I BEG TO DISAGREE!

Ayala Corporation Chair Jaime Augusto Zobel de Ayala

Ayala Corporation Chair Jaime Augusto Zobel de Ayala

Last August 23 2013, Ayala Corp. Chair Jaime Augusto Zobel de Ayala, said that the Philippines should play an active role in pursuing the integration of Southeast Asian economies.  Zobel, citing “skilled labor and a strong economy”, opined that the country actually had comparative advantages that should make integration beneficial to Filipino businesses.

However, what he said is contrary to the fears of most economic and financial experts and even our own legislators.

Senators Juan Angara and Bam Aquino said that there are looming concerns that our domestic businesses, manufacturing industry and labor sector may not yet be ready to compete against other ASEAN countries, as foreign businesses will be able to freely enter the country which is feared to cause more harm than good in the regional economic integration process.

Senator Juan Edgardo Angara and Senator Paolo Benigno Aquino IV

Senator Juan Edgardo Angara and Senator Paolo Benigno Aquino IV

They added that there was “an urgent need to prepare the Philippines’ micro, small, and medium enterprise sector—which comprises 99 percent of the country’s economic backbone—to ensure that small players are not left behind in the integration initiative.”

There is also one fact to remember – our country’s  major export partners are mostly non-ASEAN members.

Meanwhile, Standard & Poor’s, a debt watcher, warned that because of the reduction of US treasury and bond purchases, capital flight from Asian economies may result in a significant increase in borrowing costs, which could lead to slower growth across the region.

Nestor Tan, the President of  BDO Unibank Inc, which is of the country’s largest banks, said that  “Philippine banks are not yet ready for full ASEAN economic integration by 2015. Among the major financial effects of the integration, Tan stressed that the AEC should lead to more job creation for Filipinos.

Economist Bernardo Villegas noted that the Philippines can no longer follow the free-wheeling formula of the US but rather choose niche sectors, particularly the SME’s (small-medium enterprises).

While our country’s economic and financial future are being debated because of the ASEAN integration,  Mr. Albert Castro, of Malaya Business News Online, published and posted an article, last June 13, 2013 in the PAREB Industry News & Updates.

The article begins by quoting Jones Lang LaSalle, a Property Consultant, that the country (Philippines) property market is seen to benefit from its single economy.

With my experience in the real estate business, I beg to disagree, that the Filipino real estate practitioners will generally benefit from ASEAN Integration.

Association of SoutEast Asian Nation and ASEAN Valuers Association

Association of SoutEast Asian Nation and ASEAN Valuers Association

The “property consultant” Yang Liang Chua, Jones Lang LaSalle, Head of research for Southeast Asia said “with greater ease of capital flow and investments, the level of real estate investment activity is expected to rise in the untapped Southeast Asian markets as investor appetite grows. The level of capital flow in ASEAN is also likely to rise as and when regulatory barriers are removed.”

While it’s maybe true that the integrated economy may result to better productivity due to the pressures of market competitiveness and required developing sharper professional skills to meet international standards and best practices across the ASEAN, the Filipino real estate practitioners is faced with a disadvantage for having to meet competitors that are bigger in terms of capital, size and global reach.

Up: CB Richard Ellis, Cushman & Wakefield Down: Jones Lang LaSalle, Colliers International

Up: CB Richard Ellis, Cushman & Wakefield
Down: Jones Lang LaSalle, Colliers International

Even without the ASEAN Integration, the real estate service industry is dominated by foreign owned and controlled corporations such as CB Richard Ellis, Jones Lang LaSalle, Cushman Wakefield and Colliers and others. These multinational corporations have the advantage because of their global presence large capital base and they service the 1000 corporations here and abroad. In my past blog about the disadvantage of real estate practitioners that are sole proprietors or have formed partnerships or corporations, are finding it difficult to penetrate the clientele being held by these foreign multinational real estate corporations. It is unfortunate that even government agencies, corporations and departments are biased and prejudiced against the Filipino real estate practitioner.

