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BUBBLE Debate: Is there a Bubble in PH Property?


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THE BUBBLE Debate: Is there a Bubble in PH Property?

==== Useful DEFINITIONS, added in edit, Feb. 2023 ====

My view  is...

There are THREE PRICES for Property in the Philippines Market:
1. Developers REPLACEMENT value;
Which includes all their costs, land, materials, construction costs plus marketing costs, and the developers profit margins.  This price is “managed” by the developers, and will rarely be a bargain.  The developer might sell at this price on an instalment  basis, and even help the Buyer to obtain finance from an affiliated bank.

2. COMPARABLES price
Based on what prices are achieved in the secondary market, where the Seller may wait months for the Buyer to get bank finance.  This may require the seller to have a clean title, and keep the unit vacant while they search for buyer.  (Often is near the Zonal valuation of the property, and it may be significantly below NEW List prices of nearby properties.)

3. (DISTRESSED) CASH SELLERS price
The best price the buyer can obtain from Cash buyers within a limited time frame.  The buyer may have to advance funds so the seller can repay the mortgage and then wait for the title.  It may not be possible for the buyer to get bank finance, so they may need to have free cash available,  The buyers are often investors, who will expect to achieve an Yield similar to what they can get from the REIT market (currently 6.5%), or higher than that, if the property is old and/or needs renovation,

( Please compare my detailed description here, with some vague and conflicting descriptions people may use for “Fair Market Value.”  I do people hope people will spread this to add more clarity, for Buyers and Sellers. )

====

http://i.imgur.com/zOoAza7.jpg

At least one big media company (CNN Philippines) says: NO!

What bubble? Analysts see sunny property sector

By Paolo Taruc, CNN Philippines / Nov. 6, 2015

(CNN Philippines) — Despite fears of a growing real estate bubble, some analysts believe that the Philippine economy can rest easy for now. If anything, the property sector can look forward to more expansion — especially in cities.

"There is no truth to the rumor that there is going to be a real estate bubble," said Board of Real Estate Service Chairman Eduardo Ong during this year's Asia Real Estate Summit.

"We are in the midst of an urban revolution," explained Jeremy Kelly, director for global research of real estate services firm Jones Lang LaSalle (JLL). "[C]ities have become the heartbeat of the word... land and real estate are the heartbeat of cities."

 

Related: Philippines has most resilient economy – study

JLL's 2014 Global300 index reports that cities in the list account for roughly 40% of the world's gross domestic product (GDP). Over half of the total commercial real estate investment in the list landed in it's top 30 cities.

That's good news for Metro Manila, which joined JLL's Top30 list in 2014. The firm said that such is symptomatic of a "steady shift in the balance of real estate activity towards the Asia Pacific region."

Rising star

Kelly noted that in 2010, Metro Manila ranked 28th in the world in terms of city GDP. He predicts the metropolis to rise to the 25th spot in 2020, and the 18th spot in 2030.

 

"Real estate will play a key role in [Metro] Manila's success, and will be a driver of its success."

He also pointed out that the market has one of the highest rates of absorption among its Asian peers, and is one of the most affordable in the world.

Nevertheless, his praise comes with a caveat: Kelly stressed the need for the metropolis to adopt its own "foreign policy."

"[Metro] Manila needs to assert its position more forcibly on the global stage," he said.

Growing IT sector

"Cities that are successful are specialists in certain areas," Kelly said.

The analyst believes that much potential lies in Metro Manila's information technology (IT) sector. "Its economy is far more geared towards IT than its regional peers."

In a Tech-Rich Cities index, Kelly pointed out that Metro Manila ranked 10th in the world from the first quarter of 2014 to the first quarter of 2015, above other cities such as San Diego, Osaka, Munich, and Beijing.

Likewise, he has also noted the increasing role of the city mayor in a locale's development. "We are in the age of the city mayor." Kelly believes that a good mayor can be a catalyst of a city's success, granted that the politician is practical and closer to problems.

Although urban planning poses immense benefits to a city, Kelly said that it can also go too far. He believes that cities should also allow room for organic growth, lest they lose their character and identity. "Over-planned cities lack a soul."

===

> http://cnnphilippines.com/business/2015/05/22/sunny-ph-real-estate-2015.html#.VV7KecmH0T8.twitter

 

Well, that was written in late 2015, before Colliers reported a 1.6% drop in Rents, for 3BR flats in Makati in Q1-2016/

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BUBBLE? Or just a Healthy Correction

 

"18 years Property Cycle, which is generally: 14 years up, and 4 years down"

 

I'm not sure there's a Bubble, since that usually means a 30-50% drop in Property prices.

 

I'm expectlng correction from a possible peak in 2016, over the next 3-5 years, let's say until 2019-2020,

But the correction need not be as large as 30% - it could potentially be that deep, but something like a 15-25% drop, if that much, seems more likely to me.

 

This chart shows Capital Values in Makati 3BR flats :

Prices rose from about P 65,000 per SM to P 151,000 : that's + 132%, over 14 years.

Chart Updated to Q1-2017:

UIdB5mp.jpg

 

In recent years, Capital Values (blue line) have risen with Rents (green line), but race ahead of CPI (red line).

If capital values fall back to the CPI line, which may be about P 130,000 in 2019/20, that would be a drop of almost -15%.

 

And here's a longer chart, showing LAND prices back to 1994 ... PB :

4cMM8Zg.jpg

 

Notice that...

+ There was a big spike up, in 2-3 years, when Land prices more than doubled

+ Then over about four years, that gain was retraced (more than retraced in Makati

+ There was a low in 2002-2003, when Makati CBD Land prices fell to about P 170,000 psm

+ Then, over about 12-13 years, Land prices rose to P 500,000 psm, a gain of almost 200%

+ I reckon it was easier to retrace a sharp two year gain (like after 1996), than it would be to retrace a slow and steady gain

+ If the gain of the last 2-3 years gets retraced, then Makati Land prices would fall back to about P 400,000 psm

 

I'm expecting that future prices moves may conform to the 18 years Property Cycle, which is generally: 14 years up, and 4 years down

And so:

 

Low-2002 + 14 years = Peak-2016? + 4 years = next Low: 2020? or so, prior to the next Long Cycle upturn

 

As shown above in chart#1, a retracement back to the CPI line (red) by 2019-20 would P 130,000, or nearly 15%.

I chose that red line, because it may approximately represent rising salaries, and so could be a good measure of affordability.

 

In fact, it may be easier for RENTS to fall back 10-20%, than PROPERTY PRICES.

