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BUBBLE Debate: Is there a Bubble in PH Property?

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Currency devaluations and revaluations also play a role

 

 

Hi - follwing Brexit - the GBP lost value against USD as well as PHP, so that must have had an impact.

The euro strengthened from the low EURPHP46.8 in march 2015 to around EURPHP53.5 now.

So that also helps to explain the lower value of the remittances, i.e. the strength of PHP.

 

Then some other - oil producting ? - countries like Kuwait saw huge gains, while Italy and Greece contracted massively

indicating severe economic stress in those countries.

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"

The euro strengthened from the low EURPHP46.8 in march 2015 to around EURPHP53.5 now.

So that also helps to explain the lower value of the remittances, i.e. the strength of PHP"

 

I thought that too - until I looked at the data

 

The comparison was July'2015 to July'2016, and those two months showed the EUR at similar levels

 

EUR - in USD ... update

EUR2_zpsbs5yaqit.gif

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Let's see how this plays out....currently USD/PHP reaching new highs every week (peso devaluing). Would this necessary translate into higher remittances and be positive for the real estate sector? Am not too sure. I wonder how much of an impact has Duterte's vocal thoughts and extreme actions have had on the PHP.

 

On another note, this is the first time in my listing scoutings that I've come across a 'Retail / Commercial' unit for sale in BGC. I'm not sure if it is cheap/ expensive or even how that street shop compares to other streets.

 

https://www.olx.ph/item/300sqm-prime-commercial-space-for-sale-bgc-ID7y2V4.html?p=6&h=26b610ba28#26b610ba28

 

140,000,000 for 300 sqm (i.e. 450,000 per sqm). Assuming commercial prices are approx 200,000 per sqm, this translates to a 125% premium. Hah I wish there would be a way to long that retail unit, short the commercial directly above and milk the difference :P:P

 

Edited by Steve Netwriter to remove unintended weird text :)

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Today's bloomberg

 

http://www.bloomberg.com/news/articles/2016-09-22/foreigners-shun-philippine-stocks-as-duterte-loses-luster-chart

 

 

-1x-1.png

 

 

 

The money that flowed into the Philippines after presidential elections in May is drying up. As of Wednesday, the nation’s stock exchange had seen 20 straight days of foreign outflows, the longest stretch since 2007. Some investors are speculating that outbursts from President Rodrigo Duterte will have consequences beyond politics that affect the economy.

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FOREIGN SELLING?

I showed the above chart to a friend (here in Makati) who has good political contacts, and knowledge of finance.

His reaction was:

+ August is usually a slow month for the stock market

+ The market is still getting used to the new president, and there will be some swings

+ Although people see he is not speaking very carefully sometimes, Duterte is making some positive changes and he still has good support internally,

+ However, he has created some enemies (often with drug connections), who may be pulling some money out of the country.

 

Thus, the departing funds may be "foreign investors" (like from Switzerland or Cayman Islands?) but with the shots called within the PH.

 

Let's see how sensible President Duterte is.

I don't think he wants to be responsible for the reversal of the reputation of the PH -

which has improved in recent years.

 

If he is smart, and can learn, he may learn to discipline himself and his own statements (as Mr Trump has done over the last several weeks)

 

On the other hand, some of RD's enemies, are said to be keen to destroy Duterte's reputation, and even have him impeached.

So let's see how he handles it.

 

=== ===

(I tried to post this earlier, and could not get onto the MP website):

 

140,000,000 for 300 sqm (i.e. 450,000 per sqm = about US$10,000 psm).

Assuming commercial prices are approx 200,000 per sqm, this translates to a 125% premium

 

It is interesting to see that BGC prices have gone that high.

 

It sounds like the high price is driven by the Value of the Ground floor - hugely attractive to capture walk-by, street traffic.

Ground floor retail units will always be at a premium in areas of high density - for shops, restaurants, etc
Hong Kong gets around the scarcity of ground floors, by creating a second level in Central and other areas, where people can walk above the car traffic and still do their shopping and other business. This provides a sort of bonus for the property owners, which they can monetize by opening commercial units along along walkways.
We are beginning to see this in Makati also. This morning, I will be visiting a building (Eton Tower) which draws the walkway traffic inside, so that they can provide customers for the retail units on that floor. In that part of Makati, they may get as many paying customers on the walkway level, as they get at street level

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There are still some Bulls around

 

AyalaLand stock is still holding up okay (so far)

 

PH:ALI ... update

(in edit: 8/11/2016 ... 3-year chart - Is ALI peaking at/ near P 41-42 ?): Last : PHP 39.65 (10/5/16)

ALI-all_zps0owe6tjs.gif

x

 

Booming Philippine property market inspires confidence among expat investors

Chris Nelson

September 14, 2016

 

> http://www.thenational.ae/business/property/booming-philippine-property-market-inspires-confidence-among-expat-investors

The overwhelming majority of Filipinos in the UAE are optimistic that the property sector in their home country is rapidly improving,

according to a new survey.

 

A poll conducted by New Perspective Media (NPM), the organisers of the annual Philippine Property and Investment Exhibition, showed that 98 per cent of Filipinos in the UAE believe positive change is coming to the Philippines with 93 per cent agreeing that the investment environment is already improving.

According to official government figures, the Philippines was the second-fastest growing economy globally in the second quarter of this year, expanding at 7 per cent compared with the same period last year, followed by China (6.7 per cent), Vietnam (5.6 per cent), Indonesia (5.2 per cent), Malaysia (4 per cent) and Thailand (3.5 per cent). India registered the highest growth at 7.1 per cent in the second quarter.

The survey of 1,000 UAE-based Filipinos showed that 90 per cent believe "now" is the best time to invest in Philippine property, with expatriates "very optimistic" the value of their property investment will see significant gains over the next few years. Property topped the list of preferred investments with 80 per cent of the respondents choosing real estate while 20 per cent opted for the stock market, business start-ups, mutual funds, bonds and other investments.

