CEBU, Philippines - More and more people will be able to buy residential products this year, may it be condominium or single detached houses, as the active real estate industry here, is strongly supported by the banking sector, making residential properties more affordable and easy to acquire.
Philippine Allied Chamber of Real Estate Brokers and Licensed Salesmen (PhilAcre) president Anthony Leuterio said that while the 2012 real estate industry in Cebu was considered as “record breaking” year for developers. The year 2013 is seen to surpass the previous year’s performance, in terms of sales, and even number of projects to be built.
Big and small developers have already made their presence in Cebu, even local businessmen who have idle properties have started to make use of their lots, to take a grip of the real estate opportunity.
“With the banks giving the lowest interest rates today, more buyers will come in and sales performance for real estate products, specifically for residential is seen to surpass the 2012 record,” projected Leuterio.
According to Leuterio, the result of 7.1 percent GDP (Gross Domestic Product) and good economic prospects can be enjoyed in the second half of 2013. The unserved market, such as those that can only afford to purchase P1 million to P1.5 million price range of residential units will be addressed by developers.
Countryside projects for residential and even retirement developers are expected to heighten this year, Leuterio said adding that Cebu has started to gain interest as the preferred location for “vacation homes” investments not only from Filipino buyers, but also foreigners.
Cebu Holdings Inc. (CHI), one of Cebu’s largest commercial and residential developers, expressed its sustained confidence on Cebu’s real estate sector, with more projects are lined-up in the next few years, in partnership with its mother company the Ayala Land Inc., (ALI).
“The real estate industry is expected to grow even faster and a positive outlook is seen for 2013. With the Philippines is seen as one of the most cost-effective outsourcing destinations in Asia, providing a conducive environment for foreign investors and an excellent pool of skilled labor, the BPO sector will continue to be one of the major drivers of the industry,” said CHI president Francis O. Monera.
Monera added that with the growth of the BPO sector which brings in high disposable income and coupled with low interest rates, the country will also experience increased real demand across all market segments.
On the other hand, to further boost the growth in the real estate industry, Monera emphasized that there is a need to pursue and strengthen industry required support such as creating a business-conducive and enabling environment, consistent and supportive government policies, public-private collaboration and enhancing infrastructure to encourage investment in the country.
The real estate industry, in particular, saw a revenue growth rate of 18.8 percent in the third quarter of 2012, making it the fastest growing of all industries.
“The growth drivers of the real estate industry in the country continue to be the funds sent home by overseas Filipino workers, and the booming business process outsourcing industry,” said Monera.
In the residential front, strong and steady influx of remittances, complemented by a healthy investing environment and low interest rates have encouraged more and more Filipinos to buy property.
In the commercial front, the country’s position as the top call center provider in the world and second in non-voice operations, has continued to spur the BPO industry. CBRE Philippines highlights multiple credit rating upgrades, the support of the government and a positive economic outlook as encouraging international businesses to expand and relocate in the country.
Although, the Philippine peso has appreciated more than seven percent late last year, making it Asia’s best performing currency and this may affect the value of the remittances OFWs send to their families, “we believe that the desire to buy and/or build a home in their native land remains strong. We believe that the shift in the value of the dollar will not significantly curb the demand enough to deter Filipinos from their desire to own a home.”
Based on the reports of CBRE Philippines, the country will continue to experience increased real demand across all market segments, spurred by both the strong OFW remittances and the growing BPO sector. Multiple credit rating upgrades (Standard & Poor’s in July and Moody’s Investor’s Service in October), coupled with government support and a general positive outlook in the country’s economy are encouraging more businesses to invest in the Philippines.
OFW remittances are powering the low-end to mid-range residential property market, while the increasing housing demands from BPO employees and expatriates will drive the expansion of the upper residential market, said Monera, who is also the former president of the Cebu Chamber of Commerce and Industry (CCCI).
Cebu Investment and Promotions Center (CIPC) managing director Joel Mari S. Yu said that the position of Cebu as a second-home destination boosts the fast turn-over or sales performance of residential projects, specifically the condominiums.
“Today OFWs are a lot more smarter. They invest their money in real estate, and looking the future value of their investment. And the best place to put their money is in real estate properties not their home provinces, but in urban cities like Cebu,” said Yu.
Five years down the road, investments in real estate is seen to double or triple in value, Yu said adding that OFWs now are only looking at Metro Manila, and Cebu as best locations for the investments in real estate.
While the sector is still enjoying the “best” performance in the recent years, economist Winston Conrad B. Padajinog, senior economist and dean of the school of management at the University of Asia & the Pacific (UA&P), warned that the real estate industry in the country is now hitting an over-production of middle to high-end products, which is not solving the country’s problem of housing supply shortage.
Padajinog said that amid the “real estate” boom,” the Philippines is still suffering from housing backlog, while the socialize or low-end demand is left behind with no choices being offered.
“Although, the bubble still yet to happen may be in the long term, but there is a need for developers to shift their interest in providing residential products, and re-focus to the strong demand for socialized and affordable housing developments,” he said.
What is happening now, he described is developers are supplying the market that does not need housing, but merely for investments, second home, and even for gifts.
“The market is leading towards glut, if we are not to address the multiple need in across real estate market segment,” the economist said.
Likewise, Padajinog urged the banks to open its doors to lending the mainstream market segment—those that can afford to borrow an average of P3 million residential loans.
Padajinog emphasized now, that both developers and banking institution are now overly biased in opening their doors to the middle to high-end consumer based in the real estate sector.
With the favorable interest rate environment, many monthly income-earners can afford to get financing from banks, not necessarily from Pag-ibig—wherein this agency is charging higher interest rates than banks right now.
He said there are a growing number consumer based now that still need to own residential units, but are left with no choice, because what developers are building are units that are much expensive for the middle-low income earners to purchase.
“People are buying units not out of need but out of other purposes, like convenience, investments, and these are prone to speculations,” he said adding that there is a need for developers to be educated of the market movement now, and the critical market or the growing under-served market those that can afford to purchase houses worth from P100 thousand to P3 million are ignored.
In Cebu alone, record shows the there are least 200 thousand consumer based who are needing housing units priced between P100 thousand to P3 million. This particular market base can be tapped by developers, although building economic housing developments both for horizontal and medium-rise building is not as profitable as building units for the middle to higher markets.