Published in the December 29, 2005 issue of BusinessWorld
Publicly listed Megaworld Corp. announced early this year its tie-up with Araneta Center, Inc. for the construction of 17 residential towers in the group’s 35-hectare residential/commercial development in Cubao, Quezon City.
The seven-year project will entail the construction of 6,000 condominium units and is just one of the projects that the firm launched in 2005.
Meanwhile, Filinvest Land Inc., another publicly listed company, recently launched Asenso Village, which targets those engaged in cottage industries.
The project, which is being piloted in Cavite and Laguna, would offer 581 and 370 lots, respectively. The project is on top of Filinvest Land’s over 60 existing developments. The company is launching seven more projects next year.
From the high-end developers, Lopez-owned Rockwell Land, Inc. recently started its road show for the first of two towers of One Rockwell in Rockwell Center in Makati City.
Ayala Land, Inc., for its part, launched Serendra in Fort Bonifacio and the second tower of The Residences at Greenbelt, while its middle-income market subsidiary, Community Innovations, Inc., would launch this month The Columns at Legazpi Village, which is a sequel to The Columns at Ayala Avenue, and a joint venture with the Manila Jockey Club, Inc. to develop the old San Lazaro race track into a townhouse project that would target the Chinese community in Binondo.
Other developers are also embarking on their own projects.
In its most recent property market overview, property services firm Colliers International Philippines, Inc. noted that while there was a downturn in the total number of licenses issued by the Housing and Land Use Regulatory Board (HLURB) for the first half of the year, it was not because of lack of activity in the residential property segment.
Citing data from the government body, Colliers said HLURB-issued licenses for property developers dropped almost 12% to 159,123 units for the first half from 179,972 units in the same period last year.
But Colliers also noted that except for low-cost housing, which got licenses to sell 21,594 units from 37,329 units for the same period the previous year, residential segments posted an increase in the number of HLURB-issued selling licenses.
Approved licenses for socialized housing, for instance, increased 45.2% to 26,369 units from 18,162. Those for mid-income housing rose 59.9% to 29,895 units from 18,697, with projects registered during the period including the fourth phase of Ayala Westgrove Heights, Laguna Properties Holdings Inc.’s Villa Sta. Monica and San Rafael Country Estate, Robinsons Homes’ Robinsons Residencia Milano, Sta. Lucia Realty’s Greenwood South phase 1-A, Club Morocco 2 Phase 4, and Ponte Verde 1 C, and Filinvest’s Sta. Cecilla II.
Licenses to sell high-rise residential units, meanwhile, rose 84.3% to 7,883 from 4,277. Among the projects registered for the period are The Residences at Greenbelt II under Ayala Land and DMCI Homes’ Bonifacio Heights, a housing project for the military, and Mayfield Park Residences.
Segments that pulled down the total number of licenses issued, data showed, were the commercial condominiums, which saw a 64.2% decrease in the issued licenses to 177 units from 494, the farm lots, which fell by 80.3% to 642 from 3,262, memorial parks, which posted a 25.8% decline to 72,031 from 97,052, industrial subdivisions, which fell to 39 from 66, and commercial subdivisions, which were reduced to 532 from 633.
Danilo A. Antonio, professor at the Asian Institute of Management and head of various property development firms, told BusinessWorld that the activity in the residential sector is driven by two factors: the need for affordable housing and remittance from overseas workers.
With a housing backlog of four million units and increasing by 300,000 a year, Mr. Antonio said current projects that cater to the P500,000- to the P3 million-market are still outside the majority’s affordability
He said the constraints of the market’s capacity to pay makes it challenging for developers to offer projects that would address both the need for housing and affordability.
"The demand has always been there and the prices for these products do not move. Developers know the capacity to pay is only so much so the challenge is how do you come up with structures profitably and still sell to the market?
"The moment you push up the prices no one will buy anymore not because they don’t want to but because they could not afford it. The lack of housing is still a major issue so the key is for developers to come up with efficient units where we can sell at a price they can afford and still make money," he said.
But Manuel Colayco, president of Sunfields Realty, said developers are confident in serving this market because the Home Development Mutual Fund lends as much as P2 million.
Remittances "keep the real estate sector alive," Mr. Antonio said, particularly the low- to middle-income segments.
Data from the Bangko Sentral ng Pilipinas (central bank) showed that remittances reached $8.8 billion as of October, up 27.1% year-on-year. The central bank expects $10.3 billion in remittances this year, up from its original target of $9.4 billion.
"The market is really overseas Filipinos-based now. Among the local employees there are still some who can afford to buy new houses, but this is rare. You really need excess income to fund projects like these. People who are locally employed barely even cover their own overhead," Mr. Antonio said.