Asked to describe the investment and business environment in the Philippines following the election of Robert Duterte as the president in June, 93 per cent said the situation is improving, 2 per cent said it is deteriorating; and 5 per cent said they do not see any change.

"A vast majority of the Filipinos in the UAE are confident in the improving investment scenario in the Philippines," said Karen Remo, the managing director of NPM. "This is an affirmative boost to the new administration of the Philippines as the economy’s growth registers stellar performance in recent months."

"Our survey supports the increasing appetite of the Filipinos and the international community to invest in real estate. This is in response to the positive forecasts of good investment returns in the Philippines, which is now being considered the Asia’s rising tiger," Ms Remo added.

The strong economic growth in the Philippines is driving demand in the property market. According to Oxford Business Group, the construction and real estate sectors make up around 20 per cent of the Philippine economy, slightly ahead of manufacturing.

The Philippines provides immense advantages to potential investors who seek alternative markets amidst the global economic uncertainty, according to the Philippine property services provider KMC Mag. "With an average investment growth of 10 per cent and a record-high of 15 per cent in 2015, foreign direct investment [FDI] inflows are seen to rise even further as the new administration addresses macroeconomic bottlenecks through its agenda," said the company, which is an affiliate of the international property group Savills.

"The economic agenda for the country prioritises countryside development, infrastructure and agriculture growth, and increased government spending," said Michael McCullough, the co-founder and managing director of KMC Savills. "Pair this with the administration’s goal of positioning the Philippines as one of the top three destinations in South East Asia for FDI inflows by 2022, and we see a very positive outlook for the real estate industry."

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Sometimes these Drops take a Long Time to get going

 

The Singapore property market peaked in 2013-14, when taxes were imposed - but the bigger drops are coming in 2016

 

Singapore-Property-Price-Index_zps70039c

 

Singapore home prices dropped by the most in more than seven years as developers offered discounts amid signals from the government that it won’t roll back property curbs initiated in 2009.
An index tracking private residential prices fell 1.5 percent in the three months ended Sept. 30 from the previous quarter, the biggest decline since June 2009. Prices fell for the 12th straight quarter, the longest streak of quarterly losses since prices were first published in 1975, according to preliminary data from the Urban Redevelopment Authority Monday.
http://www.bloomberg.com/news/articles/2016-10-03/singapore-home-prices-have-biggest-drop-in-more-than-seven-years

-1x-1.png
Singapore is down from 154.5 (Estimated for Q3.2013) to 137.9 (Q2.2016) - that's - 10.7%
/ 2 /
Singapore Is Crushing Hong Kong in the Race to Cut Home Prices

On the surface, the property markets in Singapore and Hong Kong have much in common. The two Asian financial hubs have both moved to rein in runaway home prices in recent years as they sought to make housing more affordable.
Yet, consider how home values in the cities have diverged. Singapore has been successful in damping buyer demand with curbs (prices slumped by the most in seven years last month), while restrictions have had little impact on Hong Kong’s gravity-defying market, which is rebounding after a short-lived dip.

http://www.bloomberg.com/news/articles/2016-10-06/singapore-crushing-hong-kong-in-race-to-bring-down-home-prices

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WILL CHINA's Problems spill over into the Philippines?

 

Property mogul: CHINA: “The biggest bubble in history.”
By Harry Dent, Senior Editor, Economy & Markets:

No question about it. China definitely takes the cake when it comes to bubble creation. The government encouraged everyday people to speculate in stocks in late 2014 and 2015 to help offset the slowdown in its gargantuan real estate bubble. The stock market bubbled 160% in one year and then crashed 50% (and you can be sure there’ll be more losses to come after a year of propping up a market that has merely gone sideways…)

Then to cushion that 2015 stock crash, the government made loans easier for real estate again. Bank loans surged by 7.5 trillion renminbi (RMB) in 2015 and are on track to surpass 15 trillion RMB by the end of this year. About half of these loans are in mortgages.

So what happened?

After flattening for three years, real estate prices went totally bananas again. They’re up 59% in the hottest large city, Shenzhen, since February 2015. They’re up 35% in Shanghai.

Just look at this bubble in Tier 1 cities. Real estate is up 48% since just February 2015! Since early 2010, it’s up 107%. That’s clearly the orgasmic phase of this bubble.

A Bubble Looking for a Pin

For more evidence of how bubbly China’s real estate is, look at this next chart from HSBC. It shows the total value of residential housing as a multiple of GDP, as is possibly the best measure of the situation over there.

China’s ratio (the red line) is currently 3.27 times GDP, and forecast to hit 3.72 times by year-end!

Japan’s great bubble (the black line) peaked in 1990 at 3.7 times GDP. Shortly after, property prices fell through the floor, losing 67%!

Hong Kong’s 1997 bubble peak (green line) was at 3.04 times.

The U.S. bubble peak (the blue line) in early 2006 was at 1.75 times.


Hong Kong still holds the honors for the greatest bubble of all thanks to affluent Chinese laundering their money there, just like they are laundering it into other major English speaking cities around the world. Hong Kong’s housing value to GDP is now at 5.0 times and projected to go to around 5.5 by year-end.

More http://wolfstreet.com/2016/10/13/chinese-house-price-bubble/

http://9640-presscdn-0-28.pagely.netdna-cdn.com/wp-content/uploads/2016/10/Rocketing-Real-Estate-Prices-in-China.gif
Rocketing-Real-Estate-Prices-in-China.gi

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SIGNS OF A PROPERTY TOP being in-place are increasing

=

+ Colliers reported a -2.3% drop in mean Makati Property prices for P 150.0K psm in Q1-2016, to P P 146.5K psm in Q2-2016

.

