The Philippine Economy, Real Estate Industry & The Good of 2013 into the Dawn of 2014

Greetings to all my Amigos y Amigas!

A Happy Prosperous and Healthy New Year!

Real Estate Overview: Excellent! From the top of the crane, to the majestic Skylines of our Central Business Districts

Supply Boom addressing, housing and condominium living

The supply pipe of the residential condominium in Metro Manila is predicted to reach 7,253 units in 2013 only. In 2016, 4 years down the track, the supply will reach 78,212 condominium units in Manila Metropolis. Majority of the supply comes from Makati and Bonifacio Global City which collectively accounts roughly 60% of the total condominium units.
In Makati alone, the inventory of studio to one bedroom unit is roughly 1,700 units which accounts to 85% of the total new supply for this year only.

Demand : Perfect Investment, Were only the rich can afford, keep money safe, and produce good yields

The demand for condominiums, especially for the multi-bedroom units is not met even after the combined Makati and Bonifacio Global city. In 2013 general vacancy rate in Makati central business areas, across all grades, is currently at 9.6% from first quarter’s 9.8%. Low vacancy rate of Makati’s premium units from 4.7% to 3.4% is also noted for this quarter.

Rental rate for Makati CBD premium residential condominium units is steady at P790/sqm on average, monthly. While Bonifacio Global City is at P780/sqm monthly average.

On the other hand, quite the opposite is true in the smaller unit sector. Lessors for smaller units have a hard time beating the competition thus resorting to a “price war” by decreasing the bargaining price of the rent to attract tenants.

Risks brings Good Returns, Buy, Rent and Hold if Units are not Sold:

Risks to the growth projections will primarily come from a slower global recovery, domestic reform lags caused by increased resistance from vested interests, and possible asset bubbles in the real estate sector and the stock market. Global uncertainties stemming from weak demand and financial market volatility in high-income countries pose substantial risks to Philippine growth…

The predicted real estate bubble, which actually did not materialize, market crash and other catastrophes in the Philippine economy will possibly be caused not only by our government’s slow implementation of reforms, decisions of the controlling business dynasties and poor management of household debts.

It may also be caused by the slow economic recovery in the Eurozone market, the implications of the recent government shutdown and economic turmoil in the United States and other foreign uncertain conditions, as I mentioned earlier.

The projected growth rate of the GDP at 7.8 this year went down to 6%. But despite this statistic, most of the real estate players is optimistic and see more growth and expansion because of strong industry demand, robust economy and attractive business environment.

“The outpour of global relief support right after the typhoon wrought havoc in the Visayas region, the national government, along with various local and international groups, has likewise generated billions of pesos for rehabilitation and reconstruction”.

All sectors are now seeing growth areas, with some caveats in the residential, industrial, commercial,resort- hotel developments, tourism investments and retail segments will all grow very well in 2014.

Great opportunities abound in Construction, PPP Projects and Infrastructure. These are supported by real demand,from the need to Redevelop the Visayas Region. With a strong economy and positive business climate, we property consultants are very optimistic about the Prosperous New Year 2014!

There will be growth, growth, everywhere.. Thanks to the economic fundamentals of 2013

The residential market will remain on the top as most of the developers have become more discerning in launching their bigger and better projects.Looking now on Regional Expansion, Venturing to New Territories and Building New Cities.

Industry giants Ayala, Filinvest, Robinsons, Century Properties and Rockwell have introduced new Township Projects, targeting the rich and famous, with monthly rents in luxurious high-end condo units have gone beyond P200,000, while those in posh villages cost from P300,000 to half-a-million pesos.

Different developers are funding these projects by issuing Bonds, or availed loans from the banks and even funding from international institutions. Buyers, on the other hand, have accessed various ” creative” financing schemes for their residential property acquisition.

Taking advantage of low interest rates , and high liquidity , have contributed highly for the success in the mid-market housing projects.

Demand for affordable and socialized housing, remains to atleast three million homes.

The Pinnacle Group, a real estate company, sees the residential sector as highly opportunistic, with the integration of residential to office and retail developments as a common trend.

