PHILIPPINE REAL ESTATE MONITOR
Week: January 1-10, 2013
WHAT’S UP IN REAL ESTATE AS 2013 BEGINS: THE GOOD, THE BAD, THE GWAPO, AND THE UGLY
As usual, the New Year started with a bang. We started with good news that the real estate industry is expected to grow, glow, and show to be an international choice in investments.
The Real Estate Industry will continue to be robust this year and until three more years, according to the top Real Estate experts. Jones Lang La Salle Leechiu credited the improvement of the economy as one of the factors in the Real Estate boom.
“It took 20 years to get the stars aligned, but now we’re looking at sustained growth and success. We are now experiencing the best real estate market in the Philippines in the last 20 years,” said Rick Santos, CB Richard Ellis Chairman. CBRE
The office market will continue to benefit from the global offshore and outsourcing industry, while the residential and retail space markets would still be propped up by improving private consumption.
In the office space segment, demand is seen to hit a record 430,000 square meters, driven primarily by the business process outsourcing (BPO) business.
Sheila Lobien, JLLL director for project leasing, said that “Even before preferred office buildings are completed, companies are committing to take up space, indicating strong optimism and heightened business activity projected by the leading real estate consultancy for 2013. Pre-commitments are backed up by signed lease agreements between parties, and advanced rent and security deposits are paid.”
Lobien said the office space market continues to be a sellers’ market as pre-commitments more than doubled in January to November 2012 compared to the same period in 2011.
Due to low interest rates and financing schemes, the housing sector will expect a democratization that will transform it from a nation of renters to owners.
CBRE expects that housing developers will focus on mid-income residential market segment within the P45,000 to P80,000 per sqm price range. CBRE Head of Research, Victor Asuncion, noted the continuous increase in housing loans volume.
Despite of the rising prices, there is no bubble developing according to JLLS. “There is no bubble in the Philippine property development market, because what is built is leased.”
A bubble scenario similar to what happened in the US has a nil chance of plaguing the country because of “the holding power of Filipino buyers is longer,” according to Philip Añonuevo, JLLL Associate Director for Markets.
For the construction sector, the encouraging prospects of the Real Estate industry are giving optimism to the sector that helped the economy last year.
BCI Economics said in their study that the construction industry would continue to grow and is growing side by side with the economy. BCI noted that new construction projects are seen to grow by 264 percent in 2013 with new building construction expected to grow by 145 percent.
Manolito Madrasto, Philippine Constructors Association (PCA) Executive Director, that like the Real Estate industry, construction industry may see a reverse migration of labour, similar to what happened in neighbouring Malaysia some five years back.
“So if we keep up this growth, for the next three years, we will see a reverse migration. It’s bound to happen. All because the government finally decided what needs to be done,” Madrasto said.
He also mentioned that demand for local contractors abroad would dwindle because of the current global slowdown which would erode the cost competitiveness of wages in other countries.
“As the market hits a high, I foresee that the industry will be forced to increase compensation benefits, wherein if you consider the take home (pay if you work abroad), you would rather be here,” he said.
Because of the competitiveness of Filipino construction workers, Singapore’s Building and Construction Authority said that it is sourcing out construction workers from the Philippines, according to Singapore’s Channel News Asia. They are now seeking approval from the Philippine government to put up a testing center in the country.
The authority said they hope to “be less reliant on these countries” and “boost supply and diversify the source for foreign labor” by adding Filipinos and Sri Lankans as their new choice.
We will also see the emergence of the Philippines as the next gaming hub of Southeast Asia as more entertainment firms will develop gaming hubs and one of them is the PAGCOR Entertainment City which has provided impetus for tourism development.
“The Philippines is the Macau in leisure and gaming of Southeast Asia. In five years, the Philippines will challenge Macau and Las Vegas in casino revenues,” he added.
“Investment in the hotels and hospitality real estate asset class is experiencing record growth. In addition, commercial properties such as Aseana One in the same district have become an attractive destination for firms seeking to do business in the proximity of the entertainment district,” Anonuevo said.