+ Money is now flowing out of the PH - $807 million in Sept, the highest in 32 months, says the Manila Times (10/14/16):
This was more than twice the outflow of a year earlier, and a turnaround from the INflow of of $427mn in August.
Some factors influencing this are stock investments, political confidence, and the prospect of higher USD interest rates.
(However, for 2016 YTD there has still been an inflow of $13.7 billion, and PH finances remain healthy.)

.

+ Stock charts of property developers (a leading indicator) are showing weakness.

MEG-5yr_zps1kc5ocxr.gif

This is especially true for Megaworld (PH: MEG) which peaked at P5.92. in Mid-April 2015, is now at P4.11,
and may test key support at near P 4.00 before the year is out.

ALI-5yrs_zpslnerd6zf.gif

Bellwether stock, AyalaLand (PH:ALI) at P 36.40 remains in a range just -13.7% off the High for the year (P 42.15)
But if it cracks support near P36, then that may be a sign an important high is in place.

=

Stock Summary at 10/13:
ALI - / Ayalaland - : Yr-H: $42.15 : 10/13 : $36.40 : Off H: -13.65% :: P/E: 28.56 : Earns: P1.27
MEG / Megaworld : Yr-H: $05.51 : 10/13 : $04.11 : Off H: -25.41% :: P/E: 12.48 : Earns: P0.33
Popi / PrimeOrion : Yr-H: $02.28 : 10/13 : $01.92 : Off H: -15.79% :: P/E: - n/a - : Earns: P -nil -
CPG / Cent.PrpGr : Yr-H: $0.780 : 10/13 : $0.570 : Off H: -26.93% :: P/E: 6.364 : Earns: P0.090

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SOME SIGNS OF STRESS in the Manila Property market

 

1/ Share prices

PH:ALI / Ayalaland .. 5-yrs : 1-yr : Last: P 32.80 - 1.05 LoYr: 27.20

PH-ALI-5yr2_zpsxougm0ck.gif

 

PH:MEG / Megaworld .. 5-yrs : 1yr / Last : P 3.78 - 0.17 LoYr: 3.00

PH-MEG-5yr_zpsolz1oua2.gif

 

 

2/ Evidence of a possible wave of payment defaults?

Maybe even at this nice project in Makati?

Greenbelt Hamilton is due on Complete, soon in Q4-2016, or Q1-2017

 

I am aware of the impending completion, so when I received the message below, it got me thinking...

 

"Once in a lifetime​ preview of our LATEST project
And... (RENT TO OWN)​ -- at Greenbelt Hamilton (?)
in Legaspi Village to be able to view the final finishing of our projects here in Makati."
​"We will also offer additional ​DISCOUNTS ​for the exclusive clients that we will join us
​this Saturday (November ​12​, 2016).​"

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Not hugely positive - that Q3 Report.

=

Colliers is expecting over the Next 12 months
+ A -5.37% drop in Makati Rents (vs. -4.9% in Rockwell, -5.8% in BGC)
+ A -5.27 % drop in Makati Capital values (vs. -4.8% in Rockwell, -5.8% in BGC)

 

They seem to be having some difficulty in pushing new Primary Property sales,

and so are asking Developers to help make sales more attractive through Rental assistance/ or guarantees, Rent-to-buy,

and finding new types of Tenants

=

Colliers has some ideas about how PH developers can cope with Over-supply

 

Residential rental rates continue to soften across major business districts. Rates in Makati CBD dropped by 1.2% to PHP858 per sq m a month from PHP869 per sq. / Mean rents dropped from X to Y
The decline is slower than the 1.6% drop recorded in 1Q 2016, reflecting slow absorption amid lack of new completions. Rents also dropped in Fort Bonifacio (-1.5%) and Rockwell (- 0.4%). Colliers sees the continued decline in rental rates given the additional 10,000+ units slated for completion for the remainder of the year in the major CBDs. Over the next twelve months Colliers sees rental rates in Makati CBD, Fort Bonifacio, and Ortigas Center declining between 4% and 7%. With these trends, condominium investors whose units are now being completed face a very challenging rental market environment. In order to assist their unit buyers in achieving their expected rental yields, residential condominium developers should explore creative rental

 

Demand for worker accomodation units
Colliers believes that the need to explore a creative lease model is needed as investors face an increasingly challenging rental environment. We recommend that developers look into worker accommodation projects to cater to the highly-mobile young urban professionals who can’t afford to own their own apartment yet or rent a condominium unit within the established business districts such as Makati, Fort Bonifacio, and Ortigas Center. These halfway residential units are for professionals who want to live near their place of work during weekdays but go home to their families‘ suburban areas during weekends.
The worker-accomodation units are also more practical for employees working in CBDs as the worsening traffic in
Metro Manila only makes their commute to and from work more unbearable. But developers must ensure that the worker-accomodation projects have amenities similar to condominium developments in the CBDs to entice more users. Since they are targeting millennials they should apportion amenities and facilties such as gyms, retail shops and lounges with fast broadband internet connection. In light of falling occupancy rates in the CBDs, it may be prudent for developers with projects under construction within and outside the CBDs to organize their own leasing arms in order to assist their buyers to lease out their units and attain the yields that they were promised. For developers that have significant ready -for- occupancy (RFO) units, leasing out these units either individually or maybe even as shared units may make sense, as long as it does not conflict with the market positioning of the property and does not lead to a deterioration of its perceived value.

==

> source, end of the Q3-2016 report: http://www.colliers.com/-/media/3q2016_residential_report.pdf

=

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PH Developer stocks are falling hard, & this suggests the Bull market in property may be over already

- But Who wants to know this? And is it to early to say this falling momentum will continue?

