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AlexHK

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  1. I would still take side with USD vs EUR in 2019. Raising interest rates in US together with the end of QE in the Euro Zone could boost USD even higher. But USD could go down vs AUD for instance.
  2. Hi Dr Bubb, Sorry for this very late reply. You are probably correct about a possible jump of rent prices. Regarding Skyland Plaza it's hard to say where the market is right now because there are no transactions. What is sure is the demand is very high (even for parking slots) but totally dependent on POGOs
  3. Hi ECB, I own a unit in Megaworld One Central and I think your estimate of second hand prices for this building is accurate. I would say around PHP150k per sqm. The adv you mentioned at 125k per sqm does not seem realistic. One unit was offered for sale recently slightly below 140k per sqm but this unit has a problem (unit k on low floor facing a wall) so it’s not really representative of the market. One Central is now fully occupied. Majority of occupants are now Chinese & Korean. But despite the demand I agree with you, prices are not going up much. Nearby in what Dr Bubb calls "little china" (San Antonio) it's a total different story. Demand there is extremely high and prices are going up accordingly.
  4. I fully agree. And on secondary market what you see is what you get, and you can start generating income immediately.
  5. I really enjoyed reading this conversation. It reminds me the showrooms in Makati I visited few years ago. I stopped visiting them once I decided to focus on the secondary market, and probably also because I am not as patient as you DrBubb. A sentence like “Prices always go up” would be final for me Majority of property agents here in Philippines are not trained to handle investors, or let’s say not trained to handle investors with financial & local knowledge. They are selling dreams, and several times I felt like being a joy killer with my questions about rental yield and contractual issues. On top of that, info you get in showrooms can be misleading. Materials, settings, windows etc... presented in the showroom are only a possibility of what you might get, but without any guarantee. Completion date is also purely indicative. When you leave the showroom you do not know exactly what you will get and when you’ll get it. You just know how much you’re going to pay ! In the case of this 26sqm unit for 7.2M I calculated that I could expect a rental yield of 3.4% net before taxation (considering P2600 mngt fees per month and P15,000 property tax and P26,000 property agent commission per year), and this is assuming that the unit is rented unfurnished since day 1. This is low, and how long will I need to wait to be able to get back 7.2M net for this 26sqm unit on the secondary market after CGT & agent commission?
  6. Interesting point Euro Chocozone. I agree with most part of what you wrote. Again, my post about Time Deposits generating 5% tax-free was not necessarily an invitation to invest in them, but a reminder for people ready to purchase properties on primary market with rental yield below 5% net. Living in Philippines for about 10 years I am always amazed by people here investing in real estates with the glossy brochure of the developer & developer’s agent fairy tale as only reference. Regarding your point 3 “property bought at market prices can offer some (- and better -) protection in case of a complete collapse of trust in the currency”, I agree with you for property owners who can hold their properties and wait a few years, because in a collapse situation you can also expect property prices to first fall sharply. Even during “good times” you have a lot of weak hands in Philippines. Local owners who need to sell urgently for personal reasons, and foreign owners leaving the country with the need to liquidate their local assets before leaving. And in a secondary market not very liquid it’s not a good thing to be in a rush. So in case of serious crisis I expect to see a lot of panic sellers, and this could be the best time for cash buyers to purchase well located properties.
  7. PDIC only insured Time Deposits up to PHP500.000, but PS Bank (Metrobank Group) is a safe bank. BPI gives almost the same rate (4.33%) for 5 years time deposits. You can get details here : https://www.bpiexpressonline.com/p/1/69/plan-ahead-time-deposits I am not against Philippines property market in general, but I find people buying on primary market too optimistic these days. The second thing to keep in mind when buying from developers is that just to break even you’ll need to find a buyer on secondary market at a price 11% higher than what you paid on primary market (in order to cover the 6% Capital Gain Tax and the 5% agent commission). So if you add this 11% to the difference of prices between primary market and secondary market you need the property market to go up something like 30% just not to lose. In my opinion this is only acceptable for long term investment with high rental yield (7% net minimum)
