5 mid-year tips for homebuyers, developers

With the second half of 2013 commencing, it’s an opportune time for would-be owners and developers to assess their positions and take note of property experts’ tips for the remaining half of the year.

1 The time to buy is now. “For prospective first-time homebuyers, now is a great time to buy because of the all-time low-interest rates,” quipped Julius Guevara, Colliers International’s associate director for valuation and advisory services and consultancy research head.

“However, if you are buying, you should always keep a realistic budget in mind. Also keep in mind that the payment levels for down payments amortized over a period of two to three years being offered by developers would likely increase once it is time to take out the balance with a bank, so those calculations should be made first before one decides to sign a sales contract,” added Guevara.

2 Watch out for those maintenance costs. “Developers and buyers should be aware of the practical ways to ensure property values are well-protected. As the industry has become increasingly commoditized, developers and buyers can (protect) their investments, both from competition and the property cycles,” said Claro dG. Cordero Jr., head of Jones Lang LaSalle’s research, consulting and valuation.

“To achieve this, developers and buyers should ensure that the developments are constructed using high-grade, sustainable technologies and materials that will (slow down) the rate of obsolescence and keep the cost of maintenance low, thus withstanding market pressures due to tightening competition and evolving property cycles,” Cordero added.

3 The trust between buyers and developers is based on the future, too. “Fundamentally speaking, developers must future-proof their business models, (they must) explore new assets or socioeconomic classes and calibrate and retool their internal systems and account management infrastructure,” said Enrique M. Soriano III, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business Advisory.

Soriano explained that in order to grow sales, developers should expand their channels and, most importantly, brand their organizations. The key is sustainability and having that compelling strategy.

“This is where only a handful of seasoned developers I know are compliant. The rest will likely learn the hard way if and when markets slow down,” Soriano said.

He added: “Just like the equities market correcting itself, the property sector will naturally soften at some point. Selected geographical areas will get saturated and target buyers will have more choices but little time. When we enter the ‘commoditization’ phase, homebuyers (the end users and investors) will inevitably base their purchasing decisions primarily on trust.”

4 Highlight what makes your condo different. Guevara stressed that for developers, differentiation is key.

“Condos in the same price segments now all look the same, so developers should think of ways in order to give more value to their clients.”

5 Pay attention to high-end developments. “Despite lower cap rates, investments should be more secured in the premium segment versus the other grades because of the relatively higher demand for the prior than the latter, and that, the middle-income developments should still be mainly geared towards end-users/owner-occupiers,” quipped Karlo Pobre, Colliers International’s research and advisory services manager.

“Moreover, we have also been getting more inquiries among expatriates who have been looking for three- to four-bedroom units, a supply (segment) that has been limited in the market. Besides this, the demand for larger unit sizes of one- to two-bedroom units has also increased with requirements from international schools and institutions, the gaming and hotel industry, and from among the BPO firms. While demand for leasable properties remains high in Rockwell, Makati and Bonifacio Global City, the Pasay-Manila area has also become a preferred destination for expatriates engaged particularly in the Pagcor Entertainment City,”  Pobre added.

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Foreigners flocking to PHL for property investments

Foreigners are flocking to the Philippines for luxury residential investments amid tightening realty laws in other Asian countries, property consultancy firm CBRE Philippines said Wednesday.

Overseas Filipinos and the rising middle-class, on the other hand, continue to fuel demand for housing in the fringe areas of Metro Manila.

“The luxury residential sector will continue to pick up,” said Rick Santos, chairman at CBRE Philippines. “Foreigners are now moving from renters to buyers.”

“New restrictive property tax laws in Hong Kong and Singapore will drive more Asian residential investors to the Philippines,” he added.

While the Philippine Constitution prohibits foreign ownership of land, there is no restriction for foreigners to buy condominium units. Thus, foreign fund managers and retail investors buy luxury units by top developers here for investment purposes.

"Foreigners have opted to invest in branded condominium projects," said Santos. "And so far, they're very happy."

Early this year, Hong Kong and Singapore raised taxes for luxury homeowners and investment properties as part of their campaign against bubble risks stemming from speculative investments in the realty sector.

Investor-friendly tax laws

With tightening restrictions there, foreigners are turning to the Philippines – where tax laws are more investor-friendly and financing is relatively cheap – for secondary properties.

“Number one, it's much cheaper here from a tax perspective and cost. From a financing point of view, it's much more expensive to get financing there,” Santos said.