It is instructive to conduct accurate market scanning on the sizes, amenities and pricing of the residential products to be offered; and how much retail and office spaces to be blended in the mix,” the company suggested.

Retail spaces have continued to be one of the consistent income-generating property sectors.

With the increased purchasing power brought about by the rising disposable incomes of overseas Filipinos and their families, business-process outsourcing (BPO) workers, traditional employees, as well as self-employed or small businessmen, cash kept on pouring to retail owners.

The “shopping mentality of Filipinos” in malls also contributed highly to the increase in retailing spaces.

Expansion is in the rise as the continued growth of the BPO industry, which, according to the property consultant firm, is the main driver for office space demand that pushes developers to fast track completion of their projects.

The hike in leasing fees, the report noted, “are still within tolerable limits,” as monthly rents in Premium Grade A within Makati City remain slightly higher than P1,000 per square meter (sq m), while those of Grade A, as well as small and old buildings average at P750 each sq m and P550 per sq m, respectively.

Strong demand for lots at the Bonifacio Global City (BGC) in Taguig City, on the other hand, has pushed accommodation values even higher than the P30,000 market price since most of them stand below the 16-floor area ratio.

New players in the real estate, especially in Cebu made a good income because of the low interest rates, OFW remittances and the BPO sector.

Continued growth in the local property sector is evident even just within the Cebu Business Park and Cebu I.T. Park, which host the majority of office and residential high-rise developments in the city. As of the end of the year, there are currently 14 ongoing construction projects in Cebu Business Park and five constructions in Cebu I.T. Park for residential, office and commercial purposes. Once completed, these projects will bring in a total gross floor area of 434,800 square meters and 94,400 square meters respectively

Philippine Economy as a Whole

It is also in this year that our economy had a Fitch rating upgrade after a 7.6% growth. OFW remittances surpass the $17.3 Billion mark, while our electronic exports contributed $22Billion, and the BPO industry contributing at least $2Billion and this does not include contributions other Philippine worth goods worth more than $11 billion.

Financial Strength

The Bangko Sentral ng Pilipinas (BSP) reported losses of P21.55 billion as of end-October, but lower compared to losses incurred the same period last 2012 of P78.43 billion.

The central bank has been reporting losses for the past five years straight as the cost of financial and price stability amid strong foreign capital inflows and liquidity is very high and the BSP has had to sacrifice better income.

Although unemployment went down from 7.6 to 6.5% and underemployment at 17%, assuming the statistics are right, the figures do not tell the full story. How about the underpaid family workers, daily wage earner, or jobs that that do not pay enough to cover for the basic needs to survive?

Our population growth is another important factor. People are our most important Resource. We need to Capitalize on our strong work force. This is our Human Capital, Our Professionals, who are World Class and of International Quality.

So, the government policy of birth Control, the RH bill , and the ” Culture of Death” because of the Anti- Life conspiracy. Is counter productive to Economic Growth and Development . Population its not a problem, or a generalization that there are to manny people to feed, these arguments have no scientific basis.

What we need is to improve Education! The Filipino is very clever, skillful, beautiful and strong.. Given the proper Education, there will be better job opportunities. The real issue is not the population. But, Social Injustice, where by there is unequal distribution of wealth and opportunities . The poor, do not have Social Welfare, and Expensive higher Education makes one who is born poor, with unequal ” rights” and with great difficulties in advancing one’s position in life, or the quality of living. NSO said 10% of rich families earned more than the poorest 70% of families combined.

Another major issue is urban migration, where many rural workers move to cities looking for work and ended up living in slums, the streets, or in squatter colonies , only to be driven away after violent evacuations.

Macroeconomic Broad Strokes: Philippine Achieved a Very Good Score

In the third quarter of 2013, Filipino GDP growth slowed for the second straight quarter to a seasonally adjusted 1.1 percent, from 1.6 percent in the previous period.

The Industry sector grew by a seasonally adjusted 0.3 percent in the third quarter of 2013, slowing down from 1.4 percent in the second quarter and services also decelerated to 1.6 percent.