Because the demographics is a vital part in economic development, the Philippine population is expected to hit 97.7M this year according to Commission on Population. This is based on the statistics of 1.7 to 1.8M Filipino babies born every year,
This record is still unofficial, says PopCom Executive Director Tomas Osias. PopCom’ computation is based on the annual population growth rate of 1.9 percent. “Our population in 2010 was 92.3 million in absolute number. So based on that, we may estimate that by May 2013, our population will be 97.7 million,” she said.
Despite of the good news, however, we also received bad news, starting the BIR slapping extra burden to the majority if middle class condominium dwellers with value added tax (VAT) on their already burdensome monthly dues or CUSA.
The Revenue Memorandum Circular (RMC) 65-2012 reversed the previous position of past Commissioners exempting condominium associations from the payment of income tax and VAT.
The exemption was based on the speculation that condominium corporations provide services and benefits to its members so the association dues and assessment charges is not receipt of income because there is no sale of goods or rendition of service. Because of this, these corporations are subject to income tax and withholding taxes.
Condominium owners expect an increase in their dues soon.
A copy of BIR RMC No. 65-2012 can be found at BIR’s website: ftp://ftp.bir.gov.ph/webadmin1/pdf/66019RMC%20No%2065-2012.pdf
With this, I often advised my would-be-buyers that sometimes, one is better renting a home than owning a condominium unit.
The gwapo is what most RE practitioners are anxious about: “Who are the gwapos and gwapas to lead the Association of Integrated Professional Organizations”?
Since the passing of RESA Law, or RA 9646, the required integration of these professional organizations has failed. I often like to joke that combining of fusing “tubig”, “langis”, “toyo”, and “patis” (Water, oil, soy sauce, and fish sauce) is next impossible to integrate.
But with the leadership and determination of the PRC Chairperson, Teresita Manzala, this endeavor shall be carried out. With the help of author and father of RESA Law, Congressman Rod Valencia, I am confident that the AIPO saga will eventually end up in a win-win victory for all RE practitioners.
The ugly start of the year is the fires that we saw in San Juan, leaving 1,585 families or 7,492 people homeless. Are there relocation sites? Will their homes be restored?
The San Juan fire reached Alpha alarm because firefighters were unable to control the blaze, which burned to the ground most of the affected area in Barangay Saint Joseph.
San Juan Mayor, Guia Gomez, promised the affected families that her LGU is mapping out a rebuilding plan.
“We have brought them peace of mind with the assurance that we are going to form an Inter-Agency Task Force who will lay all the plans, mechanics and programs to speed up the implementation of our in-city housing not only for them but also for the other low-income families,” she said in through the San Juan government’s facebook page.
The task force will include three representatives from Barangay St. Joseph aside from Housing and Urban Development Council, National Housing Authority, National Anti-Poverty Commission, Presidential Council for the Urban Poor, and the city government’s local housing board.
We also started experiencing the frenzy of election campaign, even before the campaign periods set by COMELEC.
Politicians start early. It’s still 4 months to go before the 2013 elections, but people already see various forms of early campaigning as early as last year. We’ve seen some politicians’ advertisements in TV, radio, and newspapers. When the country was hit by natural calamities, politicians took advantage by placing their names and faces in the relief goods.
But the most distasteful pre-mature campaigning are the “epal” politicians who put their names and faces in tarpaulins around the city, in the government projects signs, billboards, greetings, etc.
COMELEC can’t do anything to stop this because there is now law prohibiting pre-mature campaigning.
“This issue of campaigning before the election period is something that Pera’t Pulika has been very concerned with. And the public doesn’t like the idea of politicians putting their ads months before the political campaign period starts,” Vincent Lazatin, Transparency and Accountability Network executive director, told Rappler.
Likewise, it is also ugly to see how RE developers starting to use all sorts of tricks and marketing gimmicks to gain market share in a very competitive condominium market.
We’ve seen them roaming around, catching passerby by surprise to hand them flyers, direct them to their booth, get their contact details so they can be scheduled for free tripping, etc.
The winner in the long term will be the developer with creative financing, easy payment terms, and affordability.
With sources from:
- Business World
- Philippine Daily Inquirer
- Yahoo Southeast Asia
- Philippine Star
- GMA News