He noted that the Philippines' real-estate developers continue to benefit from foreign interest in branded developments.

Santos, however, was quick to add that he still doesn't see a bubble arising from such investment flows. “This isn't a bubble. This is sustainable,” he said.

“It is exciting. You will see a lot more money from mainland China, Russia, Europe, Korea and US flowing here,” Santos said.

OFWs and housing backlog

Overseas Filipino workers (OFWs) and middle-income earners support demand for residential products, particularly single-detached homes, in the fringe areas of Metro Manila

“OFWs and middle-income earners to sustain the demand for horizontal residential projects,” said Jan Custodio, CBRE Philippines' senior director for global research and consultancy.

“Economic housing will continue to observe strong take-up with its affordable prices and ample supply in the fringes of the country’s major cities,” he added.

Total housing needs for 2013 can reach 646,128 units, of which 57 percent will come from new households who can afford to own or rent, CBRE data showed. — KBK, GMA News

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PH property market seen to be hottest in Asia

The Philippine office sector is among the most dynamic in Asia and is growing at record levels, according to officials of CBRE Philippines.

The commercial real estate services firm said Metro Manila was leading the country’s office market, with occupancy rates hitting 97 percent across Central Business Districts (CBDs) in the first quarter of 2013.

In the office rent market, Manila is among the areas where rental growth is accelerating, alongside Bangkok, Taipei, Tokyo, according to industry data.

High investor confidence brought vacancy levels to hover at an all-time low of 3.21 percent in Metro Manila from the recorded 3.43 percent in the fourth quarter of 2012 amid economic growth, credit upgrades, cost-effective rental rates, the influx of expanding multinationals and manufacturers, and expatriates moving from renting to buying properties, said CBRE CEO Rick Santos in a briefing on Wednesday.

Combined with the effect of anti-speculation taxes, tighter rules, and sky-high property costs in saturated markets such as China, Hong Kong and Singapore, more property investments are expected to boost Philippine developers, said CBRE vice chairman and global corporate services chief Joey Radovan at the same briefing.

Radovan said that even with the challenge posed by a strong peso, the Philippines remained among the most cost-effective and attractive (with a young and talented labor force) destinations for BPOs and real estate investors in Asia.

Makati City remains the country’s top CBD as it offers the highest quality Grade A and premium office buildings available in the market, Radovan said. Makati largely gained from the expansion of multinational corporations, with the CBD’s vacancy rating down to 5.07 percent in the first quarter from 5.45 percent recorded in the previous quarter.

Declining office space vacancy put upward pressure on rent, pushing average asking lease rate up to P890.27 a square meter a month for the first quarter of 2013.

Radovan said vacancy rates in Bonifacio Global City (BGC), Ortigas, Alabang, and Quezon City fell below 5 percent in the first quarter, benefiting from the tightening of supply and increasing rates in Makati CBD.

CBRE research also showed that the growth of hiring for BPO full-time employees (FTE) was highest in BGC, Muntinlupa and Quezon City.

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Infrastructure demand seen hitting $110 billion

INFRASTRUCTURE DEMAND from now until the end of the decade could reach $110 billion as the Philippines continues to grow, investment bank Goldman Sachs said.

   "The Philippines could see the largest increase in demand for infrastructure as a percent of GDP (gross domestic product)," the bank said in a May 30 research note.

"It has the lowest per capita income in the region, and ranks the weakest in infrastructure quality," it added.

"The low base, and increases in per capita income and urbanization could drive demand across the board for a projected $110 billion."

In the note, Goldman Sachs projected infrastructure needs among four of the 10-member Association of Southeast Asian Nations: the Philippines, Malaysia, Indonesia and Thailand (ASEAN-4).

As a whole, the ASEAN-4’s infrastructure needs through 2020 would be $550 billion, with Indonesia on top at $235 billion, the Philippines second, Thailand with $105 billion and Malaysia with $100 billion.

Citing the World Economic Forum’s 2012 Global Competitiveness Report, the bank noted that Malaysia and Thailand had improved the quality of their infrastructure while the Philippines and Indonesia ranked near the bottom. Specifically, on a scale of one to seven with seven being the highest, the Philippines scored a 3.2 while Indonesia, Thailand, and Malaysia got 3.8, 4.6 and 5.1, respectively.

"In the decade ahead, income growth and urbanization will drive infrastructure demand. We expect the ASEAN-4’s per capita GDP to nearly double between 2010 and 2020," Goldman Sachs said.

