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BUBBLE Debate: Is there a Bubble in PH Property?

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"massive built up of private debt" ?

 

Philippines Public debt, owed externally, is falling - as a Percentage of GDP.philippines-government-debt-to-gdp.png?s

 

I think that private debt in the PH banking system is growing at about 15-20% per annum, which is almost double the nominal growth of 8-10%.

If i find a chart of private debt, i will post it here

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

 

Household debt - US and several Asian countries (but not PH)

 

Special_Figure1.jpg

 

Malaysia might have a problem (2013 data) -especially since oil prices have dropped by 2/3rds in USD terms

 

Household-Debt-to-Disposable-Income-2.jp

 

Old data (2013); and it shows PH Household Debt down at 6%, up from 5% in 2010

PH-HHDtoGDP_zpsk1yjwu67.png

 

A minority of Filipinos even have bank accounts, and so it is not easy for most citizens to borrow at all.

Perhaps increasing sophistication explains who bank lending is climbing so fast.

 

Philippines Household Debt | Economic Indicators - CEIC

In the latest reports, Philippines's Household Debt accounted for 8.8 % of the country's Nominal GDP in Dec 2016.

Money Supply M2 in Philippines increased ...

==

> https://www.ceicdata.com/en/indicator/philippines/household-debt

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Philippines, plenty of borrowing capacity, to fuel infrastructure Build-outs

 

I was a little surprised how GOOD the Debt figures now look for the Philippines
====
Government Debt to GDP : 42% (end 2016)
Household Debt to GDP-- : 9 % (end 2016)
That combined total of ---: 51% is very low, and shows there is plenty of room to borrow for infrastructure improvements
==
Compare with other countries:
Country tot'l 2013 / Govt.: HseHD : Total-2016

Japan------- : ???? / 250% + 62% = 312%

USA--------- : 123% / 104% + 79% = 183%
Singapore - : 105% / 105% + 62% = 167%
Euro Area-- : ????? / 91 % + 59% = 150%
Malaysia---- : 140% / 53 % + 89% = 142%
OECD aver. : 134% /
Thailand--- : ? 53% / 44 % + 71% = 115%
Hong Kong : ????? / 32 % + 67% = 99 %
Philippines : ??? / 42 % + 9 % = 51 %
Indonesia-- : 38 % / 27 % + 17% = 44 %

==========
> http://www.tradingeconomics.com/hong-kong/indicators
> http://www.greenenergyinvestors.com/index.php?showtopic=18811&page=14

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Yes

 

This data is quite interesting.

 

==

> https://www.ceicdata.../household-debt

When you look at the Singapore data, you see that household debt peaked around 2013-2014 and that was also the time that their real estate peaked.

For Hong Kong you see a continued uptrend, which explains why HK has had rising real estate.

And for China, Household debt has grown about 10fold in 10 years time. Here is your real estate bubble explained according to Steve Keen.

I find that quite amazing, as the average age is becoming higher in China and elderly are less likely to get loans. It means that they borrow until (just before) they die.

They obviously do not see the risks of credit, and believe it to be the "manna" of heaven.

Maybe this is why Kyle Bass is so bearish on China and Malaysia.

For PH, I remember having read an article in one of KMC Savills publications a few years ago that many developers did not like the 40pc downpayment limit imposed by BSP on real estate loan for private individuals, but if this rule is enforced than it will help to combat bubbles and overleverage.

Yes I am a bit worried that more foreigners will come and eventually the authorities might impose foreign buyer and seller taxes/levies/fees on real estate transactions in PH

. This is not for tomorrow but the seeds are sown already. We are still quite undiscovered in my opinion.

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Hi

 

The blogger from the systemisbroken.com --- again --- surprisingly remarks that maybe the system is NOT broken as

"""ASEAN house prices, in general, may have more room to run if incomes continue to grow and that growth is evenly distributed.

So it looks to me as if PH has further momentum to the upside,

However, he measures income by GDP, and I don t know if that is a general rule that is applied by most economists.

More data would be needed to confirm these income data.

 

I am sure that the Goldmans Sachses of the world are looking at Indonesia, PH and emerging Africa where they

can practice debt slavery, because it seems the Western world's ageing populations are tapped out. (e.g. Singapore)

 

This is why the "so called PH" bubble is sustainable, -- as incomes rise and more people join the work force,

you get a lot more purchasing power. It is far healthier than a price rise caused by lowered interest rates.

 

http://systemisbroken.blogspot.com/2017/04/have-asean-house-prices-kept-up-with.html

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Euro Chocozone Buyer:

This is why the "so called PH" bubble is sustainable =

incomes rise and more people join the work force, you get a lot more purchasing power.

It is far healthier than a price rise caused by lowered interest rates.