ALI +etc ... 12mos-chart

Zpmo66n.gif

=== ===

Business Insight: Property page of Nov. 24, 2016 edition

Property Prospects Bright: '16 Best year for Realty Consultants

Okay. So it is about Property Consultants, not about the overall market.

Even so... They are growing and talking about the market, rather than being shy.

Turns out, they are most excited about the Office market segment which remains strong.

However, there were some bright spots in Residential:

+ Ayala park Triangle is selling like hotcakes, same with Roxas Tower

+ HT land sold out its two towers quickly

+ A lot of money is still flowing in (from around Asia)... at the luxury end

 

Luxury developers also seem to be discovering digital, online advertising (sites like Lamudi, little used before)

There's been a surge in high-end listings, at about P 50 million

One consultant (Leechiu Property) believes things will tighten, and prices will shoot up in two years (2018),

because of the Shortage of good sites in Makati and Metro Manila - there's "little land for development", he says.

Leechiu targets: BGC, Bay area, Filinvest City, and Arca South - presumably because they have plenty of expensive

new projects to move in those area

=== ===

Amaia - on the Low End

... is also very active, with about 2,000 units to be turned over across 22 projects

1,000 have already been turned over this year, and there are another 1,000 to come;

including 1,000 more within this year.

PROJECTS:

Amaia Skies Cubao, Avenida

Amaia Scapes: Cabanatuan, San Fernando, Urdaneta, Trece Martires,

Amaia Square Novaliches

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MARKET Comment: Rents falling, while prices go on rising

Capturing these from SSC's The Rise thread, before they are deleted or moved

+ Too Frank

"6-7M condo and rent it out for 35k a month"

The market is now "out of joint"

Rents are falling, and developers are asking more and more money for their projects. As investors, we need to learn to just say No to these higher prices.

Collier's report has these figures for the market

QUARTER-- : Cap.Values: Rent psm: Yield-- :
Q3-2016-Act.: P 146.5 K : P 840 --- : 6.87%
Q3-2017-For. : P 138.8 K : P 795 --- : 6.87% - Forecast for 12 mos. from now

I usually seek a minimum yield of 8-10%, so these numbers are stretched and getting worse, quarter-by-quarter as Rents drift lower.

But what is really stretched are the prices on NEW projects, which are pushing up to P 165k, 170K and even higher for new projects. An agent I met this week was asking P190k psm for a project in Makati that was priced at P 150k psm about 18 months ago. And that asking price rose even when Rents were falling !
(When i asked who is buying these expensive properties, I was told most buyers these days are "from China" or maybe Korea.)

Maybe we should Tell the agents that they must buy a calculator and learn how to run Yields, else they are just wasting our time! (At least the time of Investors.)
== ==

If you pay P 6.5 Million for a property, and Rent it at P35,000 monthly, your Gross Yield is only: 6.46%

 

+ MDS Investors

Agree with TooFrank – I wrote a couple of posts on this a some months ago (so no worries, I ll keep this one short) and I would add the following "details":

- Prices: For 3Q17, Colliers has noted price declines (!) in Makati CBD despite only 1 project effectively being turned over out of the 7 projects scheduled i.e the supply hit hasn’t come through yet but prices are already falling.
- Tracking the right thing: Colliers tracks “luxury 3BR unit” prices and rents.. these are a lot less oversupplied compared to studios and 1BR. Unfortunately, the supply of nearby of the Rise (Lerato, Air, Kroma, Eaton, etc) is mostly studio and 1br..
- Delays: There are delays across the board due to shortages in skilled labour. Brace yourself for more delays given all the announced infrastructure investments coming next year.. Your ROI may start 12-18m later.
- Interest rates: Borrowing costs are (very) likely to rise: Inflation is picking up, banks’ loan books are growing rapidly and funding for banks is getting more expensive. If we start seeing defaults rise in 12-18m, then credit conditions will tighten even further. So for those expecting to loan money, make sure you can afford this also with 100-200bps more expensive loans.
Interesting article yesterday: http://www.manilatimes.net/lighting-...t-bomb/299682/
- Given delays.. how easy it is to get a bank loan for an unfinished project? Will one have to go through the (very) expensive in-house financing?

What will the right rental price be in 2020.. Frankly I have no clue at all.

But I would recommend to each buyer to properly do his risk management and consider some extreme scenarios like 1) what if I can’t rent it out for several months, 2) what if the right rent for a studio suddenly falls to 25k (studio is at the bottom of the “food chain” after 1br) 3) Can I afford 1-2% higher interest rate on a bank loan, 4) what’s the ROI from having interior design in such an environment? I d be patient and buy from rush sales in the secondary market in 1-2y. There is no reason to do pre-selling anymore since prices are unlikely to go up much further from here. Relax, save – you’re not too late, you’re too early for the good opportunities

==

> http://www.skyscrapercity.com/showthread.php?t=1723515&page=67

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AN AWARD may be due to Megaworld

For guts in possible defiance of reality (haha!)

For making THIS announcement today:

ANNOUNCEMENT: 5% PRICE INCREASE IN ALL MEGAWORLD PROJECT

If only they could simultaneously raise rents all around Makati and Manila,

then their investors might really have something to celebrate

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Good News, bad news...

==========

 

+ PH Headline inflation accelerated to 2.5 in November, beating Central bank forecasts, and giving the highest rate in 2 years.