Noting that more property developers are setting up offices in cities abroad that have large populations of Filipino workers, Mr. Antonio said, "the [overseas workers’] market used to be a by-the-way market. This is no longer the case."
Some developers, he said, sell up to 70% of their products to overseas workers.
But property developers that target overseas workers also have to compete not only with other real estate companies but also with other sectors in tapping remittances, Mr. Antonio said.
Mr. Colayco said that while the overseas workers’ market is lucrative, it comprises only half of the low- to middle-income segment.
"The other half is still the local market. Among them are supervisors, those who work in Metro Manila, those who have two members in the family who are working, small entrepreneurs," he said.
HIGH-END PROJECTS
Meanwhile, developers of high-end projects, or those that cost over P5 million and who would likely buy second homes, are tapping another overseas market -- migrant Filipinos in North America and Australia.
"This is a historical market," Mr. Antonio said, as he noted that many of the migrants who left in the 1970s and who have earned enough to buy real estate properties that cost between $50,000 and $60,000 are looking to retire in the country.
Brittany Corp., the upscale arm of publicly listed C&P Homes, Inc., sells a big chunk of its products to this market with residences in subdivisions at around P6 million.
"If you look at our sales and the number of people visiting sites on weekends, you wouldn’t believe that there is a crisis," Nova Noval, Brittany Corp. head for corporate communications, told reporters in the sidelines of a recent forum.
Ayala Land and Community Innovations market 20% of their products to this same market, while Rockwell, which goes to the United States to sell products priced at between P95,000 and P105,000 per square meter, gets 30% of its sales from the same market segment.
Mr. Antonio said this is the same market being tapped for leisure projects.
BUYER’S MARKET?
Buying a house depends on the ability to acquire a property and whether or not the customer’s preferences are met, industry participants said.
Mr. Antonio said that if price is the primary consideration, the current situation could be considered a buyer’s market.
"If it’s a buyer’s market, the price is lower than what developers want it to be. If it’s a seller’s market, I sell at my price and tough luck for you if you cannot afford. It’s a buyer’s market in that sense because the buyer’s capability to pay dictates how we as developers price our products."
He noted that repayment terms for housing loans-another gauge for the market’s appetite for acquiring real estate assets-also favor buyers.
Terms are more flexible, with reservation fees going to as low as P20,000. The downpayment, he said, could be stretched up to three years, and could go for as low as 20%, while payment for the remainder could be stretched up to 10 years.
"You can see that buyers really have a say right now," Mr. Antonio said.
Interest rates, meanwhile, have recently risen, but industry executives said their impact on sales would be insignificant as long as they do not substantially raise the amount of monthly amortizations.
"What matters is how much they pay for the mortgage," Mr. Antonio said.
A bank executive, for his part, also said that the rise in interest rates is likely to be temporary and that for long-term loans, the lower rates in the future could offset the current high rates.
But while prospective buyers may be able to afford the houses that are now being sold, choices are still constrained when it comes to the features of the purchase.
The trade-off for the low prices, Mr. Antonio said, is less space.
"Sizes of condominiums right now are just at 30 square meters, sometimes even 20. That is what the market can afford so (developers) have to come out with products they can buy. But how small can you go?," he said.
Mr. Colayco said "there has to be [a] compromise" between what the buyer needs and how low the seller can price his product.
He added that the current market could not be classified as a buyers’ or a sellers’ market. "This is a balanced market."
As for foreclosed assets, bank executives said that banks have been offering good terms to unload non-performing real estate assets, but the products are still priced high.
A bank executive said only those who can afford to shell out P5 million for a house could take a pick from what is being offered in the market. "Anything below that, the buyers won’t have much of a choice."
Prices for foreclosed assets, however, are likely to remain the same, or even go lower.
Mr. Antonio said that prices of foreclosed assets would eventually have to go down as banks are competing with property developers to dispose of their non-performing assets.
"Prices have been dropping like a rock. But if you’re not in a hurry, it won’t hurt to wait a bit more," he said.
Another bank executive noted that "the housing market is still burdened by the NPLs [non-performing loans] related to the property sector."
"Despite low interest rate, tempered uptick in prices is still related to efforts of banks to liquidate these related assets," one bank executive said.
But he added that whether now is the best time to buy real estate depends on several factors. "This is related to purpose for investment or use, interest rate expectation, developer and expected property appreciation."
For those who are inclined to buy property at this time, Mr. Antonio recommended a visit to the property to assess its condition.
He said the developer’s reputation is also important, especially in pre-selling. "Can the firm meet delivery commitments, development schedules? Does it have financial backing?"