 

It is a good trend, the fast growth and rising incomes -

But the excess supply, which will get worse for the next year or two, needs to be absorb before we can

say the bubble-burst risk has faded

 

+ Residential Vacancy rates are expect to be at 15-16% by year-end, and should go on rising into 2018

+ Residential rents are down 5-10% and are still under-pressure

+ The Secondary market is (quietly) under pressure

 

These are fix-able problems, which will fade if demand goes on rising, and the time for "a shock" which will burst the bubble of rising new property prices is now upon us. Personally, I think it is better than a 50/50 bet that some news will come out which will deflate the appetite of (new) property buyers. But it may NOT happen, and at this stage, I cannot tell you what it will be. (Previously, I saw Century Properties as an "at risk" company, but they seem to have made some restructuring moves which will get them through a risky period.)

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http://www.philstar.com/business/2017/05/01/1695476/nomura-hikes-gdp-growth-2017-2018

 

I think the main risk will be a sharp downturn in the global economy, which might reduce the growth of remittances,

and which could/might severely impact the preselling market. I am less worried about vacancies as many

owners of flats have in fact entered the tourist industry by renting out their units on a very short term basis, (daily/weekly)

i.e. operating it as a hotel room. (pls check the ads on AirBnB).

 

Yes I know one Filipino acquitance who went thru the 2007-2009-2013 Real Estate bust in southern USA where her home

lost close to USD1Million in value. That experience got the best of her. Since 2013 she has been warning

me about the PH real estate bubble...

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The excess will be absorbed... eventually

The "daytime population figure" given in the article above is 2-4X what I have seen before:

"The “daytime population” of Makati is over four million people versus its “nighttime population” of just over 500,000 live-in residents. Those high-rise office buildings and malls in the business and commercial areas are densest with the daytime population going to work, eating, recreating and eking out their workaday life in Makati. Many still commute back to their residences outside of Makati in the evening."

If there will be 25,000 condo units in Makati by year-end. and 15% are vacant, that's only 3,750 vacant units.

Assume 2.67 persons per condo, and you need 10,000 new tenants to fill them.

That is only 0.3% of 3.5 million, who need to be convinced to rent in Makati rather than commute

PageImage-494270-4636610-c3.jpg

Lamudi says:

"Although one bedroom units are not the most ideal choice for families, its central location and relatively lower price makes it ideal for young professionals establishing careers in the metropolis. Among areas with one bedroom condo listings on Lamudi,

. . .

Makati has the highest average rental rate for one bedroom units, at just under P45,840 per month. Makati is followed by cities with key commercial and financial districts, as Taguig (Php42,000 average rental rate per month) and Mandaluyong (Php32,000 per month)."

2f6838019e7c9ab5d9cb8c5f9375e5db.jpg

Don Bosco Technical Institure

Frankly, SCHOOLS can also be a big draw.

Across the street from my Avida Tower San Lorenz condo is Don Bosco, and well-known boys school.

There are many families living in the building, especially in the 1BR (rent at P22-30,000, furnished for 33-38 sqm: about P700-800psm ) and 2BR (Nothing available now) flats.

> see : http://leasing.avidaland.com.ph/ : http://leasing.avidaland.com.ph/unit-details/?tower=84&unit=333&image=IMG_0136.jpg&ow=&uName=&price=27000

IMG_0106.jpg

This 22.5 sqm studio wants more than other flats in its building: P19,000, or P844 psm

002-3bcc8d38-5a50-457f-ba12-1decaafb6fa2

This studio was offer for short stays, until Avida became more strict

Some of these families may retain homes in the provinces, and simply stay in Makati during the week.

As kids grow up and finish school and find jobs, they may prefer to live and work in Makati rather than going back to the provinces were job prospects and salaries may be more limited.

So, in a way, Makati is now "growing its own" tenants. It might be interesting to count how many graduates there are each year from Makati area universities. It may make a serious dent in the 10,000 tenants needed to fill those vacant Makati condos.

Add to that, the increasing number of tourists (in AirBNB units), retirees who like urban life, and the people who just get fed up with commuting, and it is easy to understand the excess supply will eventually get absorbed so long as you have millions whose jobs. shopping. and touristic activities attract them to Makati everyday.

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"Price is what you pay. Value is what you get"

 

In PH, an agent who sold you a property might tell you something like this:

 

"Up to 10% recent price increase on all ALP projects. This is great news for existing owners and investors."

 

When I first heard this type of statement, my reaction was:

Me : Why is this good news?

Agent : Because it means you property is worth more

 

But, is it really worth more?
+ I haven't sold my property yet. Will the developer buy it back from me at this new price?

Well. no.

+ Will this price rise mean my property will rent for more?

Actually, no. Your property will be competing again properties that others paid more for, so you have an advantage.