  8. At current prices offered by property developers in Philippines, the net return yield you can expect on your investment is now sometimes below 5%. Personally I consider anything below 7% as not worth the trouble, unless you have good reason to expect a profit on the value of the property itself I suggest to keep in mind that you can get a net return of 5% tax-exempt on long term time deposit without taking any risk, and with interests paid quarterly. Below is for instance an offer I received 2 weeks ago from PS Bank (Metrobank). Normally they offer 4% on 5 years Time Deposit but they sometimes propose higher rate (5% here) for a limited time. You can also check offers from other banks. My point is not to recommend 5 years time deposits but to keep it in mind as comparison when calculation your net return yield. ----------------------------------------------------------------------------------------------------------------------- The Philippine Savings Bank (PSBank) on Tuesday began offering its Long-Term Negotiable Certificates of Time Deposits (LTNCTD), with a tenor of five years and six months. In a disclosure with the Philippine Stock Exchange (PSE), the thrift banking arm of the Metrobank Group said the offer period for the LTNCTD, which carries an annual interest rate of 5 percent, will be until August 2, 2018. Set to be issued on August 9, 2018, the investment product has an issue size of PHP3 billion but the disclosure said the issuance has an “option to upsize”. Minimum placement is PHP50,000, which is also the amount for additional investments. Payment of interest will be done on a quarterly basis, the disclosure indicated. PSBank tapped ING Bank and Standard Chartered as joint lead arrangers and bookrunners while selling agents are PSBank, Metrobank, and First Metro Investment Corporation (FMIC). LTNCTDs are investment products with longer tenors relative to regular time deposits being offered by banks. They are insured by the Philippine Deposit Insurance Corporation (PDIC) and are listed with the Philippine Dealing Exchange (PDEx) with earnings that are tax-exempt if held for more than five years. (PNA)
  9. Dr Bubb, regarding your calculation to get the net return there are also some transfer charges when you buy a flat on secondary market (around 150k for a flat of 4M) For me even 4 million would be a bit too high to get a decent return. Now, if the seller wants 5M and gets such offer at this price from purchasers within 6 months then he's correct. Otherwise he's not
  10. Correct Dr Bubb. Assessing the value of a flat by looking at the latest official value given by developers is very misleading. Only secondary market buyers will buy your unit so only their offers matter. A seller can say that an offer is too low if this offer is significantly lower than recent similar transactions. Our problem here in Philippines is that real transactions records are not freely available. The other way for a seller to justify his price is the decent return yield the buyer can expect at this price. I am trying to follow the prices of few buildings around mine in Makati, and my guess is that secondary market prices are around 20-30% lower than official prices given by developers. I expect this gap to increase even more during the next 2 years due to downwards pressure on rents and new supplies coming. This is of course hard to admit for primary market buyers who need to sell their unit urgently. And I am not counting the 5% agent commission and 6% capital gain tax payable by sellers…
  11. 100,000 Chinese Move to Manila And Trigger Property Surge On Fri, May 4, 2018 By Bloomberg News In Manila’s main financial district and its fringes, signs of the new inhabitants are everywhere: the restaurants serving steaming Chinese hotpots and dumplings, the Mandarin broadcasts at the Mall of Asia, and the soaring property prices. An estimated 100,000 migrants, mostly Chinese, have flooded into pockets of the Philippines capital since September 2016, and the deluge is rippling through the city’s real estate market in ways that are unique among the world’s urban centers. While Chinese investors have been snapping up big swathes of high-end housing in Hong Kong, London and New York for years to move their money offshore, this new rush is motivated by something different: Manila’s booming gaming industry. More than 50 offshore gambling companies that cater to overseas Chinese punters have received permits to operate in the city since President Rodrigo Duterte’s government began awarding licenses 19 months ago. While bets are placed remotely, the operators need Chinese speakers in Manila to handle everything from marketing and customer queries to payment processing for overseas clients. The resulting migration, while only a fraction of the metropolitan area’s 12.9 million population, is propelling home prices to record levels in neighborhoods favored by Chinese workers. It’s reinvigorating Manila’s commercial property market as owners convert offices and shops into gaming centers with card tables and webcams. And it’s boosting the bottom lines of local developers including Ayala Land Inc. and SM Prime Holdings Inc. While no official numbers are publicly available showing the number of Chinese arrivals in Manila, people familiar with the matter said that offshore gaming operators in the Philippines employ about 200,000 workers, predominantly Chinese, and more than half of them have arrived in the capital region since late 2016. The Bureau of Immigration said it couldn’t immediately provide the data. The influx promises to boost the nation’s economy and is helping to strengthen ties with China – a priority for Duterte. Yet it leaves the property market vulnerable in the event of an abrupt shift in online gaming or immigration policies from either country. The perils of relying too heavily on Chinese buyers became painfully obvious last year in the Malaysian enclave of Johor Bahru, which has been grappling with a glut of vacant homes after China imposed controls on investments in overseas property and demand abruptly dried up. “Concentration risk could be a potential concern,” said Emilio Neri, an economist at the Bank of the Philippine Islands in Manila. Others see only opportunities. Qiang Huang, a realtor based in the Chinese city of Hefei, expects Manila home prices to get a boost from the steady stream of Chinese workers catering not only to offshore gaming customers, but also mainland clients