Property & Infrastructure
Overseas Filipino market spurs activity in residential property development
A number of residential property developers have launched new projects that cater to all market segments.Publicly listed Megaworld Corp. announced early this year its tie-up with Araneta Center, Inc. for the construction of 17 residential towers in the group’s 35-hectare residential/commercial development in Cubao, Quezon City.
The seven-year project will entail the construction of 6,000 condominium units and is just one of the projects that the firm launched in 2005.
Meanwhile, Filinvest Land Inc., another publicly listed company, recently launched Asenso Village, which targets those engaged in cottage industries.
The project, which is being piloted in Cavite and Laguna, would offer 581 and 370 lots, respectively. The project is on top of Filinvest Land’s over 60 existing developments. The company is launching seven more projects next year.
From the high-end developers, Lopez-owned Rockwell Land, Inc. recently started its road show for the first of two towers of One Rockwell in Rockwell Center in Makati City.
Ayala Land, Inc., for its part, launched Serendra in Fort Bonifacio and the second tower of The Residences at Greenbelt, while its middle-income market subsidiary, Community Innovations, Inc., would launch this month The Columns at Legazpi Village, which is a sequel to The Columns at Ayala Avenue, and a joint venture with the Manila Jockey Club, Inc. to develop the old San Lazaro race track into a townhouse project that would target the Chinese community in Binondo.
Other developers are also embarking on their own projects.
In its most recent property market overview, property services firm Colliers International Philippines, Inc. noted that while there was a downturn in the total number of licenses issued by the Housing and Land Use Regulatory Board (HLURB) for the first half of the year, it was not because of lack of activity in the residential property segment.
Citing data from the government body, Colliers said HLURB-issued licenses for property developers dropped almost 12% to 159,123 units for the first half from 179,972 units in the same period last year.
But Colliers also noted that except for low-cost housing, which got licenses to sell 21,594 units from 37,329 units for the same period the previous year, residential segments posted an increase in the number of HLURB-issued selling licenses.
Approved licenses for socialized housing, for instance, increased 45.2% to 26,369 units from 18,162. Those for mid-income housing rose 59.9% to 29,895 units from 18,697, with projects registered during the period including the fourth phase of Ayala Westgrove Heights, Laguna Properties Holdings Inc.’s Villa Sta. Monica and San Rafael Country Estate, Robinsons Homes’ Robinsons Residencia Milano, Sta. Lucia Realty’s Greenwood South phase 1-A, Club Morocco 2 Phase 4, and Ponte Verde 1 C, and Filinvest’s Sta. Cecilla II.
Licenses to sell high-rise residential units, meanwhile, rose 84.3% to 7,883 from 4,277. Among the projects registered for the period are The Residences at Greenbelt II under Ayala Land and DMCI Homes’ Bonifacio Heights, a housing project for the military, and Mayfield Park Residences.
Segments that pulled down the total number of licenses issued, data showed, were the commercial condominiums, which saw a 64.2% decrease in the issued licenses to 177 units from 494, the farm lots, which fell by 80.3% to 642 from 3,262, memorial parks, which posted a 25.8% decline to 72,031 from 97,052, industrial subdivisions, which fell to 39 from 66, and commercial subdivisions, which were reduced to 532 from 633.
Danilo A. Antonio, professor at the Asian Institute of Management and head of various property development firms, told BusinessWorld that the activity in the residential sector is driven by two factors: the need for affordable housing and remittance from overseas workers.
With a housing backlog of four million units and increasing by 300,000 a year, Mr. Antonio said current projects that cater to the P500,000- to the P3 million-market are still outside the majority’s affordability
He said the constraints of the market’s capacity to pay makes it challenging for developers to offer projects that would address both the need for housing and affordability.
"The demand has always been there and the prices for these products do not move. Developers know the capacity to pay is only so much so the challenge is how do you come up with structures profitably and still sell to the market?
"The moment you push up the prices no one will buy anymore not because they don’t want to but because they could not afford it. The lack of housing is still a major issue so the key is for developers to come up with efficient units where we can sell at a price they can afford and still make money," he said.
But Manuel Colayco, president of Sunfields Realty, said developers are confident in serving this market because the Home Development Mutual Fund lends as much as P2 million.
Remittances "keep the real estate sector alive," Mr. Antonio said, particularly the low- to middle-income segments.
Data from the Bangko Sentral ng Pilipinas (central bank) showed that remittances reached $8.8 billion as of October, up 27.1% year-on-year. The central bank expects $10.3 billion in remittances this year, up from its original target of $9.4 billion.
"The market is really overseas Filipinos-based now. Among the local employees there are still some who can afford to buy new houses, but this is rare. You really need excess income to fund projects like these. People who are locally employed barely even cover their own overhead," Mr. Antonio said.