"This will increase demand for power, roads, airports, and water, among others. Rapid urbanization and population growth will add to the infrastructure needs of the economy," it added.

The Philippines’ per capita income, in particular, may double this decade from about $2 billion in 2012 to nearly $4 billion by 2020, and with potentially nine million new urban residents.

"We find that increases in infrastructure investment rates could potentially be most rapid for the Philippines where the ratio could rise from just over 2% to 5% of GDP ... our projections suggest that infrastructure can contribute as much as 20% of the total investment rate in the Philippines till 2020," Goldman Sachs said.

"An infrastructure build-out can directly contribute ... to GDP growth and catalyze other investments in the economy. To the extent that power, road, airport capacities are increased, it helps increase manufacturing investment," it added.

In terms of financing, Goldman Sachs said the additional burden on governments would be "largely manageable."

"Thailand and the Philippines have just begun or are about to ramp up on their mega infrastructure spending programs. Government spending is projected to rise to 4-5% of GDP towards the end of the forecast horizon from about 2% currently for the Philippines and 2-3% for Thailand and Indonesia from about 1% of GDP currently," it said.

"We expect this level of fiscal spending to be manageable, especially since their public debt ratios remain relatively low in the region compared to elsewhere."

It noted, though, that the Philippines could still improve its fiscal efficiency, specifically in broadening a "small tax base" and improving "inefficient" revenue collection.

Implementation would also be a key to meeting this projected demand, said Goldman Sachs.

"We think that political stability is vital for the successful implementation of infrastructure investment plans," the bank said.

"In the Philippines, the current president has made tackling corruption and reducing red tape a key focus of his administration. The president currently enjoys approval ratings of over 70% and the strong showing in the recent midterm elections ... bolsters his mandate to further implement national plans, including the National Development Program, where infrastructure rollout is a key focus," it said.

"Overall, we expect ... an increase in spending and greater scope for improvement in implementation for Thailand and the Philippines," it added.

"This is especially so given the lack of implementation in these countries previously and our perception of renewed focus on these plans now."

Under the Philippine Development Plan, the government is looking to increase infrastructure spending to around 5% of GDP by 2016 from the current level of 2.8% to meet an estimated $70 billion in infrastructure demand from 2011 to 2016.

For this year, the government is looking to spend P297.1 billion on infrastructure projects, 14.8% higher than year-ago levels.

As of March, disbursements for infrastructure totaled P58.1 billion, growing by 50.1% year-on-year and exceeding the period’s P55-billion program.

The Philippine economy grew by a better-than-expected 7.8% year on year in the first quarter, beating expectations and surpassing the government’s full-year target of 6-7%.

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Economy grows a stunning 7.8% , Manila Outperforms China, Rest of Asia

The Philippines became the fastest-growing economy among Asian countries during the first quarter of the year, with a better-than-expected growth rate of 7.8 percent, boosting the country’s efforts to attract more foreign investments.

Driven by strong manufacturing and construction sectors, the first-quarter growth was the highest since President Aquino took office in 2010, Jose Ramon G. Albert, secretary general of the National Statistical Coordination Board, said Thursday.

Aquino’s allies won majorities in both houses of Congress in midterm elections early this month, making it possible for him to proceed with his legislative agenda in his remaining three years in power.

“Business confidence and consumer optimism fueled this growth, [erasing] doubts cast on the 2012 figures that [they were] due to base effects only,” said Socioeconomic Planning Secretary Arsenio M. Balisacan.

Helped by increases in government and consumer spending, the year-on-year growth exceeded public and private forecasts, outpacing China (7.7 percent), Indonesia (6 percent), Thailand (5.3 percent) and Vietnam (4.9 percent).

Malacañang raved about the unexpected growth, but said it needed to be sustained to enable the masses to benefit from economic improvements.

Trickle-down effect

The trickle-down effect does not happen overnight, said deputy presidential spokesperson Abigail Valte.

“There is no one-to-one correspondence. It takes some time, which is why the goal of the administration is to sustain the growth,” she said.

“We are getting there. While it’s a work in progress, we have to make direct interventions,” she added, referring to conditional cash handouts to 3.9 million of the country’s poorest households.

Balisacan said the first-quarter growth was the second-fastest growth rate for the Philippines since the 8.9-percent growth in the first quarter of 2010.

The growth of the gross domestic product (GDP), the value of all goods and services produced by the economy in a given period, surprised even the government’s own economic managers.