That's UP from 2.3 percent in Oct., and 1.1 percent in Nov.2015. The highest since 2.7 percent in Dec. 2014. (Manila Times, 12/7/16)

 

+ HK Traders no longer fear to invest in PH. The Duterte administration has erased the lingering effects of the deadly 2010 hostage crisis... HK Chamber of commerce president, Antony Chan, says that entrepreneurs from HK are now looking to invest in tourism and manufacturing industries. Duterte is considering lifting the 40-60 restriction (40% to foreigners) on foreign investments, but not in property. HK imports from PH increased by 10.3% in 2015 to US$7.3 billion. (Manila Times, 12/7/16)

 

+ CBRE sees slow rise in (commercial) rental rise. Metro Manila rents are poised to increase just 3-5% over the next two to three years, because of the new office stock of 1.2 million sqm which will be added in 2017. (That's enough to accommodate perhaps 240k new office jobs, at 5sqm per job.) Job growth and office demand is being drive by new BPO outsourcing. (Business Insight, 12/7/16)

 

+ PH could raise P10-25B for infra. The Philippines could raise between $200-500 million (P10-25B) in new loans from the Asian Infrastructure Investment Bank (AIIB) for infrastructure investments. But this is only a drop in the bucket, since the new administration has been talking about a need for as much as P8trllion ($161 billion) "to fill the infrastructure backlog, decongest the cities and build new urban centers by the end of his term in 2022." The PH seems to be decades behind other Asian countries in building its infrastructure, says Carlos Dominquez, Finance Secty, who continues: "We need everything from new airport capacity, a cheaper and more efficient power structure, actually functioning rail systems, and even new digital pathways."

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Horsefeathers spreader called out

 

Although rental rates cannot be predicted for the Rise, there is something that I can predict with a good degree of certainty: the price of the unit in the area. As i Mentioned before, there are 2 income streams for a condo. Rental is volatile, but price appreciation is less so. Unless there is a war, or an earthquake...there is almost sure appreciation of the property within the next 5 years. This is supported by the increasing population with increasing number of middle class, and the housing backlog that we have in the philippines. Although there will be a spillover to the north and south of manila, Makati will remain, at least in the next 5 years, the crown jewel of the property market.
But yes, make sure that you will be ready for interest rate increases and for possibility of vacancy. The more properties I have, the more I realised that I am not late for investments...something always crops up, better designed and better value than the last...
Can you do it better than Colliers?
They are predicting a price drop of about 5% over the next 12 months for Makati as a whole. Perhaps if you are better than their analysts, they should offer you a job.

Also, if you are WRONG - which often happens with such forecasts - what sort of guarantee can you provide to those who might buy property based on your forecasts?

My thinking is, no one knows exactly where the market will be in 1-3 or 5 years. As the saying goes: "You pay your money, and you take your chance." Colliers doesn't like predicting a rental decline, and a price decline. It is bad for their business, I reckon. But they do it, because they can see an oversupply emerging. The interesting question is: how long will it last. I hope not too many years, and that the excess supply will be absorbed many months before The Rise is completed. But I am not going to claim to be as certain as you seem to think you are.
> SSC:

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WHY SUPPLY KEEPS RISING : Expats related to BPO's are buying, says JLL

===

BPO expat demand driving residential market despite supply concerns -- JLL

Posted on December 02, 2016

EXPATRIATES are helping drive interest toward residential investment amid the continued expansion of the business process outsourcing industry, according to property consultancy Jones Lang LaSalle.

“Interest in residential investment is expected to increase steadily from expatriate employees as O&O (offshoring and outsourcing) firms continue to expand operations in the Philippines,” JLL said in a report released on Thursday.

The vertical segment of the residential market is expected to continue growing “in the next few quarters” although the upcoming supply should keep prices from increasing, according to the report, titled “Persistent Growth Despite Large New Supply.”

From the current quarter toward 2020, about 140,000 housing units will become available in Metro Manila alone. The developments are concentrated in central business districts in Makati, Pasig and Taguig, among others.

“The substantial number of development launches in Metro Manila for the quarter is proof of the maintained pre-selling activity, although expected total launches for the year are expected to be lower than the past few years,” JLL said.

In third quarter, properties in the Bonifacio Global City and Makati Central Business District continued to fetch the highest selling prices in the National Capital Region.

In Bonifacio Global City, capital values ranged from P105,000 to P180,000 per square meter for mid-range development and from P145,000 to P188,000 for high-end developments. In the Makati Central Business District, prices ranged from P105,000 to P154,0000 for mid-range developments and from P170,000 to P260,000 for high-end developments.

Monthly rents, meanwhile, ranged from P600 to P930 per square meter in Makati City, the same level registered in the preceding quarter. The range narrowed in Taguig City to P700-P1,000 from P680-P1,000.

“Demand for residential property remained healthy in the third quarter of 2016, primarily driven by economic activity, the sustained growth in over Filipino remittances and the continuous expansion of firms in the O&O sector,” JLL said.

By the end of 2017, the property consultancy expects about 1 million square meters of office space becoming available in the metropolis. The new supply has the potential to expand vacancy rates.

==

> More: http://www.bworldonline.com/content.php?section=Economy&title=bpo-expat-demand-driving-residential-market-despite-supply-concerns----jll&id=137218

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JLL MILDLY BULLISH on Residential, Not Bearish (yet)

The vertical segment of the residential market is expected to continue growing “in the next few quarters” although

the upcoming supply should keep prices from increasing, according to the report, titled “Persistent Growth Despite Large New Supply.”

The JLL Report for Q3-2016 is Mildly Bullish, with stats more positive than those in the Colliers Report for the same quarter.

For instance, they show Capital Values for Luxury properties in BGC and Makati RISING by +1.6% from the previous quarter.

