asia, he said, the market capitalization of REITs total at least US$50 billion.

Angara quoted Ernst and Young’s Global REIT Report 2010 which said REITs are leading the recovery of property markets from the global financial crisis, with REIT markets across the globe posting positive rates of return for 2009.   

The Global REIT Report 2010 report, he added, also confirmed that Asian markets have outperformed other REIT markets in the world as the rates of return for South Korea, Malaysia and Hong Kong were all in positive territory over the last three years; even as Singapore, which registered a negative 4.2 rate of return during the financial crisis, has now strongly bounced back.

Angara noted that financial experts have been predicting that this upturn will continue for the next three to four years, and the number of REITs in Asia could more than double. “Due to the recent credit crunch, investors are now more risk-averse, favoring safer instruments such as REITs,” he said.

Angara explained that Republic Act 9856 creating the REIT provided a structural reform that can inject liquidity and stability into the property market by allowing real-estate owners to register income-generating property in the stock exchange market.

The law aims to broaden the participation of Filipinos in ownership of real estate in the country, and to use the capital market as an instrument to help finance and develop infrastructure projects.

According to Angara, the REIT law provides a structure for real-estate investments similar to how mutual funds manage stock investments. Apart from minimizing investment risks, he said, REITs level the playing field for property actors by allowing both small and large investors the opportunity to participate directly in the ownership and financing of large-scale real, estate projects at affordable rates of investment. –Butch Fernandez / Reporter, Businessmirror