A big jump in condo completions is expected over the next 2-3 years. That will push up vacancies, and put some pressure on Rents.

Here are some figures - based on what was in Colliers Q4-2015 report (see also the Office thread, post #4):

 

At Q4, 2015

Location: End2014/2015F: SUPPLY / 2016F : +% : End S- / 2017F : + Pct.: End S- / 2018F / 2019F
=======
Makati - : : 18,337 / 1,000: 19,337 / 4,148: +21.5%: 23,485 / 2,962: +12.6%: 26,447 / 1,072 / 0,598
B.G.C. -- :: 19,427 / 2,779: 22,206 / 6,931: +31.2%: 29,137 / 4,125: +14.2%: 33,262 / 2,831 / 2,482

Ortigas-- :: 13,820 / 2,430: 16,250 / 1,355: +8.34%: 17,605 / 0,899: +5.11%: 18,704 / 0,422 / 0,570
======
The huge jumps in supply for the next two years (7,110/36.8% for Makati, and 11,068/49.8% for BGC) will not be easy to absorb without a drop in Rents. Of course, many of these flats may be taken up by the owners, or their friends and family. However, if tenants for new flats move out of other flats in the same area, the new completions will create vacancies. So owners may have to offer discounts to get people from outside Makati to take-up their empty flats. The good news is, that many people work in Makati, and commute a long way, and so there is good potential demand, provided the price is right. The question is, how much will Rents have to drop to attract new tenants who have not already moved into Makati?

 

A two year jump in supply of almost 50% for BGC looks particularly scary. But there is a mitigating factor.

There are very few new Office completions due for Makati before 2019/20. But the rise in Office completions for BGC is truly massive.

Here are some figures, as adapted from the Office thread:

Let's look at a simple ratio - of Office space to Condos, and see how it is shifting over time:

 

-------- : ------ End 2014 ------ : : ---- End 2015 -est-- : :----- End 2016 -est-- : : ---- End 2017 -est-- : : ---- End 2018 -est-- :

AREA : 0ffice /Condo: Ratio : 0ffice /Condo: Ratio : 0ffice /Condo: Ratio : 0ffice /Condo: Ratio : 0ffice /Condo: Ratio :
Makati : 2,847 / 18.34 : 155.2 : 2,833 / 19.34 : 146.5 : 2,833 / 23.49 : 120.6 : 2,853 / 26.45 : 107.9 : 2,893 / 27.52 : 105.1 :
B.G.C. : 0,975 / 19.43 : 50.18 : 1,161 / 22.21 : 52.27 : 1,505 / 29.14 : 51.65 : 1,783 / 33.26 : 53.61 : 1,888 / 36.09 : 52.31 :
comb.- : 3,822 / 37.76 : 101.2 : 3,994 / 41.54 : 96.15 : 4,338 / 52.63 : 82.42 : 4,636 / 59.71 : 77.64 : 4,781 / 63.61 : 75.16 :

At10sm: worker/condo: 10.12 : workers/condo: 9.615 : worker/condo: 8.242 : workers/condo: 7.764 : worker/condo: 7.516 :
Ortigas: 1,299 / 13.82 : 93.99 : 1,380 / 16.25 : 84.92 : 1,440 / 17.61 : 81.77 : 1,455 / 18.50 : 78.65 : 1,494 / 18.93 : 78.92 :
Rockwl.: 0,??? / 4.159 : ?? ?? : 0,??? / 4.159 : 00.00 : ???? / 4.159 : 00.00 : ?? ?? / 4.505 : 00.00 : ?? ?? / 4.997 : 00.00 :

============

 

When I examine this data carefully, I am less worried about a possible large correction...

The Main thing which inspires confidence is the rapid rise in Office space, mainly in BGC.

The jump from 1,161k sqm at 12/2015 to 1,888k sqm at 12/2018 is a huge jump of +62.6% in only three years.

 

If those offices fill up, which seems likely then there will be a big jump in jobs in the area, and that will help greatly

to fill up the new condominiums. In fact, the rise in BGC condos over the same period, from 22.21k to 36.09k, is "only" +62.5%..

Thus, the balance ratio in BGC shifts from 52.27 to 52.31 - ie virtually unchanged, and so there should be the same amount of

office space (and jobs?) in BGC for every apartment at 12/2018 as there was at the end of 2015.(!)

 

The Office-to-Condo ratio for Makati shifts downwards from 12/2015 to 12/2018, but it remains well above that for BGC, suggesting a larger amount of workers are commuting from outside their working area.

 

My overall conclusion is that the Supply of New properties can be absorbed in only a few years. There may be a drop in rents, 10%, 20%. or even more (briefly?), but the availability of all that new Condo supply at similar or lower rents, will help businesses to hold down salary costs. and that too will help aid in the creation of new jobs.

 

So I expect a Healthy correction, with a drop in Rents of maybe 15-25%, and perhaps a drop in Colliers-reported prices on "only" 10-20%, or even less.

 

This may be achieved with a slowdown in price rises of new properties, and a stagnation of sales, with the brunt of the price falls showing up in the secondary market. Some keen sellers maybe have to accept lowball bids, which they think are 20-30% below market, but patient sellers may do better than that.

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UBS expects some modest drops in Capital Values, like 3-4% - over 2017 and 2018.

They expect a 10% drop in Rents, concentrated in 2016-17

 

Screen_Shot_2016_07_09_at_16_48_52.png

 

MDS comment:

"Bottom line = why buy on the primary market if the secondary market is about to offer great opportunities, no delays, bargaining power for buyers,

view of the finished project, no bullshit."

> source - post#95 : http://www.skyscrapercity.com/showthread.php?t=1907685&page=5

 

 

OTHER VIEWS ---

 

Coming....

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THE OTHER SIDE - Bull's arguments

 

(DrB, after meeting some optimistic agents)

 

I was exploring a Makati on Sunday, and I dropped into the showroom to check out XXX Project, and I met two agents there (J. and R.) and wound up having a long and interesting chat, as it was raining outside.

I got an update on the developer's projects, and also learned a few things, which might serve you guys as you develop Short Term letting opportunities. I also spoke to the guys about the value of the data on Makati Prime, and how I use it...

Some other points:
+ MMM is more flexible that many other developers, both on the payment structures it permits, and also (apparently) in being more willing to allow short term lets. We spoke about how some other developers like AAA, may be starting to enforce the 6 months minimum rent period.