JLLvsColliers_zpsysqfqb17.png

Historical-: Colliers : Mak. / - JLL : :
======= : Mak-Mid: Rent/ AveFour= Mak.Mid : Mak.Hi. / BGC.Mid : BGC.Hi. : Mid-R
Q4-2015 : 151,300 : 883 / 153,875 = 125,000 : 197,500 / 128,500 : 164,500 : P925 :
Q1-2016 : 152,000 : 865 / 158,500 = 127,500 : 200,000 / 137,500 : 169,000 : P900 :
Q2-2016 : 147,575 : 855 / 160,000 = 125,000 : 210,000 / 138,500 : 166,500 : P960 :
Q3-2016 : 146,485 : 840 / 163,375 = 129,500 : 215,000 / 142,500 : 166,500 : P988 :

Summary Q3-16

============ Low -High : Rent /L/ Low- High: CapVal. / Yield% : Vac.%
BGC----------- : P600-1000 : P800 /B/ 105k-180k : P142.5k / 6.74% :
" " high-end-- : P710-1760 : 1235 /B/ 145k-188k : P166.5k / 8.90% : 4.0%
Makati -------- : P600-1000 : P800 /M/ 105k-154k: P129.5k / 7.41% :
" " high-end-- : P710-1760 : 1235 /M/ 170k-260k : P215.0k / 6.89% : 4.0%
Ortigas /Man. : P360-P680 : P520 /O/ P82k-145k: P113.5k / 5.50% :
Alabang ------ : P520-P910 : P715 /A/ P86k-115k : P100.5k / 8.54% :
Quezon City- : P420-P690 : P555 /Q/ P78k-120k : P 99.0k / 6.72% :
Change Q2>Q3
BGC/Makati : CapV-Lux: 187.8>190.8k*: + 1.6% / Vac. 6.3%>4.0%
Condo Units : Q3-16: 252,600 +4,500 / 4G16>2020: 140k, +55.4%
AverageChg : 140k / 4.25 = 32.94k : +13.0% p.a. : 8.2k per Qtr
============
*P190.8k psm is the average of BGC (xx) and Makati (xx) mean prices for Luxury Condos, per JLL, see above

 

Meanwhile, capital value growth outpaced rent growth. Average capital values of luxury condominiums in Makati CBD and BGC in 3Q16
increased 1.6% q-o-q.

BGC and Makati CBD continued to command the highest selling prices in Metro Manila, with capital values in BGC ranging from PHP 105,000 to
PHP 180,000 per sqm for mid-range developments and from PHP 145,000 to PHP 188,000 per sqm for high-end developments. Meanwhile, Makati
CBD prices ranged from PHP 105,000 to PHP 154,000 per sqm for mid-range developments and from PHP 170,000 to PHP 260,000 per sqm for
high-end developments...
==
> http://www.ap.jll.com/asia-pacific/en-gb/Research/Philippine-Property-Digest-3Q16.pdf

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LONG LONG CYCLE Revisited - in Makati, PH Property prices

Original chart from Makati Prime "gateway page"

philippines-LTprices-Model_zpsp59kdei1.g

I am going to take another look at the Long cycle, incorporating this information:

Severe 1984-85 Economic Crisis
"Marcos bought the Philippine elite's support at that time by giving them the means not only to survive the severe 1984-1985 economic crisis but to grow richer."
"The economic conflagration was the worst ever in our history, part of the global debt crisis triggered by the Mexican default on its foreign loans in March 1982. With the ensuing rise of global interest rates, the Philippines also defaulted on its loans in 1983, which in effect barred the country from receiving any foreign exchange for its exports of goods and services...
As a result, the economy shrank by 20 percent from 1983 to 1985, the deepest such contraction in the post-war period."
"The Philippines elites were protected... through the Marco's regime's so-called "Jobo bills", named after banker Jose B. Fernandez... with unheard of interest rates, which steadily went up as high as 60 percent in mid-1985."

- from today' s Manila Times

Clearly, this will have triggered a crash in Philippines property prices, which are interest rate sensitive.

So we must expected there would be an important LOW in property prices in approx. mid-1985

Notional Cyclical Chart : three repetitions of 18 year notional cycle

philippines-LTprices-Model6_zps0h6fcawg.

Notional 18 year Cycle / Peso per Sqm. estimates
No. : start : Peak : -Low- / Levels : high-- : XXX : end-- :
#1 : 1965 : 1980 : 1985 /
#2 : 1985 : 1998 : 2002 / P ??k : P 98 k : 3-4? : P64K :
#3 : 2002 : 2016 : 2020?/ P 64k : P152k : 2.4X : P120K??

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OUTLOOK - going into 2017: Office & Residential

/ 1 /

Rising outsourcing demand from banks to help boost office property ...
Inquirer.net-16 Dec 2016
... the outsourcing and offshoring firms, but the office property market as ... million sq.ft. spread between the Makati central business district and ...
/ 2 /
Young workforce shifting PH property market - More RENTAL buildings?
The Manila Times-25 Dec 2016
Young workforce shifting PH property market ... In the Makati CBD, the Four Seasons and Tiffany Place developments (both developed by the ...
/ 3 /
Property titans to open projects in 2017
Business Mirror-19 hours ago
As a response, property developers led by the industry titans are crafting their own strategies to capture a sizable portion of the market. ... Roces Avenue and Edsa in Makati; Pioneer Woodlands in Mandaluyong; Kasara Urban ...
=== ===
“Winds of change,” global financial giants are increasingly opting for more cost-efficient locations to house their backend operations in line with efforts to contain costs. In short, the banking, financial service, and insurance sector (BFSI) is turning increasingly to offshoring and outsourcing to to help minimize costs.

And this growing demand, in real estate terms, is seen to translate to an additional 130 million square feet of office space requirements in major cities in Asia Pacific up to 2020.

“The banking and financial services industry is under intense pressure following the global financial crisis. Amid all the regulations and increased oversight, banks are increasingly shutting down non core activities with lower margins,” the global real estate advisor said.

“Accordingly, many global banks are rightsizing their operations or shifting back office operations to non-core locations or lower-cost emerging markets, such as India and the Philippines,” it added.

Key destination

And the Philippines, along with India, is reportedly well poised to ride these waves of technological breakthroughs in the BFSI sector, which has seen an increasing shift to back-office operations to non-core locations or lower-cost emerging markets, the report stated.

