Law urged to promote investment-grade property development

Architect Gilbert Yu is urging government legislators to pass a measure providing for the creation of Real Estate Investment Trust (REIT) units to give the public a chance to put their money in investment-grade properties.

REITs are real estate companies that offer common shares to the public.

In an interview with The STAR, Yu pointed out that the real estate sector is experiencing a cyclical downturn as a result of the global financial crisis.

But, in the medium to long-term, Yu said, the real estate sector remains a good investment bet.

In the Philippine market, Yu noted that investments in the real estate sector are mostly in residential condominiums, resulting in speculation that drives up unreasonably the price of residential condominiums.

According to Yu, there has to be a clear distinction between real estate investments as an investment and real estate for ownership.

He said legitimate home seekers oftentimes, have to compete with investment buyers who perpetuate the speculation in order to get a high return for their investment.

Investment buyers, Yu explained, invest mostly in residential condominiums because real estate developers do not offer investment-grade properties such as hotels and shopping malls.

He noted that most local real estate developers, opt to operate the hotels and malls themselves because they are sure that such investments will be profitable.

In other Asian countries such as Singapore and Taiwan, Yu said, REITs enable small investors to acquire investment-grade properties. He cited for instance, the acquisition of the former Oakwoods Residences at the Ayala Greenbelt by the Singaporean Ascott Group which is owned by numerous small Singaporean investors.

He pointed out that REITs are subject to certain laws that govern the types of investments they can make.

Legislation is necessary to be in place for the creation of local REITs to ensure the safety of the small investors, Yu said, adding that through REITs, local investors would finally be able to access investment-grade properties and less the pressure and speculation on residential condominium properties and thus make them affordable to true home seekers.