+ J. also raised an interesting point that I have not thought concerning the coming market correction. He said there are far more jobs than condos in Makati, so it is now and will remain "short" of housing despite the high deliveries over the next few years. I agree will this, but I still anticipate a drop in rents and maybe a fall in prices as new supply is absorbed and vacancy rates may jump for 2-3 years. J. thinks that time and the pace of investment will aid absorbsion simply because people working in Makati are gaining wealth, and shifting their investments into Makati condos, partly because they have been encouraged to invest by the arguments of developers. More people employed in Makati, have a share of their growing wealth in Makati flats, and so a rising number of people will be able to afford to live in Makati rather than commuting. JM believes they will move in and/or have family to move in, rather than deserting their investments. To J., it really matters WHO OWNS the Makati Condos, and why they bought them. They are mostly in the hands the hands of committed and responsible investors with jobs in Makati (this comes from a guy who did a lot of selling to the buyers)

+ To put this another way, the number of Condos in Makati is scheduled to rise from 19,340 at the end of 2015 to 27,520 by the end of 201x - that's a rather huge +42% increase. At the same time, there will a tiny <1% rise in Makati office space. This sounds alarming, and I have written about the discrepancy. However the new condos will mostly be in the hands of people who have a use for the condos, and want to live in them, or have friends or family who plan to live in them because they work nearby. Over the 3 years, there will be a jump in the wealth of Makati workers which is held as Makati condo because they were convinced to make the investment because they wanted to avoid long commutes and traffic jams. This voluntary deployment of people's rising wealth into condos will help to lend stability to the market - more so, than if all those new condos were simply owned by people with no employment connection to Makati. (These are my words, based on a conversation I had with J.)

.

kbv6C6c.jpg

One developer is Experimenting with lower rise, family-friendly Condos

 

3885318_orig.jpg

While the other is stressing the advantages of having the opportunity to walk to work in Makati

 

 

Good points of living in Makati - from Makati Prime Landing page (scroll down, to post #10)

 

Living in Makati...Can deliver savings: On Time, and Fuel
"Every ten minutes you leave your car idle, you are losing between 0.1 and 0.6 liters of fuel . And if fuel costs Php 41 a liter, that's Php 24.60 per hour. If you multiple that by the extra 700 hours that commuters spend in traffic, that translates to at least 17,220 wasted on fuel alone! Those living in Makati can avoid wasting that much money

+ money spent on an owner-occupied condo is not wasted on rent
+ the owner of a Makati condo will have more time to spend on other pursuits, including family

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I.M.'s COMMENTS, (he's an ex-banker with a Realtor's license - received by email):

 

I agree with the points raised, especially on the shortage of the spaces for people working in Makati (data says that only 4% of the workforce can be served by existing and 2016 inventory in terms of units. Though we could say that this number is understated, given that a unit could be let out to multiple people. But perhaps not by much). Gauging the market could be complicated once you include these details though, as say, are the people who do work in Makati people who can afford buying condos for themselves?
I'm not an economist, but my gut feel here is that people will continue to buy as long as they are confident that they can afford it (for short term gauging of demand on the reservation side) and banks and FI's are confident that these people can pay (for purchases that are or near turnover).
With improvements in the process of home loans, perhaps the secondary market can benefit from the continued rise of primary prices (especially if these will be used as benchmarks by some bank appraisers to grant loans for secondary purchases) and keep prices stable or even rising?
However, we do know that this is not true for most secondary sales now, and prices are falling in certain developments. Poor maintenance is one reason, but competition from new units is also distorting values. Without clear cut data and professional valuing methodologies, properties are pegged by owners at asking prices of neighboring properties with inflated asking prices (due to the effect of friendly financing perhaps?), forgetting that the cash market (which is what the secondary market is from the way I see it) is different from developer-driven pricing.
This is one reason why Makati Prime can be valuable to the practice of brokerage and investing, and why meetings and information sharing like this is valuable for both veterans and newbies alike.
As a Side Note - if REITs are truly coming here, then we might see more stability in the prices. I assume REITs will have professional property managers in place who are incentivized to stabilize values for properties.So we shall see if price drops would happen quickly.
Another monkey wrench is that CON-CON, which will likely happen by 2020 based on news data. If foreign limitations are limited, we may see a lot of speculation and then a spectacular crash before the end or immediately after the end of the Duterte presidency.
I guess, as I always say, we shall see.
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According to the report "Philippines: Cruise Control" by Asianomics Group Ltd., the Philippines remains to be in "relatively good shape", posting strong economic growth which is seen to be more robust later in the year, with sustained investor confidence and growth potential on the local scene.

The Hong Kong-based research company makes use of an Austrian stress analysis that involves credit and profit cycles as well as cash flows. The analysis shows that the country remains in the economic upswing phase of the business cycle. This is in line with the forecast that 2016 will post accelerated growth, compared to 2015 growth rate. Based on the stress test among emerging and developed countries, the Philippines got a +3 total score, a one-point improvement from the score in December. This is the second highest score after Taiwan.

With sustained consumer demand and an increase in infrastructure investments, Asianomics Chief Economist Jim Walker said the country can expand by 6.5-7 percent this year.

Asianomics also attributed the economic growth to the business process outsourcing sector and remittances from Filipinos working abroad. Both are expected to post $25 billion each in flows this year, with BPO revenues reaching the level of remittances at 17 percent.
Source:
http://www.bworldonline.com

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The Bulls are focused on the Rapid growth of PH

 

Steve Forbes sees more billionaires emerging from Philippines

 

... and the long term demographics - ie the big rise coming in the work force

 

Steve Forbes wants to see a simplified tax system, with a low rate, like Singapore and HK.

And ease of new business formations

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FORBES seems to have had it wrong back in 2013

 

Here's What The Philippine Bubble Deniers Are Getting Wrong - Forbes

Nov 28, 2013 - Philippine bubble deniers are clueless about how credit bubbles work. ... infamously denied the existence of our housing and credit bubble in ...

. . .

When interest rates are at all-time lows, as they are in the Philippines, property demand and property buyers’ purchasing power is always higher than it is when interest rates are at more typical levels. It is very difficult to distinguish between fundamental demand and artificial demand that solely exists due to the availability of cheap credit. The problem is that cheap credit conditions do not last forever, and the eventual tightening of central banks’ monetary policies causes hot property markets to go bust, which reveals that a good portion of what was believed to be fundamental, organic demand was actually artificial demand. As far as relying on property developers’ testimonies as evidence against a property bubble, that is akin to letting the fox guard the hen house. Property developers have a clear vested interest in ensuring that credit stays ultra cheap so that property prices rise significantly and so that investors buy their properties. Property bubbles are a developer’s dream.

. . .