Noting that more property developers are setting up offices in cities abroad that have large populations of Filipino workers, Mr. Antonio said, "the [overseas workers’] market used to be a by-the-way market. This is no longer the case."
Some developers, he said, sell up to 70% of their products to overseas workers.
But property developers that target overseas workers also have to compete not only with other real estate companies but also with other sectors in tapping remittances, Mr. Antonio said.
Mr. Colayco said that while the overseas workers’ market is lucrative, it comprises only half of the low- to middle-income segment.
"The other half is still the local market. Among them are supervisors, those who work in Metro Manila, those who have two members in the family who are working, small entrepreneurs," he said.
HIGH-END PROJECTS
Meanwhile, developers of high-end projects, or those that cost over P5 million and who would likely buy second homes, are tapping another overseas market -- migrant Filipinos in North America and Australia.
"This is a historical market," Mr. Antonio said, as he noted that many of the migrants who left in the 1970s and who have earned enough to buy real estate properties that cost between $50,000 and $60,000 are looking to retire in the country.
Brittany Corp., the upscale arm of publicly listed C&P Homes, Inc., sells a big chunk of its products to this market with residences in subdivisions at around P6 million.
"If you look at our sales and the number of people visiting sites on weekends, you wouldn’t believe that there is a crisis," Nova Noval, Brittany Corp. head for corporate communications, told reporters in the sidelines of a recent forum.
Ayala Land and Community Innovations market 20% of their products to this same market, while Rockwell, which goes to the United States to sell products priced at between P95,000 and P105,000 per square meter, gets 30% of its sales from the same market segment.
Mr. Antonio said this is the same market being tapped for leisure projects.
BUYER’S MARKET?
Buying a house depends on the ability to acquire a property and whether or not the customer’s preferences are met, industry participants said.
Mr. Antonio said that if price is the primary consideration, the current situation could be considered a buyer’s market.
"If it’s a buyer’s market, the price is lower than what developers want it to be. If it’s a seller’s market, I sell at my price and tough luck for you if you cannot afford. It’s a buyer’s market in that sense because the buyer’s capability to pay dictates how we as developers price our products."
He noted that repayment terms for housing loans-another gauge for the market’s appetite for acquiring real estate assets-also favor buyers.
Terms are more flexible, with reservation fees going to as low as P20,000. The downpayment, he said, could be stretched up to three years, and could go for as low as 20%, while payment for the remainder could be stretched up to 10 years.
"You can see that buyers really have a say right now," Mr. Antonio said.
Interest rates, meanwhile, have recently risen, but industry executives said their impact on sales would be insignificant as long as they do not substantially raise the amount of monthly amortizations.
"What matters is how much they pay for the mortgage," Mr. Antonio said.
A bank executive, for his part, also said that the rise in interest rates is likely to be temporary and that for long-term loans, the lower rates in the future could offset the current high rates.
But while prospective buyers may be able to afford the houses that are now being sold, choices are still constrained when it comes to the features of the purchase.
The trade-off for the low prices, Mr. Antonio said, is less space.
"Sizes of condominiums right now are just at 30 square meters, sometimes even 20. That is what the market can afford so (developers) have to come out with products they can buy. But how small can you go?," he said.
Mr. Colayco said "there has to be [a] compromise" between what the buyer needs and how low the seller can price his product.
He added that the current market could not be classified as a buyers’ or a sellers’ market. "This is a balanced market."
As for foreclosed assets, bank executives said that banks have been offering good terms to unload non-performing real estate assets, but the products are still priced high.
A bank executive said only those who can afford to shell out P5 million for a house could take a pick from what is being offered in the market. "Anything below that, the buyers won’t have much of a choice."
Prices for foreclosed assets, however, are likely to remain the same, or even go lower.
Mr. Antonio said that prices of foreclosed assets would eventually have to go down as banks are competing with property developers to dispose of their non-performing assets.
"Prices have been dropping like a rock. But if you’re not in a hurry, it won’t hurt to wait a bit more," he said.
Another bank executive noted that "the housing market is still burdened by the NPLs [non-performing loans] related to the property sector."
"Despite low interest rate, tempered uptick in prices is still related to efforts of banks to liquidate these related assets," one bank executive said.
But he added that whether now is the best time to buy real estate depends on several factors. "This is related to purpose for investment or use, interest rate expectation, developer and expected property appreciation."
For those who are inclined to buy property at this time, Mr. Antonio recommended a visit to the property to assess its condition.
He said the developer’s reputation is also important, especially in pre-selling. "Can the firm meet delivery commitments, development schedules? Does it have financial backing?"
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