who frequent brick-and-mortar casinos. A high-rolling gamer himself, Huang first visited the area in November to place bets at Bloomberry Resorts Corp.’s Solaire casino and realized that Manila could scratch more than his gambling itch. He’s planning to build a 500-square-meter showroom in the city to lure Chinese real estate investors and will soon sign contracts to market apartments at two projects. “I chose an area with a booming gambling business, as properties there have the largest potential to appreciate,” Huang said, adding that he has run into Chinese tourists who have formed “property-shopping” groups. Among the biggest beneficiaries of this appetite have been condo units near Manila’s Makati district, in close proximity to the gaming sites where mainland workers are employed. Patches of San Antonio Village, about one kilometer from Makati’s financial hub, now have restaurants, stores, money changers and payment centers catering to Chinese customers sharing space with local stores. In the Bay Area adjacent to Makati, home prices surged by a record 27 percent in the last three months of 2017, according to data from Santos Knight Frank Inc., dwarfing the 6 percent overall gain in residential prices in the metropolitan Manila area. Condo sales in the capital region rose to an all-time high of 52,600 units in 2017. Appetite from gaming operators is also supporting the commercial market as demand from traditional outsourcing companies wanes. The share of take-up of new office space by outsourcing companies decreased by a third to 46 percent in 2017, while that of offshore gaming operators tripled to 30 percent, said David Leechiu, CEO at Leechiu Property Consultants, which has partnered with CBRE Group Inc. in the Philippines. “If not for offshore gaming operators, the property market would have crashed last year,” Leechiu said. A typical online gaming operation consists of dealing studios and a call center-like facility that serves offshore customers. A studio that Bloomberg News recently toured in Makati City spanned roughly 400 square meters, with tables for games such as baccarat, Dragon Tiger and Fantan. Dealers – mostly young Filipino women wearing snug halter-neck dresses – staffed each table. Eight kilometers away, in another part of the city, is the main customer-service center. The 6,000 square meter space is divided into dozens of rooms with rows of desks that seat more than 5,000 employees. A cafeteria serves free meals around the clock, catering to the army of mostly mainland workers and some Taiwanese and Malaysian staff. Other amenities include a hotpot restaurant and a convenience store stocking Chinese snacks and other products. Fast Facts on Philippine Offshore Gaming Operators Also known as POGOs Such operations were limited to three provinces north of Manila before Sept. 2016 decision to expand them to the capital region 55 permits for POGOs have been awarded since then 14 of those are engaged in sports betting Revenue from POGOs quintupled to 3.57 billion Philippine pesos ($70 million) in 2017 from a year earlier Source: Philippine Amusement & Gaming Corp. Record Earnings Chinese demand is helping stoke record earnings at some builders. At SM Prime, the nation’s largest property developer, Chinese buyers accounted for almost 30 percent of residential reservation sales in the first quarter. The share of mainland nationals who bought homes from Ayala Land jumped to almost half of all sales to foreign buyers last year from 30 percent in 2016. Offshore gaming companies occupy 60 percent of DoubleDragon Properties Corp.’s completed office space in the Bay Area and they’re paying rents one-third higher than other tenants, said Chief Executive Officer Injap Sia. Developers aren’t betting that boom times will last forever. Ayala Land’s President Bobby Dy said the builder will limit offshore gaming leases to 10 percent of its office portfolio. DoubleDragon plans to cap total exposure to such tenants to 30 percent once all its office towers are completed. The firm requires a one-year deposit from offshore gaming operators and post-dated checks for the duration of the five-year contract. Kitt Lapeña, 34, a Makati resident for most of his life, has seen waves of foreign residents come and go before, from Japan and Korea, but never on the scale of the recent Chinese influx. While he welcomes the economic boost, he worries about the motivations of the new arrivals. “In a way, it’s good for business,” Lapeña said. “I hope they become an asset to the community and not just out to make money.”
  12. Dr Bubb, I noticed that Condominium association dues is on your list of "Products, service, or groups that will continue to be VAT-exempt" I do not know about other buildings but Skyland Plaza & One Central were applying 12% VAT on association dues in 2017. The monthly dues of my unit in One Central for instance was 112 pesos per sqm in 2017 and it's now 100 pesos per sqm starting January 2018.
  13. Also, no more VAT imposed to condominium association monthly dues starting 01/01/2018, which means a decrease of 12% of monthly dues
  14. Hi Dennis. Your project is brilliant. There is an urgent need of professional agents here in Philippines. I bought two units in Makati on secondary market but each time during my research I had bad experiences with property agents who cannot answer my questions professionally and waste time unnecessarily. I believe many people limit their purchases to primary market due to the lack of professional property agents in the secondary market. Your expertise is really needed here, and property agents trained by you will probably multiply their income. Good luck to you Dennis, and please keep us posted about your project.
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