While I also noted that the Philippines’ credit-to-GDP ratio is one of the lowest in the region*, I expressed my concern that Bangko Sentral ng Pilipinas has been using this as an excuse to encourage consumers to engage in further debt-driven consumption to drive economic growth, which will eventually cause a household debt problem. My criticism is not that Philippine debt levels are too high right now, but a criticism of the private sector credit growth trajectory that the country is currently on, as well as their leaders’ belief in encouraging debt-driven consumption.

=====

 

*Update - the Debt levels are still Low - 45.1% in 2015, Lower than 49.2% in 2013.

government-debt-to-gdp

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WILL FOREIGN BUYERS SAVE Makati / BGC from a downturn?

 

Image-17.jpg

/ 1 / D.O.

The bearish case rests on a number of facts and assumptions...
===
Let's focus on ...
SUPPLY is baked in the cake. And this shows us we may now be at the cliff's edge
It is very very likely the projects under construction will get built. Sure, there may be some delays of months, even a year or two on some projects. But I think we can anticipate that 90%-100% of the projects which are scheduled for completion in the next 2-3 years will get built eventually.
So what does that mean?
Look carefully at the numbers, of flats coming:
At Q4, 2015
Location: End2014/2015F: SUPPLY / 2016-F : +% : End S- / 2017F : + Pct. : End S- / 2018F / 2019F
=======
Makati -- :: 18,337 / 1,000: 19,337 / 4,148: +21.5%: 23,485 / 2,962: +12.6%: 26,447 / 1,072 / 0,598
B.G.C. -- :: 19,427 / 2,779: 22,206 / 6,931: +31.2%: 29,137 / 4,125: +14.2%: 33,262 / 2,831 / 2,482

These are massive, massive increases. Can you contemplate what a jump of 36-50% in just two years means?.

 

/ 2 / E.C.B.

I don't worry about the huge supply increases. There simply aren't enough life boats. Let's assume that there are 1pct relatively wealthy people in the developed world, - on 1 billion people that might be something like 10Million (people) USD millionaires+ in those countries. Only 2K are needed in my opinion to put a floor under the market, so that is only 0,0002pct of the wealthy people in the world. This thing could overheat very quickly.

They don't need jobs -- they are wealthy enough ... there are many titanics now and very few good life boats. Even the stupid Chinese in Vancouver won't be safe as Canada also legislated bail in laws. If they bail you in, or they do a 30pct wealth tax on all your assets, you will lose far more than the 10pct value decline in high end PH real estate. Which is why i believe they will eventually move to the PH, because all those taxes are going to eat them alive. And if they are so stupid to do a wealth tax, then it is very likely they'll do it again, as the old people and the 1pct in the government are the true tax in the developed world.

The biggest tax savings for the 1pct wealthy is to move to the PH. There is your demand.

 

/ 3 / D. O.

So if I summarize your argument, it is this: the huge jump in supply does not matter because it will be absorbed by wealthy foreign buyers - because the Philippines is a wonderful, cheap safe haven - and it will appeal to wealthy foreign buyers, like the Chinese who have been buying aggressively in places like Vancouver.
. . .
+ Chinese do not see Manila in the same way as Vancouver. Many have family ties in Canada, or have been educated there. They see Canada as a Western safe haven, but not the Philippines.

 

/ 4 / E.C.B.

In my model we need only 0,0002 pct of the entire developed world's 1pct wealthy, and there are even other regions which look very appealing like Asean and India, which also have a strong interest in PH real estate. So the potential demand is huge.

I don't know the exact details but PH has the largest overseas Chinese population I believe so there are clearly strong ties between the two powers. And most of your billionainers are etchnical Chinese, right? I guess that the CHina-PH link is much stronger than the China-Canada link.

Let forget about the "stupid" Chinese who choose Vancouver as their destination or the Singaporeans who choose London as their buying place -- WOW that drop in the exchange value of CAD and GBP must have hurt them,
but let's focus on the Japanese, the Americans, the Europeans, the Aseans, and each of them has a valid interest in buying today instead of tomorrow.

Japan doesn't like a strong currency and is in perpetual QE...
As for the USA, there is a second wave of buying vacation homes which starts at age 55 and peaks at age 65, so the birthrate peaked in 1961 in USA so it means that this wave is about to start right now....
As for the Europeans, -- I believe few Europeans will have the guts to buy in P - the same cycle only starts a few years later...
As for the Singaporeans, I can see most PH projects are launched there, and congratulations for those courageous investors who invested a few years earlier in PH, because Singapore's real estate is trending down almost for 2 years now, and the buyer/dyer model indicates serios trouble. The only thing that could bring in more buyers would be to allow for immigration...
As for the other Asean countries like Malaysia/Indonesia/even Thailand, I can only see that the PH currency is becoming much stronger against most of those currencies which really indicates sustained capital and investment flows into PH...

 

/ 5 / D.O.

EVEN IF this was 100% accurate, and indicative of the strength of Foreign interest, Foreign buyers can only acquire up to 40% of the condos in a project.
My information (from someone who knows Ayala well) is that their foreign buying is running something like 30% of their projects.
So this alone, is not going to make the SUPPLY issue go away, is it?

 

/ 6 / E.C.B.

...in the case of an older foreigner and a somehow younger Filipina, I guess it is better estate planning that the Filipina assumes full ownership because in the case of death of her husband, estate taxes will be due, and older people usually do not care too much about money, -- but it might be very well possible that another 10 to 15pct of that building is indeed also fully foreigner financed but filipino titled due to better estate planning. Or the "rich" foreigner can always give the condo as a present to his finance. And I am convinced that many arrangements exist in that fashion that look like it is Filipino financed & owned, but in reality is still foreigner financed and occupied. So we're easily 55-60pct foreigner occupied/financed on most buildings in the prime locations...

 

/ 7 / D.O.

Here's the thing - unless those foreign buyers LIVE IN the flats, or HOLD THEM EMPTY - the Supply will still weigh on the market, when they rent them out - this will add to Vacancies, and help to drive Rents lower. In my own experience (in Hong Kong) I have seen that it is primarily mainland Chinese buyers who hold empty flats. They use them like stores of wealth... My overall guess is that foreign buying with absorb maybe 1/3 of the flats for sale, and only one-half of those will be lived in by foreigners, or left empty. What foreigners will take out of the market is only 50% of 1/3, or maybe 16-17%.

