PROPERTY SECTOR: HOLDING ON

The Philippine Star
03/09/09

Surprisingly, if not fortunately, the country’s real estate and property sectors continue to be the apple of the eye of local and foreign economic experts and investors, for it is not only riding out the economic storm, but apparently going the opposite direction with its sustained growth rates the past few years and a bright forecast for 2009.

The five major developers listed in the PSE – Ayala Land, SM Group, Robinsons Land, Fil-Estate and Megaworld – have posted positive earnings last year and have performed well in the capital market with their share prices remaining relatively steady, indications that so far the property sector is holding on.

Some say that this phenomenon is in part attributable to the successive collapse of pre-need firms and other banking-cum-investment schemes; more people supposedly have turned to more sound alternative investments such as real estate.

Because several pre-need firms failed to deliver on their education, health and pension plans, those with extra resources are now weary of such, and are now looking at numerous property developments in the metropolis. 

Besides, it has been observed that many Filipinos still see and are more comfortable in having tangible, physical investments, foremost of which are houses or condominium units, rather than financial investment instruments that run the risk of being sideswiped through scheming maneuvers of some economic criminal geniuses.

Optimism

There is also the optimism in some business activities that will provide continuing employment opportunities. One of them is the outsourcing services.

Because of the tight economic squeeze, recent analysis and studies show that many US firms are expected to cut costs by outsourcing back office operations to where else but the outsourcing capitals of the world, India and the Philippines.

The Business Processing Association of the Philippines sees a 30 percent growth in the BPO sector this year, despite narrowly making its 35 percent target growth rate in 2008. BPO executives note that the implementation of many projects last year was moved to early this year due to the financial crisis crippling the U.S.

While it is true that some U.S. firms which outsourced operations to the country are mired in financial woes and may affect their outsourcing presence here, those which previously did not outsource operations but were affected by the crisis are expected to join the outsourcing bandwagon for the sake of cost-cutting and survival.

OFWs to the rescue anew

Once again, the more than eight million Filipinos working overseas have underscored their role as an economic saviors, and more so during times of crisis.

Housing industry leaders point out that because of the economic crunch, those who were lucky enough not to have been retrenched are more determined to save up and invest hard earned money in real estate.

Estimates have it that around $16 billion will be remitted by OFWs this year with a good 25 to 30 percent of it channeled to the purchase of housing units for their family and other relatives. That’s over P200 billion to be invested by buyers in low- and medium-cost housing projects.

Trends indicate that OFWs and even locally employed workers from the middle class are now more comfortable investing in fixed assets, which include real estate properties as a form of protection against inflation, economic turbulence and shady schemes.

A different type of OFWs, on the other hand, is driving up demand for middle- to high-end properties. Those who migrated in the 1970s and 1980s have began or are already eyeing retirement, and moving back to the country, or having their own homes to stay in during the cold months.

Property developers say there is a steady demand from this sector who seeks retirement homes or investment options. Many are also capitalizing on the more consumer-friendly bank loan packages, some of which offer fixed interest rates over a 20 to 30 year period.

And while foreigners are only allowed to own condominium units under the present law, there are calls and moves to pave the way for more foreign investment in real estate development as well.

Keeping interests low

Low-income members of Pag-IBIG are also expected to further propel the real estate sustained growth after the government housing agency again lowered its housing loan interest rates.

In effect, the housing loan and housing development projects will be made more attractive and affordable to many of its members, with a large chunk made up of employees and contributors in the lower and middle income bracket.

Under the new Pag-IBIG scheme, interest rates on a P300,000 housing loan availed by rank-and-file employees in the government and private sectors have been cut from 9 percent to 6 percent. Payment period of all loan packages has also been extended up to 30 years from the previous 20-25 years.

Regulatory role

With the projected growth in the real estate and property development businesses, concerned government regulators must make sure that adequate controls in financing and lease transactions and ownership registration are in place. Also important is that the building and construction frenzy would not drown the stringent need to make sure that all constructed projects are within the strict standards of safety and structural integrity.

Recent reports of syndicates selling blue chip properties using fake titles must also send warning signals to government. Imagine a former congresswoman and current ambassador falling victim to such a scheme when she discovered that her residence in a posh Makati village had been “sold” to another party via fake titles.

Buyers of properties, beware. The “dream house” you are buying may just be a mirage.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, SalcedoVillage, 1227 MakatiCity. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.