(Yet, rents are actually drifting lower, as all these new properties are completed and flood into the market.)

+ With the price rise, will the developer add something extra to the property, to make it better?

No. Prices rises were planned, but we do not know how much they will be until they are announced.

Your property will be just the same as the one you bought at a lower price.

 

The real question is: how will a PRICE rise influence the actual VALUE of a flat I may own.

The answer is: there is no change in value, unless the price rise sticks, and the secondary market price goes up too.

We will not know whether this price is achievable until the property is sold. And "discounts" to developer's prices seem to be getting wider, though the info on secondary market prices is sketchy and not readily available.

 

The reality is: secondary market prices seem to be always lower than New Property prices asked by the developer.

Developer sales are supported by a huge marketing machine which will not be there to help me sell my property in the secondary market.

 

Articles like this can be found in the news now:

Get it for: An average of P300,000/sqm:

"Inside Ayala Land's Priciest and Most Luxurious Residences"

The content may still be available on the web in a few years, when you are ready to sell your property,

but the comments will seem stale then, and the potential buyers will be told that something else is more luxurious by then.

And no one will be promoting your property with intensity, except for you and possibly your agent.

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EXCERPT - re: Demographics

"Philippines, with 31 percent of its population currently under the age of 15, is projected to see a 1.9 percent expansion of its 15-to-65 year-old population this year, with Malaysia’s due to rise 1.6 percent and India 1.5 percent, Nomura economists said in a report. Malaysia’s population growth, however, is expected to slow faster than India’s.

That contrasts with bleaker prospects for the likes of China, Japan and Hong Kong, all of which have seen a contraction in the workforce since 2015...."

So this may not be surprising:

800x-1.png

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http://www.scmp.com/country-reports/article/2084974/manilas-condo-units-offer-residential-property-investors-taste-high

More foreigners appear to be coming to the PH.

 

(Added in edit, by Dr Bubb);

Which foreigners? Many. But maybe mostly these:

Philippines president Rodrigo Duterte’s diplomacy with China has boosted Metro Manila’s residential property market, according to licensed real estate broker Joanne Almaden. She says her Bonifacio Global City-based agency, Phil. Property Expert, has signed an increasing number of leases and short-term rental agreements with Chinese-speaking tenants.

“The warming ties with Beijing certainly contributed to the confidence of Chinese buyers and renters of properties here,” she says. “At least 10 per cent of our tenants now are Chinese.”

The article is trying to steer buyers to where the supply is greatest, and AWAY from possible bargains in the secondary market:

Raymundo recommends Hongkongers should “buy in high-quality projects from a reputable developer who will, for a presale unit, hand over the unit on schedule and where good property management is assured”.

 

To some extent, this is justified, since there may be less risk of being er, disappointed... if you buy from a top class developer. But you will pay more, and the commissions might be higher for the agents. I find the price levels mentioned in the article to be VERY high. Perhaps this is to pitch expectations at a level where the agent will have an easier time too find something a little cheaper.

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UPDATE : The JLL Report for Q4-2016
bEK7vgE.png

Historical-: Colliers : Mak. ====== : : JLL : :
======= : Mak-Mid: Rent : Yield / AveFour = Mak.Mid : Mak. Hi. / BGC.Mid : BGC.Hi. : Mid-R :
Q4-2015 : 151,300 : 883 : 7.00% / 153,875 = 125,000 : 197,500 / 128,500 : 164,500 : P925 :
Q1-2016 : 152,000 : 865 : 6.83% / 158,500 = 127,500 : 200,000 / 137,500 : 169,000 : P900 :
Q2-2016 : 147,575 : 855 : 6.95% / 160,000 = 125,000 : 210,000 / 138,500 : 166,500 : P960 :
Q3-2016 : 146,485 : 840 : 6.85% / 163,375 = 129,500 : 215,000 / 142,500 : 166,500 : P988 :
Q4-2016 : 150,600 : 830 : 6.61% / 166,000 = 132,500 : 217,500 / 145,000 : 169,000 : P??? :
======= : =======

The Bubble, if there is one, is in the (rising) prices of Newly Launched properties.

They are still being pushed higher, even as Rents drift lower, and secondhand prices are under pressure.

We can see the excess in the widening gap (New-vs-Old), the high number of completions, and the growing Vacancy rates.

My opinion is that the supply excess WILL be absorbed - and that may come faster, if more foreigners come to the PH.

But we do not yet know how much Rents will come down, and what sort of Bargains we might see in secondhand prices,

before the supply excess shrinks and is gone.

 

There is some real risk to developers that well-informed buyers (especially those living in metro Manila), will turn away from new properties

and instead seek bargains in the 2nd hand market.