Balisacan, also director of the National Economic and Development Authority (Neda), said the growth from 6.5 percent in the first quarter of 2012 was widely unexpected, beating market forecasts that settled at 6 percent.

He said the 7.8-percent growth rate beat even his own forecast.

“But please note that I was the most optimistic of all,” he said, spurring a flurry of tweets and retweets.

“I said, ‘Wow,’ when I saw the number. That was the reaction, I think, of everybody who saw the number,” Trade Secretary Gregory Domingo said in a text message.

“It was significantly higher than expected given the weakness in exports, but it just goes to show the strength in other areas. Manufacturing showed its leadership, with almost 10 percent growth, which is a very big accomplishment,” Domingo said.

Economist Cid L. Terosa of the University of Asia and the Pacific said by text message that his own calculation of the GDP growth was about 6.6 percent to 7 percent.

“Election spending and consumption contributed a lot to the spectacular first-quarter growth. To sustain it, consumption spending must be supported by strong investment spending, trade performance and sustained remittance inflows,” Terosa said.

Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc., said the growth was surprising given the weak exports market, but he added that election spending might have had some impact, even small.

Local business

Encouraging local businesses and local industries like mining would help the country sustain a 7-percent to 8-percent growth for the next 10 or so years, and this could curb poverty, Ortiz-Luis said.

The Manila Business Club attributed the strong first-quarter performance of the economy to the “sound macroeconomic foundations of the country, the capable leadership of our economic managers, and the steadily growing confidence of investors in the economy.”

With the robust first-quarter growth, the club said the country was on track to achieve its 6 percent to 7 percent full-year economic growth target for 2013.

Melito S. Salazar, president of the Management Association of the Philippines, credited recent reforms for the high growth rate.

“With the recent election results, we are confident that more reforms will be introduced and previous reforms will be sustained, so higher growth is expected,” Salazar said.

Broad-based output

The Neda said in a statement that the development on the production side was broad-based, with all sectors contributing positively to growth during the first quarter.

The Neda said services expanded 7 percent during the period; industry, 10.9 percent; and agriculture, 3.3 percent.

“[The] impressive performance of these sectors prove that the country is already reaping the benefits of strengthening priority sectors that are potential growth drivers and employment generators,” Balisacan said.

He noted that under agriculture, which grew by 3.3 percent, fisheries showed a huge increase of 5.5 percent after previous quarters of contraction.

“This shows that sustainable management in fisheries is also an effective growth strategy,” he said.

Increased domestic demand pushed manufacturing growth to 9.7 percent in the first quarter, Balisacan said.

He described as “stirring” the 32.5-percent growth of construction, indicating, he said, “good positioning toward an industry-led economy.”

“Initially, this was led by infrastructure spending of the government. By the second half of 2012, private construction started to rebound,” he said.

Exports contract

Exports contracted in the first quarter, primarily because of a decrease in foreign demand for electronic components.

Analysts see the Philippines facing export headwinds as global growth shows signs of an extended slowdown.

But Finance Secretary Cesar V. Purisima spoke Thursday of “signs of global recovery” and expectations of an increase in exports.

“With the coming finalization of rules governing the mining sector, we expect to unlock another highly potent growth driver,” Purisima said.

He said the government’s strong cash position, arising from a robust growth in revenue collection, resulted in a 45.6-percent expansion in public construction and 13.2 percent in overall state spending.

“Coupled with the country’s first investment-grade rating by a major ratings agency, we can say with much pride that good governance is good economics,” Purisima said.

Budget Secretary Florencio B. Abad issued a statement saying the growth in manufacturing was particularly interesting because it was driven mainly by increased production of foodstuff.

“This not just translates to an increasing demand for local food products, but also indicates a growing need for unskilled laborers to support the industry’s demands, which may help create thousands of jobs for Filipinos,” Abad said.

Challenges

Despite the impressive growth figures, the Philippines faces many challenges. Among them, the global slowdown, excessive capital inflows and natural disasters, an annual occurrence in the country whose rickety infrastructure and rice fields suffer damage from typhoons and floods.

“Disasters can negate the gains and even push back development. Moreover, the global economy remains fragile, negatively affecting our trade performance,” Balisacan said.

“Due to the attractive investment opportunities, we are also at risk of receiving too much capital inflows as advanced economies implement quantitative easing. The challenge is to channel these inflows into productive investments,” he said.—With reports from TJ A. Burgonio, Ronnel Domingo and AP

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