It was estimated that the business process outsourcing (BPO) sector is seen to generate another 100-million sq.ft. of office space requirements in India and the Philippines up to 2020. Of this office space, around 30 to 40 percent will be attributed to offshoring activities in the banking, financial services and insurance sector.

“Notably, both countries have the requisite soft skills, aside from traditional BPO skills, that should drive BPO sector growth in the future,” Cushman & Wakefield said.

According to the report, the Philippines has made significant strides in terms of infrastructure, business environment, and tax and regulatory measures, and is gradually moving up the value chain to broaden the gamut of functions it offers in business process management (BPM) and information technology (IT).

“We have observed the increasing share of knowledge process outsourcing (KPO) services in the country which encompasses accounting, animation, insurance, legal services, engineering, architecture, game development, and software development, among others,” the report stated.

“It is interesting to note that banking and financial services constituted nearly 41 percent of the IT-BPM services portfolio followed by retail, telecom, and healthcare in 2015,” it added.

Expansions

Cushman & Wakefield pointed out that global banks such as JP Morgan Chase, DKS, HSBC, and Citibank have established offshoring operations in the Philippines.

These firms collectively have a consolidated footprint of approximately 1.8 million sq.ft. spread between the Makati central business district and Bonifacio Global City, and are expected to continue growing their presence here.

>: https://business.inquirer.net/221522/rising-outsourcing-demand-banks-help-boost-office-property-market#ixzz4UpsRCdp7

===

Multifamily’ development eyed as new revenue model by builders
MULTI-FAMILY, or high-density rental housing, is increasingly being considered as an alternative to the conventional ‘build to sell’ model among Philippine real estate developers, as a young workforce is less inclined to purchase real estate and stiff competition put increasing pressure on revenue streams.
Multi-family housing is defined as a residential building of multiple units purpose-built for rental rather than sale as condominiums. The developer retains ownership of the building, and either acts as the property manager, or engages a third-party management company.
Multi-family development is common in cities throughout the US and Europe, and in neighboring cities such as Hong Kong and Singapore, but has yet to appear in any significant way in Metro Manila or other urban areas of the Philippines.
The Manila Times spoke to a number of real estate developers, analysts, and would-be residential property buyers, and found that while builders are still reluctant to embrace the multi-family concept, the growing demand for alternatives to buying condominiums or houses from the Philippines’ millennial workforce is slowly shifting the residential real estate market.
Financially savvy? (Or just staying flexible)
Unlike markets such as the US, where according to a report this week in the World Property Journal multi-family construction starts have significantly declined this year, the demand in the Philippines for rental rather than property for sale is not driven by unfavorable financial conditions, but a surprisingly conservative outlook among up-and-coming young Filipino workers.

. . .

A focus group of five young Filipino professionals – Joven and his wife Marie, who are both employed by a major BPO firm in Metro Manila, Anna and her roommate Maricor, who work in banking and retail, respectively, and Jhayrick, a software developer – gave some insights into the millennial outlook towards real estate.

“For me, it’s not wanting to get tied down to a place and a financial obligation for a long time,” Jhayrick said. “I could actually buy a place for less per month than I pay in rent, but what if something changes, like I find a better job in a different city or even overseas? With renting, I feel like I have some freedom.”|

“I do want to settle down, have my own family and a house,” Anna said. “But right now, it’s more important to focus on my own career, kind of ‘be my own person.’ I don’t want to be like my parents, struggling for years to make ends meet when I finally do get married.”

Joven and Marie, on the other hand, found themselves disappointed by what the real estate sector had to offer. “We were looking for a house, but for what we could afford right now, everything was so disappointing. Too small, not built very well, most of them way out in places where there’s nothing around…far from the stores, work, things to do. And the real estate people, they pressure you so much to buy. We don’t want to get stuck with something we don’t like, so we just gave up for now,” Joven said.

“There are already existing developments that are exclusively for rentals. In the Makati CBD, the Four Seasons and Tiffany Place developments (both developed by the same family who controls The Landmark Store) are two developments that are exclusively for the rental market,” Cordero explained in an email.

“The residential rental property development is an attractive model for highly-mature property markets such as Singapore and Hong Kong, because of the large catchment market, which is composed mainly of high-earning corporate (both local and, especially, expatriate) executives. This is probably the reason why we have such a low demand for this type of development, as the high-earning corporate executives, especially the expatriate market, who could avail of this accommodation is also quite limited in the last 20 years,” he continued.

Julius Guevara, the head of Consultancy, Valuation, and Advisory services for Colliers International Philippines, had a similar view.

“You do not find this in the Philippines because it is more profitable for developers to sell the housing units immediately, than rent them out and wait for a longer payback period,” Guevara said.

Both property experts, however, suggested that developers would be increasingly interested in considering the multi-family model.

“Today, the development for sale model is not as profitable as it once was since take-up is now slower given the more competitive environment, and developers, especially listed ones, are hard pressed to maintain their growth targets,” Guevara observed.

. . .

3rd article feature some new projects, like: Megaworld's first Venice Luxury Residences and The Viceroy, and Avida Towers Verte at the corner of 9th Avenue and 34th Street also in Bonifacio Global City. Pioneer Woodlands in Mandaluyong; Kasara Urban Resort Residences; the Rochester Garden in Pasig; Little Baguio Residences in San Juan; and Manhattan Garden City in Quezon City.

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Compare : Singapore

Singapore’s three-year housing slump could see relief from an unexpected quarter in 2017: Hong Kong.

800x-1.png

So says Cushman & Wakefield Inc., which expects the slide in the city-state’s home prices to end this year as foreign investors turned off by Hong Kong’s move to increase the stamp duty for overseas buyers look to Singapore instead. Desmond Sim, head of research for Singapore and Southeast Asia at CBRE Ltd., said Singapore house prices are approaching their trough, with a forecast price move of flat to minus 2 percent.

