Booming still?

The recent sharp decline in the local stock market is generating some nervousness in another market… the local property market. Even as the PSEi has recovered much of what it quickly lost last month, some investors are wondering if the next big drop will be in the property market, specially for condominiums.

It doesn’t help that there seems to be a lot of condominium construction going on all over. Even the latest GDP report captured an uptick in construction. It also doesn’t help that at least half of the pesky spam messages we get on our cell phones are from property developers selling condo units.

In recent weeks, it also didn’t help investor confidence when rumors circulated that one big developer is in trouble with thousands of unsold units. The story has it that to unload the units, they allowed buyers to amortize the down payment in easy payment terms over a year. That only made matters worse and triggered an internal reorganization.

But in my conversation with one high-end developer, I am told that business had been better than ever. They have in fact launched another such project with bigger cuts and higher per square meter price. Believe it or not, the more expensive ones are selling better than the moderately priced ones.

I suspect the rich folks in this country are just richer than ever and their mattresses and pillow cases can take in only so much cash. The BSP has tightened rules on SDAs, the stock market is getting scary so a physical asset like a condo unit appears the best option.

Then too, our local property market appears to have attracted foreign investors. I have heard of Singaporeans buying condo units near schools like La Salle and rent them out to students.

ABS-CBNnews.com confirm these reports of foreign buying, citing CB Richard Ellis Philippines chairman Rick Santos as source. Apparently, “the increase in foreign buyers is due to the new laws imposed by Hong Kong and Singapore to curb speculation in their property markets.”

Santos was quoted saying that “New restrictive property tax laws in Hong Kong and Singapore will drive more Asian residential investors to the Philippines.” Compared to the two cities, the Philippines is now seen as a more foreign-investor friendly destination, Santos reportedly said. The Philippines, he said, is “one of the most cost-effective and attractive destinations for real estate investors in Asia.”

ABS-CBNnews.com reports that according to Santos, our property market has become attractive because “Number one, it’s much cheaper than Singapore, also from a tax perspective and cost. And from a financing point of view, it’s much more expensive to get financing there… on a yield perspective, these (local properties) are some of the highest yields in Asia as well. Other places in Asia are too expensive.”

Santos also noted, according to ABS-CBNnews.com, that many of the expats in the Philippines are opting to buy properties, instead of just renting here. Foreigners are among the primary market of high-end and luxury developments in the country.

He also expects to see a lot more mainland Chinese money coming in, a lot more Russian money, a lot more Korean money, and also a lot more US money coming in as well. “This isn’t a bubble. This is basically a sustainable growth.”

That is probably why BSP Gov. Say Tetangco, according to press reports, is also playing down concerns of a possible “bubble” that could harm the economy. Tetangco believes the boom in the country’s real estate sector continues to be supported by real demand from consumers.

Gov. Tetangco reportedly pointed out that “If you look at the socialized and low-cost segments, there is huge demand. There is a significant backlog there of close to four million units.”

That was also what former Sen. Manny Villar told me in a chance meeting last week. I asked Manny, who has resumed his role as a full time property developer, what he thought of the robustness of the property market. He said he is confident companies like his will continue to thrive in the years to come.

Manny is confident about the middle segment of the market. His company is working to tap this demand not just in Manila, but in key centers all over the country. He said they are selling to end-users not to property speculators.

Indeed, Gov. Tetangco, according to the same press reports, also sees the demand for in-city condo developments coming from professionals and managers who want to avoid dealing with the traffic jams daily. They live in the city near their place of work and just go back to their suburban homes at weekends. The rising employment generated by BPOs is another source of demand.

Thus, Tetangco sees no need to change lending policies that affect the exposure of local banks to the real estate sector. No more than 20 percent of their total portfolio can be lent by banks to the property sector.

Tetangco even sees the recent price corrections as a good thing because it will spare us from the risk of price bubbles. “If prices always increase, you can reach bubble-like conditions. Fortunately, we had that correction,” Tetangco said.

But the Serendra explosion is giving some potential buyers reason to pause. This is a high end development from Ayala Land no less and if a concrete slab can fly clear across a street there, what more in other less known developers who may be more into “value engineering” than Ayala is. How Ayala handles the poor unit owner will determine how fast the brand will recover from the incident. If the Fil-Am owner from Anaheim is treated shabbily, that will damage the brand for a long time.

I remember my daughter’s experience with her Apple laptop in the US. When they couldn’t fix it to her satisfaction after one try, they just gave her another brand new unit. Now all my kids are Apple believers. That is plain and simple brand management.

In sum, our property market looks healthy enough and a bubble doesn’t seem likely in the near future. Depending on the developer, buying a condo unit looks like a good investment for now. As in all investments, always be cautious. Don’t be taken for a fool by pretty smooth talking sales agents. If Gov. Tetangco is still confident, so should we.

LTO, again

Reader Jojo Espiritu has his own complaint about the LTO.

Inasmuch as you published in your column today, a citizen complaint against the LTO, I hope you will also publicize mine. I have sent this complaint to the LTO (sent through their “Feedback” mechanism on their website, which never seems to work). I am not hopeful they will act on it.  On the other hand, if this gets published in your column, perhaps, someone will take notice and take action.

I share the frustration of your letter sender as regards issuance of renewal registration stickers.  I myself had one of my vehicles’ registration renewed in January 2013. Six months later, my renewal stickers are still unavailable. 

LTO personnel say the problem is the failure of the contractor to deliver stickers on time. I say the problem is the LTO not being able to sufficiently vet their suppliers, such that delivery commitments are not met.  In the meantime, I paid for the renewal of my vehicle registration, and got nothing (so far) in return. If I get flagged down by traffic police, the possibility of getting mulcted looms ominously.

I do hope you can bring this to the attention of people who care enough to do something. Thanks.

Misunderstanding

This is from one of my e-groups.

The mother-in-law comes home and finds her son-in-law furious and packing his suitcase.

“What happened?” she asked.

Son-in-law: “What happened? I’ll tell you what happened! I sent an email to your daughter saying that I was coming home from my trip today. I got home and guess what I found? My wife, yes your daughter, with a naked guy in our marital bed! This is the end of our marriage, I will leave forever!”

“Calm down!” says mother-in-law, “There is something odd about this story. She would never do such a thing! Wait a minute while I check what happened.”

Moments later she comes back with a big smile. “You see, I told you there must be a simple explanation... She didn’t receive your email!”

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco