This is especially evident in the Residential Real Estate Loans (RRELs) data released by the BSP, which shows that RRELs granted in areas outside of NCR for the fourth quarter of 2023 was significantly higher on a quarter-on-quarter (+16.2%) and year-on-year (+25.0%) basis.
A deeper dive into the data shows NCR’s continued decline in terms of percentage composition of total granted RRELs as it only accounted for 30.7% of the 4Q23 numbers, a significant drop from 2019’s 48%.
This drop in NCR’s contribution saw Calabarzon emerging as the new number one region, composing 33.1% of overall granted RRELs, a big jump from 26.5% in 2019.
Other regions that saw a big jump in RRELs contributions over the same period are Central Luzon (4Q23: 12.0%, 2019: 8.3%) and Davao (4Q23: 5.2%, 2019: 2.8%).
Riding the wave
Our top property developers are already positioning to ride this geographic shift in housing demand.
For example, Ayala Land’s land bank in areas outside NCR now comprises 81% of their total land bank as of end-2023. The company will still continue to develop the upscale and luxury high rises that they are known for, but management also stated that an important growth strategy is a heavier focus towards horizontal developments outside Metro Manila.
In line with this, ALI has already launched projects in Pampanga, Cavite, and Laguna, with more new projects lined up outside Metro Manila, 38% of which will be located in South Luzon, 7% in Central Luzon, and a combined 11% in Visayas and Mindanao.
SM Prime Holdings is also adopting a similar stance, saying that they aim to launch 8-10k units this year which would primarily be located outside Metro Manila. Alongside this, 3 out of the 4 new malls that SMPH plans to open this year are outside NCR, namely in Cebu, La Union, and Ilocos Norte.
More retail demand
The movement of people away from Metro Manila would also entail more demand for retail spaces.
The country’s largest multi-format retailer, Robinsons Retail Holdings, has already stated its intentions to accelerate expansion outside Metro Manila in the form of Supermarkets and Drugstores. Currently, 30% of their stores are located in NCR but we can expect this number to go down further as RRHI expands its footprint outside of the Metro.
Home and furnishing supplies retailer Wilcon Depot is also planning an aggressive expansion outside of Luzon by building more of its smaller format Do-It-Wilcon stores, which is geared towards customers who require basic tools and materials used for simple home repairs and maintenance.
Casual dining giant Shakey’s Pizza Asia Ventures also said in a recent briefing that most of their planned 400 new stores will be in provincial areas and mostly in Visayas and Mindanao.
Trendspotting
Investing in the stock market is not all about riding the latest hottest trade, it’s about spotting emerging trends and companies that are well-positioned to profit from it.
As we look at the long-term outlook for the country, it is clear that the previously ignored provincial areas is now the new frontier for economic opportunities.
It is not yet immediately clear at the moment how much economic potential there is in these areas, as the broader economy is still trying to completely recover from the twin shocks of the pandemic and roaring hot inflation.
However, one thing that we know for sure is that despite being among the most unloved stocks in recent months, the aforementioned companies are now well-positioned to benefit handsomely from their ability to not only recognize where the market is going but to also allocate capital to take advantage of it. – Joey Cipres, AP Securities research analyst
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