“The fallout from the stamp duty could be beneficial for Singapore,” said Sigrid Zialcita, managing director for Asia Pacific research at Cushman & Wakefield. “Singapore is always seen as a place where you can preserve capital and we are expecting interest from foreign nationals to come back.”

==
More https://www.bloomberg.com/news/articles/2017-01-18/hong-kong-s-home-curbs-may-help-end-singapore-s-three-year-slump

The downphase of the 18 year cycle, generally lasts 3-5 years.
So maybe it is getting close to a low - possibly within 2017 or 2018

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Philippines Growth remains strong - but the toughest years of the decade are just ahead

PH growth

===============
1990 : 3.0% / 2000 : 4.4% / 2010 : 7.6%
1991 :-0.6% / 2001 : 2.9% / 2011 : 3.7%
1992 : 0.3% / 2002 : 3.6% / 2012 : 6.8%
1993 : 2.1% / 2003 : 5.0% / 2013 : 7.1%
1994 : 4.4% / 2004 : 6.7% / 2014 : 6.1%
1995 : 4.7% / 2005 : 4.8% / 2015 : 5.9%
1996 : 5.8% / 2006 : 5.2% / 2016 : 6.8%
1997 : 5.2% / 2007 : 6.6% /
1998 :-0.6% / 2008 : 4.2% /
1999 : 3.1% / 2009 : 1.1% /
=====
-yrs7 : 19.7 / ------- : 32.6 / ------ : 44.0
Av7yr: 2.8%/ ------- : 4.7% / ------ : 6.3% : Growth has accelerated
-last3: 0.77 / ------- : 11.9 / ------ : ????
Av3yr: 2.6% / ------ : 4.0% / ------ : ??? : But the last 3-years of the decade could be slower

=====

15-q1 : ?.?% / 16-q1: 6.8%

15-q2 : ?.?% / 16-q2: 7.0%

15-q3 : 6.5% / 16-q3: 7.0%

15-q4 : 6.6% / 16-q4: 6.6%

=====

At 6.8% full-year growth, PH Tops China's 6.7%, and Vietnam's 6.2%

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Expert opinion for 2017: BUY OFFICE, Sell Residential property

Report Summary
Sector: -BUY : -Hold : -SELL / NetBuy
Residential
2015 : 27.3% : 56.8% : 15.9% / 11.4%, #4
2016 : 25.0% : 60.4% : 14.6% / 10.4%, #6
2017 : 28.6% : 00.0% : 71.4% /-42.8%, #9 : Big MINUS Rating!
Office
2015 : 21.5% : 59.8% : 18.7% / 02.8%, #13
2016 : 37.1% : 48.4% : 14.5% / 22.6%, #4
2017 : 85.7% : 00.0% : 14.3% / 71.4%, #1

Property-Values-Infographics-new.jpg

> http://www.entrepreneur.com.ph/news-and-events/buy-hold-or-sell-what-insiders-really-think-of-manila-s-property-market-a1672-20170130?ref=home_feed_1

 

For 2017, a vast majority of the respondents—marking the highest ratios in the last five years—gave a "buy" rating for four of the five segments: industrial/distribution, office, retail and hotel. The only exception is residential apartments, where an equally overwhelming majority is recommending a "sell" rating.

Indeed, Manila had the most respondents wanting to buy property in the office and retail sectors among the 22 Asia-Pacific locations surveyed, according to PwC and ULI's annual publication Emerging Trends in Real Estate: Asia Pacific 2017 released last November. The capital region got "buy" ratings from 85.7 percent and 66.7 percent of respondents, respectively. High "buy" ratings were also observed in the hotel (71.4 percent) and industrial space (57.1 percent).

However, while the number of respondents that gave a "buy" rating for residential property increased to 28.6 percent from 25 percent in the previous year, the remaining 71.4 percent chose a "sell" rating for residential property in Manila. This was a change from the previous two years when a majority of the respondents recommended holding investments in the residential sector.

In the report’s overall ranking of how investor-friendly the 22 markets are, Manila ranked third in terms of city investment prospects and fourth in terms of city development prospects. The report pointed to the Philippines’ “vibrant economy led by a booming BPO market and strong remittances from overseas workers” as the drivers of Manila’s high ranking. The report also said that “demand is resilient” and “vacancies remain low.”

On the other hand, PwC and ULI also warned of impediments to investing in Philippine property. “While foreign investors like the Philippines, there aren’t many specific deals they can do or players to work with,” said a local developer who was quoted in the report. “Real estate assets are not being actively traded or sold here, and the exit strategy is also unclear.”

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High-end property firms Bullish, JLL says

For properties above P 15mn, prices continue to rise "towards Singapore levels"
Mr Lindsay Orr, PH chairman of JLL sees "pent-up demand for luxury... until the next 5 years"

park-central-towers-5.jpg
He points to Ayala's Park Central*, where the most pricey units are already fetching SG like prices - P300k psm !!
Another developer, Net Group is very bullish on premium Office buildings. Their 7 bldgs in BGC are near 100% leased
Orr of JLL thinks fears of a bubble are overdone, despite 1 million sq of completions to 2018.
"Demand is increasing as well, " and he sees a balance over the next 3-4 years.
(Notes from today's Manila Standard BUSINESS section)
==

> more: http://www.malaya.com.ph/business-news/business/residential-offices-filipinos-see-more-quality-developments

Hmm. Methinks he has property to see for his clients, especially high end properties.
What about the 10% vacancy rates, and falling rents? (in Makati)
A true balance would not look like that. His comments may be more applicable to BGC,
which given the tranport in-and-out issues, may be a market increasingly separated from Makati

==

* http://www.parkcentraltowers.com/

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