So let me adjust the raw figures show a jump of 36-50% in just two years:

Let's assume Foreigners take 17% of the news supply.
Then,
At Q4, 2015 - here's the 83%:
Location: End2014/2015F: SUPPLY/ 2016F/ 2017F/ 2016-2017
Makati - : : 18,337 / 1,000 : 19,337 / 3,443 / 2,458 / 5,901: + 30.5% in two years
B.G.C. -- :: 19,427 / 2,779 : 22,206 / 5,753 / 3,424 / 9,177: + 41.3%
=========
The Supply "problem" is still very large, and very real, at +30-41% in just two years.
And remember, the foreign buyers will sell at some point in the future, pushing up the future supply of flats.
. . .
BTW, I am not in a state pf panic, and I will soon say why. Buy I wanted to first explore the supply problem is some detail.

 

> EXCERPTS - from SSC discussion

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  • 2 weeks later...

From the PH - Data thread

 

Hi

 

You have a good website.

I just think they are going to underestimate the growth of Manila. I mean -- the city is growing at a rate of 28 new entrants every hour,

so that"s about 250K new inhabitants every year, and i feel this is too conservative, because other waves are coming: the large number of tourists which

will grow spectacularly in the years ahead -- baby boomers after age 53 (car sales peak), their main expenditure is travel and leisure -- , the huge number of

economic immigrants that will inevitably enter PH, and the overseas Filipinos who will return because of economic conditions which are deteriorating in their host country,

so my guess is that they should be plan for 350K new entrants in MM every year, not the 250K. I believe MM is the fastest growing metropolis in Asia, so they

have to plan ahead.

 

The problem is, there are not enough good jobs.

 

The average call center work makes P 22,000 per month.

If two share (P 22k x 2 = P 44k), they can barely afford P 15,000 rent on an unfurnished P 2.5 - 3 million flat,

 

And nowadays the prices of many Studio and 1 BR flats are pushing above that, and even beyond the P 3.2 Million VAT threshold.

 

Lower taxes might help, but it looks like the market is getting hit right now with a Supply glut

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Residential Market is Crashing in BGC and Makati

 

 

Hi

 

Latest report from Colliers is out. Residential rents and colleteral values are dropping in both BGC and Makati, and slightly increasing in Ortigas.

I had not expected this. Rents declining yes but colleteral values should hold up. In any case, interest rate on 10year bonds

dropped sharply following Duterte's speech so this should mitigate the price declines.

 

BGC has the stock exchange coming and that is where all the wealth is concentrated, and I think it will outperform Makati and Makati will become an Ortigas.

 

http://www.colliers.com/-/media/phil_knowledge_2q2016.pdf

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"CRASHING" seems a bit strong !

 

I will read it with interest.

But for me a crash is a drop in prices of at least 20%.

Some prices may fall that much by 2020 - but overall, I do not expect that (at least, not yet)

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  • 3 weeks later...

Residential Market is Crashing in BGC and Makati

 

Hi

 

Latest report from Colliers is out. Residential rents and colleteral values are dropping in both BGC and Makati, and slightly increasing in Ortigas.

I had not expected this. Rents declining yes but colleteral values should hold up. In any case, interest rate on 10year bonds

dropped sharply following Duterte's speech so this should mitigate the price declines.

 

BGC has the stock exchange coming and that is where all the wealth is concentrated, and I think it will outperform Makati and Makati will become an Ortigas.

 

http://www.colliers.com/-/media/phil_knowledge_2q2016.pdf

 

Let's take a closer look at 2016's 2nd Quarter changes

 

MEAN Prices

Residential

------- : Q4-2015 : Q1-2016 / %-chg. : Q2-2016 / %-chg. :

(Makati )

Rents-- : P0,900 : -P 0,865 : - 3.89% : -P 0,855 : - 1.16% : Rents per SqM

Condos: 151,300 : 152,000 : +0.46% : 147,500 : - 2.97% : Prices per SqM

Yields-- : -- 7.14% : - 6.83% : --------- : -- 6.96% : --------- :

Land--- : 500,000 : 523,000 : +4.60% : 545,000 : +4.21% :

Floors--: : 3.30 fls :: 3.44 floors needed :: 3.69 floors needed :

 

(B.G.C.)

Rents-- : P 0,892 : -P 0,870 : -2.47% : -P 0,855 : - 1.72% : Rents per SqM

Condos: 150,000 : 150,000: +0.00% : 146,500 : - 2.34% : Prices per SqM

Yields- : -- 7.14% : - 6.96% : ---------- : -- 7.00% : ---------- :

Land-- : 417,000 : 444,500 : +6.59% : 460,500 : +3.60% :

Floors-- :: 2,78 fls :: 2.96 floors needed :: 3.14 floors needed :

 

(Ortigas)

Rents-- : P0,506 : -P 0,516 : +1.97% : - 0,520 Estimate :

Condos: 075,000 : 077,000: +2.67% : 078,400 : +1.82% : Estimates, per SqM

Yields- : -- 8.10% : - 8.04% : ---------- : -- 7.96% : ---------- :

Land-- : 179,500 : 188,500 : +5.01% : 196,000 : +3.98%

Flr. Est. :: 2.40 fls :: 2.45 floors needed :: 2.50 floors needed : Estimates

 

VrCvHVv.jpg

What's "Floors needed" mean?

Well, it is simply a way of comparing Land prices with Capital Values.

I divide the Land price (per sm), by the Capital Value - and work out how many floors

need to be sold to recover the land cost. But this is an oversimplification, since it assumes

the building has a footprint which is equal to the size of the Land plot. In reality, the build may occupy

50% or less of the Land area. On top of that, there is also the building cost to recover.

(More on this later.)

======

 

Hey, what's holding those Land prices up?

Office demand? (see below)

Or maybe just a strong long term interest in owning property assets

 

Office - Makati CBD

------- : Q4-2015 : Q1-2016 / %-chg. : Q2-2016 / %-chg. :

Rents

Premium P1,270 : -P 1,275 : +0.39% : -P 1,285 : +0.78% : Rents per SqM

Grade-A P0,910 : -P 0,915 : +0.55% : -P 0,915 : +0.00% :

Grade-B P0,717 : -P 0,715 : -0.38% : -P 0,715 : +0.00% :

CapValues

Premium 166,700 : 174,500 : +4.68% : 179,000 : +2.58% : Prices per SqM

Grade-A 108,900 : 115,000 : +5.60% : 118,500 : +3.04% :

Grade-B : 80,650 : 084,500 : +4.77% : 087,000 : +2.96% :

Yields

Premium - 9.14% : - 8.76% : --------- : -- 8.61% : ---------

Grade-A: 10.03% : - 9.55% : --------- : -- 9.27% : ---------

Grade-B: 10.67% : 10.15% : --------- : -- 9.86% : ---------

Floors

Premium: 3.00 fls : 3.00 floors needed: 3.04 floors needed :

 

It is interesting to see that Office Rents (+0.78%) and Capital Values (+2.58%) have gone on rising,

while Residential Rents and Capital Values have begun to fall

 

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Faulty reasoning

 

""

It is interesting to see that Office Rents (+0.78%) and Capital Values (+2.58%) have gone on rising,

while Residential Rents and Capital Values have begun to fall

""

This is not true of the entire residential real estate market in PH, I mean Ortigas and probably all the other

areas in PH are still in a long term uptrend, even though they're rising only very modestly. Brixton's Place

is rumored to have a small price increase, as well as Viera's, so there's ample evidence that in the mid

to lower end prices are slightly rising, and let's not forget that the great majority of MM lives in QZ-Ortigas

so the overall market is still in an uptrend.