To be specific, the accreditation process required by the Security and Exchange Commission, BSP, GSIS and SSS are a clear indication that the Filipino real estate practitioner is a no contest against the big foreign owned and controlled real estate service corporation.

Professional Regulatory Board of Real Estate Service from left: Mr. Bansan Choa, Mr Rafael Fajardo, Mr. Eduardo G. Ong, Mr. Ramon CF Cuervo III

Professional Regulatory Board of Real Estate Service
from left: Mr. Bansan Choa, Mr Rafael Fajardo, Mr. Eduardo G. Ong and Mr. Ramon CF Cuervo III

This is  a blatant and clear violation of the Real Estate Service Act Sec.2 of RA 9646 clearly states that the state recognize the vital role of real estate service practitioners… so why is it that in the accreditation process the Filipino real estate professional  as an individual is not recognized. In another section of RA 9646 on Foreign Reciprocity states that “no foreign real estate service practitioner shall be admitted to the licensure examination or be given a certificate of registration or a professional identification card, or be entitled to any of the privileges under this Act unless the country of which he/she is a citizen specifically allows Filipino real estate service practitioners to practice within its territorial limits on the same basis as citizens of such foreign country.”

The Royal Institution of Chartered Surveyors(RICS ), was created in 1868 U.K.  and received a royal charter in 1881.   Originating from the Surveyors Club of 1792, the members who are called “Chartered surveyors” proudly wears an emblem bearing their name and designation FRICS (for Fellow of RICS) or MRICS (for Member of RICS).

RICS is the world’s leading professional body and has set the highest standards of competency and integrity among its members and regulated firms in the surveying industry by:

  • Regulating and promoting the profession
  • Maintaining the highest educational and professional standards
  • Protecting clients and consumers through a strict code of ethics
  • Providing impartial advice, analysis and guidance

With Members all around the globe, they deliver knowledge and serve’s the public interest at a local level.  In their work, the members draw on RICS’ ever-growing range of globally applicable and regionally specific standards and guidance.

Operating as an independent organization in the public interest, they provide impartial, authoritative advice on key issues to business, society and government around the world.

The headquarters are based in London with six world regional branches; RICS Europe, RICS Americas, RICS Asia, RICS South Asia, RICS Oceania, RICS Middle East & Africa.

Mr. Ramon CF Cuervo III and Director of Colliers International Marissa Benitez, first member of Royal institute of Chartered Surveyors in the Philippines, together with other members of RICS.

Marissa Benitez of Colliers International and PRC-PRBRES Board Member, Ramon C. F. Cuervo III both members of Royal Institute of Charter Surveyors( RICS) whose advocacy is to adopt the Professional Standards of RICS for Global Competitiveness.

But we see these foreigners representing corporations that are established here in the Philippines acting as real estate consultants or advisors and even exclusive agents of commercial buildings undertaking the sales and leasing of high-end buildings catering to international corporations, multinational offices and business processing offices.

Again, this is a violation to Sec. 29 Prohibition Against the Unauthorized Practice of Real Estate Service stating “no person shall practice or offer to practice real estate service in the Philippines or offer himself/herself as real estate service practitioner, or use the title, word, letter, figure or any manner whatsoever that of is qualified to practice the profession or be appointed as real property appraiser unless he/she has satisfactorily passed the licensure examination given by the Board, except as otherwise provided in this Act, a holder of a valid certificate of registration, ad professional identification card or a valid special/temporary permit duly issued to him/her by the Board and the Commission.

It is pathetic that even members of the Professional Regulatory Board of Real Estate Service who have been given the task and responsibility in implementing RA 9646 are without the necessary police powers to go after the violations of this law Article 5 on penal and final provisions states in Sec. 39 that unlicensed real estate service practitioners shall be fined no less than P100,000 or imprisonment of not less than 2 years or both upon discretion of the court.

In case the violation is committed, by a partnership, corporation, association or any other juridical person, the partner, president, director or manager who has committed or consented or knowingly tolerated such violation shall be held directly liable and responsible for the acts as principal or as a co-principal with the other participants, if any.