In contrast, agriculture, hunting, forestry and fishing grew by 0.7 percent, a reversal from the previous quarter’s 0.7 percent drop.

On the demand side, seasonally adjusted household final consumption expenditure grew faster by 1.9 percent from 1.4 percent growth in the June quarter.

Fortunately, Unemployment Rate in Philippines decreased to 6.50 percent in the third quarter of 2013 from 7.30 percent in the second quarter of 2013, based on the figures reported by Statistics Office of Philippines. There were 2.6 million unemployed in the Philippines in October, down from 3.0 million in July.
Unemployment Rate in Philippines averaged 9.03 Percent from 1994 until 2013, reaching an all time high of 13.90 Percent in the first quarter of 2002 and a record low of 6.30 Percent in the third quarter of 2007. So in this area, it is a big improvement.

According to the report released August 2013 by the credit rating agency, Standard & Poor’s (S&P), the Philippines’ gross domestic product (GDP) is expected to expand by almost 7% in 2013 making it Southeast Asia’s economic growth leader! Great!

The country’s annual headline inflation further slowed down to 2.6 percent in April from 3.2 percent in March. It resulted from the slower annual increments in all the commodity groups except in the education index. The annual decline still recorded in the transport index also contributed to the downtrend. Inflation a year ago was steady at a very good rate of only 3.0 percent.

Excellent Microeconomic Basic Foundations: The Filipino Entrepreneur and our “underground” economy

Even if The Philippines has one of the highest power rates in the world, the Entrepreneur has managed to show outstanding performance. The growth factor of businessman, especially the small-medium size entrepreneurs, showed how Filipinos are resourceful, very creative and know how to innovate. Statistics show the fast growth of the manufacturing sector, exports and industrial production. This trend will go on with a quantum leap in 2014, Bringing in a New ” Industrial revolution” in the Philippines.

However, Food prices here are also considered to be expensive. In a study by Rolando T. Dy, Head of the Agribusiness unit at the University of Asia and the Pacific, said while the country has enough rice to feed 90 million Filipinos, we just have to start paying for higher prices of goods and basic commodities”.
“Gone are the days of cheap food in the Philippines”, he added.
The higher prices are due partly to increases in the cost of oil, fertilizer, transport, electricity as well as the high demand for biofuel feedstock. There is also a shortage of Farm – to – Market Roads, no Transport facilities, especially the neglect of the Rail Road System. Lack of Air- Ports. For example, Mindoro Island and Province is one of the best Agricultural and Marine food producer in the Philippines. But till this day, there is no appropriate Airport that can be utilized to transport these produce for distribution and marketing.

Fiscal Policies and Unequal , unjust Taxation system: The Ugly News

There is injustice being done by the BIR, headed by Commissioner Kim Henares. Although the intention is right, the method and outcome is focused on the Middle Class Wage earner. Employees, pay much more in terms of percentage or Income ratios than that of the very rich ” owners”, who can afford tax experts and lawyers to do a “tax avoidance scheme “. The BIR policies scourges the lower to middle-class income employees whose salaries diminished by automatic deductions while the rich and famous personalities and businessmen are getting all the incentives while obviously know how to manipulate with irregular taxation accounting, in order to avoid paying the right taxes. Why is it that the richest tycoons in the country are not the highest taxpayers?

Our country also has one of the highest tax rates, especially with the EVAT (Extended value added tax). The BIR also imposes ridiculous measures like taxing toll fees, condominium dues, even the dead! This is one of the reasons why our business, especially investors and entrepreneurs are shying away from coming up to the open, for they see no equality, so the ” Underground ” economy is the only alternative in order to survive in the competitive business jungle.

The year 2013 was indeed a good year for the Philippine economy as a whole and the real estate industry.

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One Response to The Philippine Economy, Real Estate Industry & The Good of 2013 into the Dawn of 2014

  1. efren tormes says:

    Thank you very much for your very prompt economic updates. We remain guided.
    keep it up. Happy new year

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