It is very similar to the 2000 Nasdaq + Dow Jones TOP. What really happened then - if I am not mistaken

-- is that the small and midcaps, the wilshire 5000 and Rus 2000 never really crashed, and went on

to make new highs. So the bulls can still claim that even the residential market overall is still in a very

modest uptrend. The reason why MAK/BGC has declined might be due to the fact that they attract more

overseas investment and as all overseas economies everywhere experience growth pains, that pain

is being felt the most where overseas capital invests the most, precisely MAK+BGC. You are saying that

the entire market is slowing down but the facts do not support your statement.

So your statement - I feel - is not representative of the overall picture for most average filipinos

because they will soon be hit by price increases of DMCI and other lower to middle end developers

who appear to have a brisk business.

There's only 1 reason why land values are increasing, -- as there is only 1 fundamental driver for property prices --

and that is because more people are bidding for the same amount of assets, and land values reflect that process

the best. It happened in many countries. The wave process, the people == this is the fundamental driver,

not the cycle. But it is a cycle that has repeated itself in many Asian countries, and it is just getting started in PH.

+Land values up

+Overall residential prices, -- the broad indices - still up

+Office rents: spiking up despite big supply growth

+Retail rents: up despite forecast 8pct supply growth 1H2016.

Now I forecast stable residential rents for 3Q for MAK/BGC and 1pct growth in rental prices 4Q, so yearly rental growth mak:bgc: around -1 to -1,5pct

For Ortigas the yearly residential rental growth will be around 3pct.

Overall -- the broad indexes -- remain in an uptrend.

Extremely healthy in fact, when there is a rotation in leadership.

That also indicates broader participation IMO.

I'd be more worried if land prices started to fall, or the broader residential market started to fall, or office prices started to decline rapidly, or retail rents, -- but that's not happening. When a baby is conceived the first 9 months you will see the biggest phenomenal growth rate. Likewise, an economy, which is nothing more than a gathering of people - will experience its most rapid growth 9-10 years after the birth peak. And it is just getting started for PH.

That's what Patrick Schwerdtfeger talks about in his Keynote Speech on Global Business trends, please go to minute 24.

""" PH will grow like crazy and it is just getting started. """

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"so there's ample evidence that in the mid to lower end prices are slightly rising,"

 

Clearly, NOT for residential properties in Makati (- 2.97%) and BGC (- 2.34%)

 

In fact, We don't have as much data for Ortigas as we do for Makati and BGC.

But from what I have heard, Ayala took over the management of Oritigas Corp., earlier this year.

And the takeover was followed by some strong buying in the first half based on:

+ Lower prices in Ortigas, and

+ Ayala's reputation based on their demonstrated record of making money for investors, and their great success at turning around BGC, etc

which is not far away from Ortigas.

Since they have done it before, friendly investors assume they will do it again

 

This may be only a short-duration pop in Ortigas prices, unless Ayala can make some real progress in bringing in new investors,and/or

in enhancing the value of the central location of Ortigas - with all its traffic challenges

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What do you make of this?

 

 

Read a report that Megaworld is rumored to have another price increase this september 1st.

(and that follows another move early july when they also raised I believe)

 

https://www.facebook.com/megaworldmcbd.yap?fref=ts

 

How can they raise the prices when -- according to your models, and your and Colliers data -- prices should fall slightly?

Is it only to fool the current investors that everything's ok, while the market is collapsing beneath them??

Or is it a genuine move that indicates that they're selling their inventory too fast and that

they have to adjust the price to keep up with rising demand?? (and with the rise in land values which you have documented).

 

Is this move genuine, real and based on market signals or just a false signal to create a feeling of euphoria amongst its current

investors while hiding the bloodbath in the real world?

 

I want answers.

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"How can they raise the prices when -- according to your models, and your and Colliers data -- prices should fall slightly?"

 

BECAUSE... it is called perception management :

 

+ The builders have huge marketing staffs whose JOB it is to persuade people that they should go on buying, even when Rents and Secondhand values are falling

+ The potential buyers look around and see that the prices on new properties launched by Ayala, Megaworld, SMDC, etc go on rising in virtual lockstep

+ Only a small minority of people seek out information like the Colliers report, and instead they believe what they are told by sales people

 

I had a case where I was very close to buying a property, based on what I had seen in the showroom, and been told by sales people (it was not in Makati or BGC). I liked the property and the development it was in very much, and I was told that I could expect to achieve a rental of P 900-1000 psm. I decided to do my own due dilligence. Fortunately, there were some similar properties available for Rent on websites like OLX and Rentpad, so I started tracking them. After 2-3 weeks, I noticed that they were still there, and had not been rented. In fact, the asking rents on the most expensive properties were being cut.

 

After studying this new information, I came to the conclusion that a realistic rent would be P 650-750 psm, rather than the P 900-1000 that I had been told.

 

I don't think they were intentionally lying to me. I think they had just not done any proper research, like I had done. In fact, it is far harder to do the research in the Philippines than it is in a more transparent market, like Hong Kong - where you can go into any agent's office and they will give you a full "Transaction Report" with data on last done sales and leases, going back many weeks, and even several months. And this information is highly accurate. In PH the info is generally, kept secret - perhaps because of the tax implications. In HK taxes are at reasonable levels, and they are easy to understand and comply with. In the Philippines, it is not so simple.

 

So perhaps they were relying on old Asking prices for 1-2 years earlier, and they had not yet appreciated that the market had been drifting lower for some months.

 

I repeat that old warning: BUYER BEWARE, especially in times like these we are in, where (according to Colliers): supply is huge, vacancies are rising, and rents have begun to soften.