One must face the reality that the only way to meet these threats, issues and concerns is to equip oneself with the necessary technical and professional skills to meet the global competition by being globally competent with credentials of international standards.

One must master financial know-how, learn real estate economics, master the English language being proficient in written and oral skills, keep up with updated information technology, sharpen one’s personality and character with higher educational attainment.

Dr. Bernardo Villegas, guest speaker during the Presidency of Emanuel G. Aguilar, Vice President Ramon F. Cuervo, with incoming President Tony Calero

Dr. Bernardo Villegas, guest speaker during the Presidency of Emanuel G. Aguilar, Vice President Ramon F. Cuervo, with incoming President Tony Calero

Dr. Bernardo Villegas, economist of University of Asia and the Pacific (UA&P) said that as the ASEAN Economic Community 2015 deadline draws near, business will scramble to have a foothold in the expanded economy. He also added “we (real estate practitioners) can be sure, that a lot of the companies in the advanced countries will compete for a place in the market and we are strategically located”.

That is why it is very clear that the benefits derived from the ASEAN Integration will be earned by real estate corporations coming from USA, Europe, UK, Singapore, Hongkong, Korea, Japan, China and the like as advanced countries.

Institute of Real Estate Appraisers advocacy seeking just and faire accreditation process from government agencies and corporations.

Institute of Real Estate Appraisers advocacy seeking just and fair accreditation process from government agencies and corporations.

What will happen now with the 20,000 licensed real estate practitioners? Let us again go back to the article I wrote on the IPREA Journal First Semester 2013 entitled “The Appraisal Industry Today”.

The 1980’s saw a period of consolidation with the industry becoming a duopoly wherein the two largest firms offered expanded service coverage until the 1997 Asian Financial Crisis.

The 1997 crisis resulted to the plummeting of appraisal professional fees and the inability of the duopoly to maintain service revenues.  Intense pressure to streamline and increase efficiencies resulted to firms downsize staff, especially with the appraisers. This process of disaggregation continued in succeeding years and the number of appraisals ballooned, manned by former employees of the duopoly. The competition led to vicious price wars that lead to decreased revenues.

The first decade of the 21st century saw new and old companies continuously competing with each other and many cutthroat services below “maintaining levels” – the levels of revenues new appraisers can be trained competently within independent appraisal firms.  Appraisal fees reach historical lows, the supply of new and competent appraisals stifled. As assurance, new appraisals in private banks that have budgets continue to be trained. Take note that these appraisers are only third party appraisers since they are attached to lending institutions that have specific interests to protect.

During those times, a strong economic growth fueled a round of aggregation and it was led by multinational brokerages or multi-service firms not affected by the 90’s crisis. Since they have the resources to maintain an appraisal department, these companies are now rivaling or even exceeding the largest independent appraisers in revenues and employment which composed mostly of Filipinos.

For instance the licensed real estate appraisers were only about 10 – 12 appraisal corporations (not individuals) accredited by the Securities and Exchange Commission; even less by the Bangko Sentral ng Pilipinas (BSP).

More so are the real estate consultants were only foreign based real estate corporations have the advantage of gaining recognition and prestige. The question is now “What will happen to the individual real estate practitioner?” As an optimist, I believe that the Filipino professionals may not benefit immediately on a short term but since this is their country and familiar with the geographic socio-cultural and natural environment, one may discover a particular nitch in the real estate industry by having the necessary creativity and innovations in the performance of their real estate service whether it is in a particular type, use or geographical and territorial advantage.

The growth of the economy and kindled interest of foreign investors demand for competent and licensed appraisers increased. However, on a corporate level, further competition and aggregation may lead to a possible monopoly or duopoly, a gloomy situation similar to the late 1970s.  Also, foreign appraisers have been practicing in the Philippines without licenses. Legal or not, this trend will only continue with the impending economic integration of ASEAN Countries in 2015.

