What You Need to Know About POGOs and Its Effect on Real Estate
When President Rodrigo Duterte signed Executive Order 13 of 2016, it opened doors to POGOs in the Philippines. Since then, the industry has taken flight and it has a remarkable impact on the economy. With the Philippines now tapping into the opportunities of the online gaming market, POGOs have brought in large sums of money in just 3 years. Its growth in the country has transcended industries, including real estate. It has influenced rental prices of residential properties near CBDs, and it has raised the demand for commercial spaces.
What are POGOs?
POGOs, or Philippine Offshore Gaming Operators, are companies that provide online gaming services limited to foreigners. These games of chance use a network or software, and authorized players who have a registered gaming account with the POGO can participate.
Are there rules and regulations for POGOs?
To operate in the Philippines, POGOs require a license from the Philippine Amusement and Gaming Corporation (PAGCOR) and must function certain rules and regulations stated in the Offshore Gaming Regulatory Manual. Those in operation without a PAGCOR license are considered illegal.
Perhaps its most important rule – one that affects Filipinos – is a regulation forbidding them from participating in POGO sites, as long as they are physically present in the Philippines. All POGO sites are blocked in the Philippines and in territories where online gaming is prohibited.
Why are POGOs in the Philippines?
It hasn’t been immune to controversy, but one cannot discount how POGOs have given the Philippine economy a major boost. Because of POGOs opening shop in the Philippines, jobs for Filipinos have significantly multiplied, increasing economic activity. As of August 2019, just three years since Executive Order 13, there are now 60 licensed POGOs in the Philippines with 48 in operation. This does not, however, dismiss the presence of illegal POGOs in the country.
How do POGOs affect the real estate market?
Most POGO workers are Chinese, providing IT support and translation. While there is no clear data on just how many Chinese are employed by POGOs, many cite the positive political relations between the Philippines and China as the main reason why an approximate hundred thousand have been granted work permits. A major segment of POGOs’ market is also Chinese, because gambling is illegal in their country.
The influx of foreign workers coming into the Philippines has spurred a new demand for housing. In addition to the rapid demand for commercial or office spaces for online gaming businesses, prices in the local residential sector have gone up as well — both for mid-range and luxury condos.
This has also created supplementary benefits for other industries. As these POGO workers live close-by the CBD, they find themselves in interacting with retail businesses, restaurants, and even convenience stores, increasing customers and income for these developments.
One of the regulations of PAGCOR is that each Philippine offshore gaming operators must have an office space of a minimum of 10,000 square meters. Because of this, areas like the Bay Area in Parañaque, Bonifacio Global City (BGC) in Taguig, and the Makati Central Business District enjoyed an increased demand for commercial spaces in the last three years. In fact, with demand zooming high fast, many developers rushed to increase the available supply of commercial real estate spaces to cater to this booming market.
What will happen to the market because of the POGO crackdown?
In August 2019, China signaled a crackdown on the release of new licenses by PAGCOR, because of many illegal mainland Chinese coming to the Philippines to work. This temporarily restricts the coming in of new POGOs. This sudden move by the Chinese government is expected to cause a drastic change in sales, revenues, and income across industries.
As expected, the real estate industry quickly experienced a drop in rental income because of the crackdown. Some developers are more affected by the crackdown than others who have limited interaction with POGOs.
Real estate buyers, sellers, and investors can expect a downward slope in property prices in the final quarter of the year. The crackdown, though barely a month old and still subject to new policies in the coming weeks, has the potential to affect thousands of jobs of both Filipinos and foreign workers. According to PAGCOR chairman Andrea Domingo, the crackdown may cause several problems because of China’s uncompromising stand on gambling.
Many real estate veterans, though, believe that while the crackdown could cause abrupt shifts, the real estate market will continue to remain a lucrative endeavor. For one, the BPO industry, which has been a consistent economic driver in the Philippines, continues to expand and require office spaces. Though not as fast and aggressive as POGOs, there’s consistent interest in this market. The other rental vacancies in commercial spaces in Metro Manila can also be filled up by other tenants like government agencies, coworking operators, and construction firms.