 

If you do get to know some agents well enough that they will be honest with you, and think that they may quietly admit that it is getting harder to sell new properties, especially in BGC, where prices have run up the most, and the coming supply is the heaviest

==============================

 

Sidebar - Look at how they are selling properties now:

 

Tomorrow!!!!! Get EXCLUSIVE OFFERS on PREMIUM PROPERTIES for ONE DAY ONLY.

I would like to invite everyone to take advantage of our Special Discounts and Payment Terms on Close to Handover Properties in the CBD.

We will have a price increase by Sept 1, this will be a great time to reserve units to make your investment earn instantly because of the price appreciation.

... See more

 

They are trying to clear their books of unsold properties.

Would they be offering "Special Discounts and Payment Terms" - if these properties were selling well?

What is the real price: The Builder's LIST price, or the DISCOUNTED price?

I would say neither. The crucial price you need to focus on, is what you can actually sell if for AFTER you buy it.

If you plan to live in it for years, you may not care about the Resale price. But if you are buying as an investor,

I would argue that this price, the Achievable Resale price, is more important that the price you pay for the property.

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CPG could be the stock to watch.

I think problems renting Knightsbridge, Gramercy, and other projects at Century City,

could potentially trigger a slide in resale/secondhand prices, at projects on the Fringe of the CBD

 

"It is the reason why Century Properties PH share price is not doing very well -- but they've understood it and they are going

to concentrate on the lower end of the market now as well." - see Bangkok, TH thread

 

CHART: Century Property, in Makati, PH

CPG ... All :

iALmtVX.gif

 

I see it differently.

Century has built an expensive product, in the WRONG location - they are in Makati's old "red light district"

fo3le8z.jpg

 

The high-paying jobs are in the CBD. To get to the CBD, residents in Century City will need to walk around Bel Air Village, the Western part.

 

Imagine it rains, what is going to happen?

Are they going to have a very long wait for cabs? Or will they have to get wet walking around Bel Air Village,

 

Another problem is this:

The public areas of the buildings (Knightsbridge & Gramercy - not sure yet about Trump Tower),

are nice, but the flats themselves are not great. I am told the "walls are particle board, not concrete", and so it

is very noisy for residents.

 

As a result, Knightsbridge and Gramercy are renting at under P 1000 psm, probably below expectations of owners

 

From OLX: Knightsbridge Flats for Rent
=========
P 24,000 / 27 SM = P 889 psm (F.Furn.)
P 26,000 / 27 SM = P 963 psm (F.Furn.)
P 28,000 / 30 SM = P 933 psm (F.Furn + Wifi)
P 29,000 / 30?sm = P 967 psm (F.Furn + Wifi)
Others available at P 30,000, and higher
. .
From OLX: Gramercy Flats for Rent
=========
P 27,000 / 27 SM = P1000 psm (F.Furn.)
P 29,999 / 30 SM = P1000 psm (F.Furn.)
P 38,000 / 46 SM = P 826 psm (F.Furn.)
Other 1BR flats at P 40,000, and higher
. .

I am seeing Flats for Sale at prices like these: (resales?)

Kn. : P 3900k/27=144k, P 4000k/27=148k, P6000k/33=181k, say P150k psm
Gr. : P 4000k/26.5=151k, P 5500k/39=141k, say P146k psm

 

P950 x12 = 11.4/ 150k = 7.6% Gross yield, which is not far from the levels Colliers reports for Makati CBD

 

If I am right, the rents will slide, or at least drift lower, and that will undermine property prices

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Century, Megaworld, Ayala and DMCI,

 

which company is "better" managed.

 

Hi

 

I still think Century will be a turnaround story as they are now going to concentrate more on the lower end of the market. The Azure North project - has seen significant

appreciation since its launch -- and I think they are getting the signal. Location wise

 

Megaworld and Empire East, one of their sister companies, to me looks like the best managed company because actually Empire East project is very expensive, I mean they are maximizing shareholder value to the extreme, and Megaworld is trying to deliver Ayaland Premier quality at Alveo prices, -- and some of their projects are really low density projects which will always attract massive interest. So Megaworld will hold up better than Ayala Land, I.M.O.

 

Ayala Land will likely be hit more than Megaworld as they are resting on their laurels, -- and some of their projects are delayed significantly. And I guess most their profit comes from the high end part Ayaland Land Premier, and this is where I expect the hits to come, so Ayala's share price will suffer more than Megaworld IMO. Ayala is too much mass focused on high end, -- MEG understand that you cannot market High end projects as mass housing projects which is what Ayala and increasingly Alveo are doing. The lower end is growing more rapidly and Empire East products are more expensive than Avidalands products so even here MEG has an advantage.

 

DMCI is an extremely unprofessionally managed company. I mean some of their projects get sold out within 1-2 months of their launch, -- don't they get the impression that they're selling their product below market value? And they have mining operations as well, which is an industry engulfed in deflation. Some DMCI projects like Illuminia residences, 2BR units and 3Br units are sold with heavy discounts like 10-12pct I believe, so they must a have a huge stock overhang on their bad locations, and here a value investor who offers cash might get big discounts. Looks like a typical Filipino company which destroys shareholders value. The price is almost the same in every location for most of their projects which I find strange, and their new -first high end - project OAK residences in Paranaque, I predict it will be a failure. The design is too similar to their mass housing projects, -- how can they expect to sell this for 120K per square meter?? I mean their Oak harbor residences projects which will be launched soon.

 

Lastly share prices are very much influenced by sentiment and international markets, and might crash following international markets, while their underlying property values might hold up much better due to better localized demand and supply.

 

So that is why I expect, CPG turnaround, MEG holding up better than Ayala, DMCI continue to underperform due to destroying shareholder value, and not following market signals.

MEGAWORLD is best managed for shareholder value, IMO. Ayala will come under severe stress IMO. Ayala is the next CPG.

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http://systemisbroken.blogspot.com

 

The broader market in the leading indicator.

 

Hi the latest blogpost from our friend in the abovementioned blog describes the state of the PH property market. He is a bit surprised by the strength of the non NCR market, because it is the clear that it is only the prime areas MAK-BGC which are taking hits and have experienced some price declines.

 

In any case the price development and forecast for PH and CHINA is completely the opposite. In China only TIER1 cities are still rising, TIER2 cities have stabilized while TIER3 and rural countryside prices have collapsed, and I have no doubt that the overall market is extremely weak in CH, and that this China bubble will pop soon, and that it is the overall, broader market which forecasts this decline. Similarly, in PH, we are now in the strange situation where the prime markets are declining, but where the overall, broader market is still rallying, and my explanation for this fact might just be that it is the foreigners themselves who are in trouble. Their home economies are not doing well, and they were faced with significant appreciation the last 3-4 years in PH home prices, plus a 20 per cent PHP appreciation against the major currencies, except USD, so the time for a healty pullback in an overall bullish market has arrived.

