In general, infrastructure projects have a significant impact on the economy and are usually associated with physical development. These serve as a base for other economic activities, providing cross-sectoral benefits in the economy – including the property sector.
In particular, the presence of nearby infrastructure generally increases the attractiveness of any development. One general benefit of infrastructure to property development is enhanced accessibility. Accessibility has increasingly become a competitive edge for property developments in the country. The premium on accessibility is underpinned by the growing culture of convenience and efficiency, and reflected in part in the emergence of concepts such as live-work-play and mixed-used districts. This is evident in the growth of property developments along or near key infrastructure projects. In recent years, property developers have likewise integrated infrastructure facilities in their respective development plans. Not only do these generate traffic, which is crucial in creating and sustaining critical mass that may support these developments, but also it widens the catchment area of property developments. Formerly latent markets in the periphery areas may now be tapped, as ease of travel have bridged the geographical gap between the different areas in the metropolis. Altogether, these benefits from infrastructure influence property values, effecting price appreciation in adjacent areas.
Conversely, there are also drawbacks to these infrastructure projects especially on the property market. As developments cluster around these infrastructure projects, the increasing development density and traffic may outpace the capacities of these facilities and outweigh its benefits. A related by-product of this increased traffic is the increased noise and pollution, which may affect the quality of the environment and the attractiveness of property developments.
Unfortunately, the Philippines has been noted for its lack of infrastructures. Despite its relative robust economic growth in recent years, the country is considered a laggard among its Asian peers in terms of investments in infrastructures. According to the latest Global Competitiveness Report by the World Economic Forum, the country ranked 98 (out of 144 countries) in terms of the overall quality of infrastructures. The report also notes that this inadequacy in infrastructure is the third most problematic factor for doing business in the country. In response, the Philippine government has adopted a Private-Public-Partnerships (PPP) model to promote infrastructure projects that would support development in the country. Notable infrastructure projects that have been awarded include the North Luzon Expressway and South Luzon Expressway Connector Road and the Ninoy Aquino International Airport Expressway Project. If completed, these projects would decongest existing road and create new ones that may spur property development in various areas of Metro Manila.
While the property upswing is a welcome boon to the economy the lack of infrastructures in the country may impede the long-term growth of the property sector. Thus, it is imperative that the property sector be accompanied by the masterful placement of infrastructure if the Philippine property market growth prospects are to be maintained.
About the author
Janlo de los Reyes is the Senior Research Analyst for Jones Lang LaSalle in the Philippines.