A NEW EMERGING ECONOMY: MY FEARLESS AND OPTIMISTIC FORECAST OF REAL ESTATE IN THE PHILIPPINES

In 2008, when the United States of America experienced one of the worst economic and financial meltdown, the entire Global Economy was affected in different levels or degrees.

The Philippines however proved to be resilient and strong. Having survived the “Global Economic Storm”, we in the Real Estate, Building & Construction Industry can attest that never before had we seen the frenzy of buildings everywhere. The cranes just keep on moving, changing the city skyline into a reflection of growth and development.

I must give credit to the wise, prudent and conservative monetary, banking and financial leaders and policy makers who kept interest rates low, inflation at bay, liquid money supply and proved to win the confidence of business and investments in the Real Estate and Construction Industry as well as the Philippine economy as a whole.

The Philippines survived the free fall and shock of 2008 and managed to make a positive turn around. We saw the economy grow in 2009, 2010, and 2011.

In early 2011, I made a fearless (more like a fearful) forecast that the Real Estate boom was to continue only up to the first quarter of 2012. I was wrong.

I even warned my Real Estate investors about the negative effects of a speculative market, the downward trend of remittances, the drop of Direct foreign investments, the lower disposable income from BPO agents and workers, etc.

However, the truth is, as we enter towards the last quarter of 2012, we still experience a strong demand in Real Estate- both for investors and end users, particularly in affordable housing.

Given the Real Estate economic facts that property investments follow a cyclical trend, I wrongly concluded then that Real Estate investments would go down. Rentals would go flat and demand for high end condo units weaken. Bueno, I was proven wrong. So, today I stand corrected.

What I missed to see were very important economic and financial factors that were not within my radar in the forecast. These are- low interest rates, stable inflation, positive fiscal policy, higher inflow of “Hot” money or direct foreign investments and a bullish stable stock market and business confidence.

Given the very bullish scenarios of the Real Estate industry, we have all reasons to believe that the growth will continue even into the next cycle.

Our nation is about to be given the honor and privilege of having an “A” or “B+” Investment Grade.

If this happens, then we will experience an avalanche or waves of hot money and direct foreign investors entrusting their money into the stock market, or big Real Estate developments and township projects, infrastructures, seaports and airports, manufacturing, urban renewal, housing, BPO’s, office and retail complex, tourism, resorts and hotel projects not only in Manila but in all emerging cities and regions of the Philippines.

The prospects are mind blogging and the multiplier effect will fuel our gross domestic product above the projected rate of 7% to as high as 8-9% up to beyond 2014.

Image

Dr. Bernie M. Villegas.

This economic forecast comes not only form optimistic gurus like Dr. Bernie M. Villegas, but also investment bankers like REIT Expert, Melchor Guerrero, formerly with Philippine Stock Exchange, or our Real Estate expert and Congressman, Dr. Ed Ziaclita; Realtor-Patriot Rod “RGV” Vallencia; and Senetor- Nation builder/ developer, the brilliant, Manny Villar. These are some of the pillars of the Real Estate industry in the Philippines. These leaders have the expertise and experience who share their knowledge and professional certainty that Real Estate is a sunshine industry were we cry out… Good Morning!!

So, what are the prospects of Real Estate today and how must I position myself as a Professional Real Estate Practitioner in contributing my Services in Building the Nation?

Some of these prospects are:

  • Infrastructure Development
  • Roads and Bridges
  • Housing
  • Utilities and Power Generation
  • BPO’s
  • Township Projects
  • Rural and Agriculture Development
  • Retail, Food and Commerce
  • Urban Renewal
  • Seaports, Airports, and Land Transports
  • Retirement and Medical Tourism
  • Remittances (OFW’s)
  • Tourism, Resort & Hotels
  • Education, Review & Training Centers
  • Private-Public Partnership Projects

What are the risks or dangers? And what pit falls must we avoid in Philippine Real Estate?

  • Over valuation by private appraisers and speculation of Real Estate prices by developers who go high above market levels
  • Over aggressive building without study of buyers demand
  • No objective Project Feasibility Studies
  • No adequate funding: Using Short term money invested in long term projects
  • False nationalism vs. Foreign ownership
  • Funding projects dependent on Pre-selling
  • Project Development without proper technical studies, financial and legal feasibility mismanagement, no tax studies, disorganized set-up
  • Graft and corruption , no peace and order or security
  • Going too high end projects are limited
  • Difficult to sell and not affordable for the vast majority
  • Some big public listed Real Estate developers are over leveraged, depending on bonds, debts, pre-selling for capital expenses.
  • Urban decay in downtown Manila, Quezon City, and parts of Makati where office rentals have gone down or stayed flat
  • Problems with squatters, informal settlers and criminal syndicates
Image

Senator Manuel Villar and Congressman Ed Zialcita. (Photo source: Congressman Zialcita’s Facebook account)

These are some “snapshots of what can go wrong in Real Estate development and investment.

That is why, the Real Estate Professionals must be very well educated and study the trends, opportunities, and learn how to foresee the pit falls from the macroeconomic level down to the micro details of market demand, absorption, affordability, finance, pricing, location, legal impediments, taxation, corporate law, management and even interpersonal relations that will make or break the project or transaction.

To end, let our Good Morning Optimism turn into a positive work attitude. Work with perfection to aspire for excellence and build a reputation of prestige.

This is achieved by being responsible, ethical and going beyond international standards. For only in the Philippines where we find Real Estate practitioners serving with a sincere smile, truly personal in care and compassion, going beyond the extra mile. The Filipino is a master of all skills, trade and know-how. All these with a fun, a cheerful, and a self-giving hospitality and service.

MABUHAY!  Good Morning Philippines!!

THIS BLOG OR ARTICLE IS OWNED BY MR. RAMON C.F. CUERVO AND MAY CONTAIN LEGAL PROPERTY WHICH IS RIGHTS-PROTECTED. IT IS INTENDED FOR PUBLIC READING ONLY. COPYING, DISTRIBUTING, OR RE-PUBLISHING THE ARTICLE OR BLOG WITHOUT THE APPROVED CONSENT OF THE WRITER IS PROHIBITED. ANY ENTITIES WHO WANT TO SHARE THIS BLOG OR ARTICLE, PLEASE CONTACT THE WRITER AND ACKNOWLEDGE THE SOURCE: www.cuervopropertyadvisory.wordpress.com  AND WRITER: MR. RAMON C.F. CUERVO, WITH MR. RAPHAEL D. TORRALBA

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One Response to A NEW EMERGING ECONOMY: MY FEARLESS AND OPTIMISTIC FORECAST OF REAL ESTATE IN THE PHILIPPINES

  1. Joshua says:

    If most of the housing units are being built to satisfy OFWs who hardly live in their units due to the “almost US Dollarized” cost of living in the Philippines relative to local purchasing power then there is something seriously amiss about investing there for the long term. What will sustain the boom other than the prevailing low interest rates will be the constant creation of good paying jobs that will hopefully enable domestic workers to afford taking out housing loans and wean us away from over dependence on the OFW market. For the government to meet it’s goal of reducing poverty it has to open up the economy and increase foreign capital participation in the domestic market to foster increased competition that will ultimately lower housing costs for the average worker and/or family.

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