Why invest in real estate in the Philippines?
In the residential segment, the estimated four million housing unit backlog (a recent study conducted by the Subdivision and Housing Developers Association of the Philippines) makes investment in condominiums very palatable.
A sign of the confidence in the market include the mushrooming of residential towers all over Metro Manila. Developers, according to property consultancy firm CB Richard Ellis (CBRE), are taking advantage of the low cost financing of a housing unit, taking note of people’s need to live near their work and places of leisure as opposed to owning house and lots outside the city.
“The liquidity in the market enables developers to provide more affordable payment terms to buyers. Low cost of borrowing are likewise spurring development expansions in the residential/ housing industry,” explains Santos.
In Jones Lang Lasalle’s most recent report, it noted that much of the condominium developments in the country that will rise until 2018 are located in Metro Manila.
Of the 149,920 condominium units set for construction in the next five years, majority of them or 144,330 units, cater to the middle-income segment of the market.
Quezon City holds the bulk of the supply, followed by the Makati central business district (CBD), Ortigas CBD (Pasig and Mandaluyong), and Bonifacio Global City (BGC)/Taguig.
Jones Lang Lasalle noted that in this segment of the condo market, units are priced at a range of P1.5 million to P10 million, with unit sizes measuring up to 150 square meters (price per square meter is between P50,000 to P110,000).
The property consultancy firm’s study also showed that of the upcoming supply, more than half of them are priced under P3 million, while 32 percent of the supply is priced at a range of P3 to P6 million. The rest caters to a market that can shoulder a unit costing over P10 million.
High rental rates
Colliers Philippines, another property consultancy firm, has noted that there is a supply mismatch in five of Manila’s known CBDs — Makati CBD, BGC, Rockwell, Ortigas CBD, and Eastwood in Libis.
Particularly in Makati and BGC, “the majority of the upcoming supply is not seen to fulfill the requirements of the end-users and expatriates, as only a quarter of the total inventory is allocated to multi-bedroom units,” notes Colliers.
This results for premier three bedroom rental rates in the Makati CBD to be priced at P790 per square meter per month on average.
“This translates to a monthly rate of P197,500 for a 150-sqm unit,” says Colliers.
In BGC, rents stand at P780 per sqm per month.
“Rents in both CBDs will improve by 7 to 8 percent in the next 12 months as the demand and supply gap remains narrow,” says Colliers.
Increasing property values
Both Jones Lang Lasalle and Colliers say that property values have gone up since 2010. The former says that prime commercial properties in Makati have gone up to P130,000/sqm from just a little over P90,000/sqm in 2010.
Colliers meanwhile say they expect land values in Makati, and BGC to grow between 8 to 9 percent between now and the second quarter of next year; Ortigas properties are seen to grow by 6.4 percent.
Between 2009 and the first half of the year, the inflation-adjusted prices of luxury condominium units in the Philippines have grown by a compounded annual rate of 8 percent, while the values of existing high-mid/luxury residential condominium developments have grown by 3 percent within Metro Manila.
As in the case of Plaza Azalea project by developer Landco Pacific Corporation, the value of its lots has almost doubled to P7,000 to 20,000 per square meter.
“We are pleased with the sales velocity and market appreciation of our projects. This is because whether it’s a leisure community, resort-inspired condominium or luxury home community, Landco consistently delivers its brand promise of ‘Life at Your Leisure’ to our customers,” said Maritess de Ocampo, AVP for corporate communications, Landco Pacific Corp.
Playa Azalea is Landco’s premier luxury island resort community on Samal Island, Davao. It boasts of a 400-meter stretch of white sand beach and world-class leisure and resort amenities such as the Aqua Park, which features a river pool with infinity edge, kiddie pool, cabanas and snack bar. There is also the newly completed Hilltop Pavilion, which gives magnificent views of Davao City and Mount Apo.
Meanwhile, Landco’s Terrazas de Punta Fuego has lots that are now selling 60 to 75 percent higher in a per square meter basis, at a range of P10,000 to P14,000, since it was launched in 2002.
In Landco’s condominium project Tribeca Private Residences in Sucat meanwhile, units for the first of 15 towers already saw a price inflation of 72 percent, at P95,000 per square meter, since its 2007 launch.
De Ocampo expressed optimism that Tribeca’s development plan will interest Filipinos living in Europe.
If there’s one thing investors can be thankful for the low interest rate environment, it’s the fact that they have democratized acquisition of properties more for buyers.
Bobby Dy, Ayala Land senior vice president, observes how property amortization as a result of the low interest rate has become more accommodating.
“Just a decade ago, a borrower has to pay a 12 percent interest for a 10 year loan,” says Dy.
Today, one can apply for a property loan payable within 20 to 25 years with an interest rate at 10 percent, according to Dy.
“This means that previous loans that had to be amortized at P17,000 a month is now amortized at P7,000 a month,” explains Dy.
As much as outlook is rosy for the property market, broker Edwardo Miguel Roldan says buyers still need to be discerning of what, where, and when to buy.
“First and foremost, think of your finances. Never think of investing if you are not really ready financially. Just because the payment terms are attractive, you’ll grab the product immediately,” cautions Roldan.
Second, in buying a property, make sure the developer has a good track record; though that is not to say that buyers should ignore small players, adds Roldan.
Roldan said that if one is buying a property for cash flow considerations, buyers should make sure it is located in areas where there will be an ample demand for the unit.
“In choosing a real estate development you should also make sure you like the building, and you are comfortable with the unit density per floor as well as the amenities. Make sure you are comfortable on the people density in your building because sooner or later it will also become your home,” recommends Roldan.