 

Demographics play a role in both countries, the major group is 35-40 old plus people and older people in CH, and older people prefer to live in the bigger cities, which is why their TIER1 cities are still performing very well, while for PH, the biggest group in the 20-30 years old people and they very much prefer to live in the suburbs and condo buying is not very much on their mind - yet, - Lamudi had done a study on this I believe -- but it is coming.

 

In any case, the bullish argument is the overall broader market which is still rallying and the bulls can take solace in that. So -- to answer a question that was raised here before -- will foreigners rescue PH real estate market -- the answer is NO, --- they are in trouble themselves and it is the locals who are taking over leadership. A mixed portfolio that is invested in all areas of the NCR and the country, and in all segments like Middle Class and Lower upper class will still end positive for the year, while a portfolio that is exclusively invested in BCG-MAK high end assets might see some value erosion this year.

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Some very interesting points is both posts, and I will respond to them later

 

... In Edit / answers added later...

 

((I still think Century will be a turnaround story as they are now going to concentrate more on the lower end of the market.)
The stocks is holding above the Lows, suggesting that they doing something right. The crunch comes when the projects are completed, and they have to be rent. That is when the high prices of their properties may become challenging. I am not sure how much exposure they will still have then. If they have unsold properties, the values may get hit.

 

(Megaworld is trying to deliver Ayaland Premier quality at Alveo prices.)
Good luck to them - It will not be easy when costs are rising. I have heard they cut corners on layouts, and thickness of concrete between floors. On the other side, the projects usually look good; and I've heard that they have improved property management on some of their delivered properties

 

(... high end part Ayaland Land Premier, and this is where I expect the hits to come)
The ALP and Alveo properties are still selling well, from what I hear. And they are conservative in their credit policies, so I am not sure how you expect them to get hit. The completion of Garden Towers near Greenbelt may puts some downwards pressure on ALP property rents.

 

(... DMCI / must a have a huge stock overhang on their bad locations, and here a value investor who offers cash might get big discounts)
I have tended to avoid DMCI properties because if their locations, so I don't know what to say. I have noticed that they are cheaper. if I had a family with 2 or more kids, I would probably be more interested, since they are amenity rich, I believe.

 

821955816_1_1000x700.jpg?rev=002&bucket=

Garden Towers - Ayala Center Makati City

2/
(it is only the prime areas MAK-BGC which are taking hits and have experienced some price declines)
What are you seeing? Colliers is reporting drops like 3% in MAK-BGC, but is expecting more ahead. On new properties, I am still seeing 5-10% p.a. type rises, which seems pretty aggressive in an market where rents are down like 3-5%. But I am hearing that Ayala's and Megaworld's highend projects in Makati ae still selling well, which is some feat. BGC ma be sluggish however.

(CHINA is completely the opposite. In China only TIER1 cities are still rising)
We have seen that in Hong Kong and London too, up until the last few months, and these locations have slowed over the last year. China has the additional problem of some wealthy families want to shift money outside the country.

(, in PH, we are now in the strange situation where the prime markets are declining, but where the overall, broader market is still rallying)
Can you give some figures on the broader market, and give the source. It is possible the new President will push for job creation outside Greater Manila, and/or outside the principle CBD's in Makati and BGC.

(a 20 per cent PHP appreciation against the major currencies, except USD, so the time for a healty pullback in an overall bullish market has arrived.)
I am watching mainly in USD, so I am less aware of how European, British or Japanese buyers may view property prices in PH

(the bullish argument is the overall broader market which is still rallying and the bulls can take solace in that. So -- to answer a question that was raised here before -- will foreigners rescue PH real estate market -- the answer is NO, --- they are in trouble themselves and it is the locals who are taking over leadership)
Yes, I have heard from Ayala friends that the strongest buying is coming out of PH, and especially wealthy Filipino Chinese families. Foreigners do not like the complex tax laws, including the 6% tax on GROSS sales prices.

(all segments like Middle Class and Lower upper class will still end positive for the year, while a portfolio that is exclusively invested in BCG-MAK high end assets might see some value erosion this year)
I haven't seen the data, but you may be right. What data sources do you use apart from Colliers

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Well, the data comes from the Philippine Central Bank, they have developed their own indexes and you can clearly see that non-CBD district prices are still in an uptrend.

That was menioned on systemisbroken.blogspot.com. The blogger of this URL is very much confused by this as he had expected prices to fall by now... he doesn't know

what will happen now...

 

http://systemisbroken.blogspot.com

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More evidence of a LOW END focus - but will the profits shrink?

 

Philippines Property Market: Boom or Bust?
VIDEO: http://www.bloomberg.com/news/videos/b/8979b196-38b4-4163-a3d8-fef1dca1f339
May 22 (Bloomberg) –- With the World Economic Forum underway in Manila, Bloomberg will be looking at therise of the Philippines all morning. The economy is growing strongly, and one sector is gaining rapidly - property. Bloomberg's David Ingles reports. (Source: Bloomberg)
They are talking about US $25,000 properties, and they are speculating that prices could move up by 25-30% "after development"
Ayala is "reaching down into the pyramid" - where there is huge pent-up demand

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EXCERPTS

"The Bangko Sentral ng Pilipinas (BSP) said soft remittance flows from overseas Filipinos could persist this year amid various de-risking activities by foreign banks and weak oil prices."

"Latest data from the central bank showed cash remittances contracted 5.4 percent to $2.13 billion in July from $2.25 billion in the same month last year. This pulled down the growth in cash remittances to three percent in the first seven months, lower than the full-year target set by the BSP.

Cash remittances amounted to $15.32 billion from January to July, $449 million higher than the $14.87 billion recorded in the same period last year."

WHERE were the drops?:

+ Remittances from Filipinos in Saudi Arabia fell 10.8 percent to $1.51 billion from $1.7 billion (Oil related*?)

+ Cash remittance from Europe dropped 8.5 percent to $2.2 billion in the first seven months from $2.41 billion in the same period last year. Remittances from the United Kingdom fell seven percent to $805.8 million from $886.77 million (Europe hiring more refugees, rather than Filipinos?)

=== ===

 

*Oil-related

OILB ... All-data : 5-yrs : 1-yr : ... PB :

S2eUHOx.gif

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