The present scenario of international and local Appraisal Companies.

The scenario of international and local Appraisal Companies. From SEC, Financial Statements, as of 2010 to 2011

As you can see in the pie chart, the international companies captured 40% of the Philippine Corporate appraisal industries while local companies fight “tooth and nail” to get a small share of the remaining market.  If local companies already have a hard time competing with the current international competitors, how much will they fare against the whole ASEAN neighbors? It is only here by leveling the playing field that the men would be separated from the boys and the real estate practitioner that is internationally competent, will benefit most.

A concrete example of a present practice being done by big developers who purchase properties from real estate brokers, is their policy to avoid and even not to pay for the services being rendered by the professional practitioners.  I have in the hands two letters coming from two largest real estate developers who have categorically mentioned that they will not pay the corresponding commissions or professional fee due to the broker, even if the broker rendered the services required.

Another common unethical practice being done by large real estate multinational and foreign corporations, is to go directly to the seller after having learned from an individual broker, that a particular property is for sale.

Big Corporate Buyers, claim that they ” know the owners” to justify, cutting out the Real Estate Broker. Same with Conglomerate Sellers , who will try to deal directly to the Buyer, so as to ” save” on commissions. This is a common unethical practice, and small brokers, are in no position to fight this injustice in court.

By the way, “As Heard through the Grapevine”, Fujitsu and its real estate agent Foreign based Real Estate agent ,  are being sued for estafa by Sta. Cruz-based developer Necisto Sytengco. The reason? Fujitsu and its real estate agent , backtracked on their acceptance of the Sytengco offer of P150M for the shuttered Fujitsu Plant in Tanuan Batangas and even resold the said property for only P110M.

This is but a tip of the iceberg. The consequence of a borderless and professional practice by foreigners in the Philippines will eventually compromise the real estate professional, appraiser, consultant, small real estate proprietor, broker  and sales person.

The Philippine government and private sector while preparing for a possible world panic , caused by the Fed Stimulus Program , is skeptic with the ASEAN integration.

Therefore, Will  the Filipino real estate practitioner , generally benefit from ASEAN Integration?

My answer is simple, , ” Big Fish eats small fish” …

Source:

Royal Institute of Chartered Surveyors (RICS)

Daily Inquirer

The IPREA Journal – First Semester 2013

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3 Responses to I BEG TO DISAGREE!

  1. fernando cuervo says:

    “What will happen to the individual real estate practitioner?” It is time the Philippine Govt gives priority to the small Real Estate practitioners rather then those big Companies like CB Richard Ellis, and others like them. Charity begins at home. It is time for them to leave the country and let the other Filipino Real Estate practitioners enjoy the fruits of their labor for the love of their Country. It is time the Philippine Govt. reacts to these big Companies and tightens the bolts on them with bigger sanctions and penalties for some of them do not have the licence to do appraisal and sub contracts them. Others just makes “Bolabola” about our economy and gives us an insight on the real estate economy is going on in our country. What the hell do they know of what the Philippines Real Estate Values go for if they do not know about Filipino values and manner of how we live. What will happen now with the 20,000 licensed real estate practitioners? WHAT????
    Stop foreign real estate practitioner in the Philippines. Let them all go back where they belong, and leave the Filipinos to love and serve their country. MABUAHY TO ALL YOU FILIPINOS REAL ESTATE PRACTITIONERS. Your effort are much more valued then those imported international companies that are making “pakealam” in our own Country.
    Thank you.

  2. fernando cuervo says:

    If Jose Rizal were living today, he would be crazy writing books against these international real estate companies taking advantage of our country and our countrymen.

  3. fernando cuervo says:

    “no foreign real estate service practitioner shall be admitted to the licensure examination or be given a certificate of registration or a professional identification card, or be entitled to any of the privileges under this Act unless the country of which he/she is a citizen specifically allows Filipino real estate service practitioners to practice within its territorial limits on the same basis as citizens of such foreign country. STOP all foreign real estate service practitioners NOW.

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