How Davao became hot property in the Philippines

Duterte’s former stronghold goes from strength to strength as Manila property firms pivot south

[caption id="attachment_56642" align="aligncenter" width="1000"]Image: Dmitry Kaminsky/Shuttershock Dmitry Kaminsky/Shutterstock[/caption]

To witness how Davao stands out, a visitor only needs to be there on New Year’s Eve. Thanks to a firecracker ban, revellers toot horns and clang pots. It’s a little less exciting than before, but at least the city avoids the wave of injuries suffered elsewhere in the Philippines.

The ordinance was the brainchild of former Davao mayor and now Philippine President Rodrigo Duterte, whose single-minded stewardship of the expansive city on the southern island of Mindanao was seen as being instrumental to his rise to national prominence.

Duterte instituted several policies that not only beefed up security in the city but also raised its game in terms of competitiveness. The local government imposes a 72-hour deadline on processing business permits, a rarity in a red-tape-ridden country, and implements a city code of fiscal incentives, previously unheard-of in the region. In their joint “Doing Business” report, the International Finance Corporation and World Bank cited Davao as the most efficient city in the Philippines to obtain construction permits.

This unique business climate has made Davao a favourite of property developers and investors nationwide. The city is in the throes of a real estate boom with 5,600 residential units in its supply pipeline, according to Jones Lang LaSalle.

[caption id="attachment_56664" align="aligncenter" width="740"]Davao is known for its beautiful beaches. Image: Mark Onod/Flickr Davao is known for its beautiful beaches. Mark Onod/Flickr[/caption]

Glenn Villarico, a 32-year-old banker, made an investment at an early stage of the upsurge. In 2008, he purchased a PHP2 million (USD41,000) unit in one of the first condominium blocks built in the city by a Manila-based developer. He expects the apartment, now valued at PHP4 million (USD83,000), to yield at least PHP30,000 (USD621) a month in rental income.

“Davao was asserting itself when I bought,” he said. “There are so many resources to tap and the cost of investment is way cheaper than in Cebu or Manila.”

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A year earlier, Manila-based property development giant Ayala Land announced a joint venture with Davao developer Anflo Management and Investment Corp (ANFLOCOR) for a mixed-use project that included Abreeza, the first Ayala shopping mall outside Luzon and Cebu, the two traditional island powerhouses in the archipelago.

In its wake, other real estate influencers are turning their gaze south. SM Prime Holdings opened a second, bigger mall in Davao. Torre Lorenzo partnered with Thailand’s Dusit Thani hotel chain for a PHP2-billion (USD41 million) serviced apartment project. Other firms, meanwhile, including DMCI Homes, Filinvest Land, Megaworld Corp, Robinsons Land, and Vista Land, are launching housing projects around the city.

“The increase in development in Davao is really because of the decrease in take-up in Manila,” said Julius Guevara, director for research and advisory at Colliers Philippines. “The strategy of developers is to look at secondary markets because the opportunities are decreasing in Manila.”

[caption id="attachment_56641" align="aligncenter" width="1000"]No more firecrackers... but the party's just starting for Davao. Image: Karve/Shutterstock No more firecrackers...but the party's just starting for Davao. Karve/Shutterstock[/caption]

Homegrown firms are rising to the occasion. ANFLOCOR subsidiary Damosa Land has sold out four of six condominium towers in its PHP2.4-billion (USD49.8 million) Seawind project, launched in 2015. FTC Group, on the other hand, is currently constructing the 33-storey AEON Towers, slated to be Davao’s tallest structure.

Vertical condominium developments are designed to appeal to overseas buyers due to the country’s rules on foreign investment, with freehold of landed houses forbidden. “By building vertical you can sell up to 40 percent of your units to foreigners,” Damosa Land vice-president Ricardo Lagdameo said. “It is something we are taking into account with our future projects.”

[caption id="attachment_56736" align="alignright" width="740"]Seawind is Damosa Land's first venture into condominium development. It is situated on a 2.86-hectare property overlooking the Davao Gulf and Samal Island Seawind is Damosa Land's first venture into condominium development. It is situated on a 2.86-hectare property overlooking the Davao Gulf and Samal Island[/caption]

Capital gains have been spectacular, with values in Damosa Land’s residential property developments shooting up by at least 30 percent in the last three to four years. Although experts claim the market is not overheating, Lagdameo hopes prices will stabilise. “While we would like the prices of our projects to continue to appreciate, it would be healthy if they were to at least gradually slow down,” he said.

It is Filipinos, not overseas buyers, who are driving prices upwards. “In the country there are a lot of promising entrepreneurs and businesspeople,” Lagdameo said. “Young people with purchasing power are starting to buy up real estate.”

Call centres and other business process outsourcing (BPO) companies are flourishing in Davao, contributing further to the overall feeling of prosperity in the city.

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It is understandable that Duterte’s shadow looms large over Davao. The mayoralty continues to be a family concern with Sara Duterte, the president’s daughter, succeeding her father. Where critics see nepotism, others appreciate the continuity in economic policies. “Investing in Davao City before was profitable. Investing now is lucrative,” said Villarico.

Davao, and indeed Mindanao as a whole, is set to benefit from some major infrastructure changes. The president himself is pushing for a 2,000-kilometre railway network that would link Davao with other cities, including Butuan, Cagayan de Oro, General Santos, Iligan, and Zamboanga. “As property developers, we’re looking forward to the infrastructure that’s going to be built over the next couple of years,” Lagdameo said.

Duterte’s election was, in no small part, due to Davao’s remarkable success hitting a sweet spot with voters. And with the real estate market surging upwards, the city continues to make a loud noise in the Philippines — despite the ban on firecrackers.

[caption id="attachment_56667" align="alignright" width="740"]The Philippine eagle, an endangered species, is bred in captivity in Davao. Stephane Bidouze/Shutterstock The Philippine eagle, an endangered species, is bred in captivity in Davao. Stephane Bidouze/Shutterstock[/caption]

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