It is possible that the majority of buyers now are either:

+ those buying for own use, who may not care (much) about future yields,

+ those who are overseas, and/or may not be fully informed about market conditions and possible 2nd-hand "bargains", or

+ those who want or need the payment structure ("low" monthly installments, rather than lump sums), offered by developers

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A further preview of Q2017

 

 

"

Developers continue to presell more units, further increasing prices across markets but rents continue to decline as units are completed at record levels.

"

 

Colliers Philippines' Research Manager Joey Bondoc discussed the developments in the retail sector during the briefing today for the company's 2017 1st quarter property market report,

https://www.facebook.com/colliersph/?hc_ref=PAGES_TIMELINE&fref=nf

 

So this report will be out soon and it is a continuation of existing trends.

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A WAKE-UP Moment?

STRONG Rental demand reported .. for affordable units

A "Landlord's Market" on Chino Roces/ Pasong Tamo?

ZCmpxlQ.jpg

Trevi Towers, viewed from Pasay Station, on PNR rail (Cityland's building is on the left of the photo) ... PB.

I posted this yesterday on our Viber chat: "Whatta a surprise - just met with a guy managing dozens of rental units at Trevi Towers on Chino Roces. He gave me a very bullish report on Rental demand.

"A Landlord's Market": that's what he called it. He could see I was surprised, so he showed me a spreadsheet with his units on it. I think he had a few dozen units ... all are the small 1br - I think they are 22 sqm + 2 sqm balcony. Near turnover available from him would be about June 7th, Most are rented out as furnished at P18k - 19k. Some were rented bare at P13k-14k, with the LL paying the association fees. With no current availability, he has a waiting list. Some people have been waiting for weeks.

featured-image47.png

More good news on Rental demand in Makati's CBD-Fringe area. The leasing manager at Avida Towers San Lo has confirmed to me that she is also seeing strong demand, just as I have heard reported at the nearby Trevi Towers. AT-SanLo is next to Waltermart on Chino Roces, and Tower 2 with 575 units was turned over last year. Avida Leasing manages over 250 units in the two towers. At the moment they have Leased out 250 units under their management, and only 10 units (3.8%) are vacant right now. Demand is healthy and rents are stable.

> see : Avida Leasing : AT-SanLo

> Rentpad- AT SanLo : https://rentpad.com.ph/places/avida-towers-san-lorenzo/c3eb0d8b10

I asked her if she was concerned about people switching over to Beacon, when Tower 3 with about 1,000 units was turned over in the very near future. She said that she expected to lose a few tenants from the (more expensive) 2BR units, but generally she was not too concerned, because asking rents at Beacon were expected to be higher, and most tenants were happy with the (lower) rents they were paying now at AT-SanLo. The Avida Leasing website shows: 0x bare studios (22-24sqm) offered at P12,000-13,000 monthly (in the past, but not right now), 3x semi-furnished or furnished studios at P16-19,000; 4x furnished 1BR units (about 33-38sqm) offered at P22,000-30,000, and 0x furnished 2BR units (52 sqm) offered P35,000-40,000.

This is very encouraging, since both Trevi and AT-SanLo completed new towers in 2016, and both of these have already been absorbed without any significant drop in Rents. Beacon's release may keep rents from climbing. But once the new units have been absorbed over the next 6-12 months, there could be some upwards pressure on rents in the Waltermart/ Chino Roces area because it is walking distance from Greenbelt and near a hub of jeepney traffic. After Beacon, there are no new towers being completed in the immediate area. San Lorenzo Place is a jeepney ride away, but not an easy walk, and it is less convenient for those who want to visit the Greenbelt malls

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Amorsolo Flats Project : EXTRA SUPPLY Coming as Ayala moves into Dormitory space market

Today's Manila Times announced some details on this long-rumored project

FLATS-Amorsolo_resized.jpg

The Flats Amorsolo in Makati City begins construction, with completion expected in Q3-2018

+ 15 storey residential building at the corner of Amorsolo & Dela Rosa St (near City Gate)
+ Caters to working professionals, and especially those in the BPO sector (has 500,000 workers in neighboring area)
+ Meant to be 'affordable and best in class", with internet connections, security card access,
+ Size: 22 sqm with built-in beds, workstations and "ample storage"

+ Units can accommodate up to 4 person
+ Ground floor to have convenience store, water-refilling station, and laundry

(similar to the recently-announced "The Flats BGC at 5th Avenue", another Ayala dormitory project)

 

Q: "It looks like you plan to offer condo for lease. I have not heard of this before from Ayala Land.

Could you give us some idea of [what] you're thinking?"

A: "We're building... uh... dormitories here... uh... in Makati. There's one that will be under construction, then there's two more... uh... in Bonifacio.

This is basically just a response from the demand that we're seeing from office workers... uh... to be able to get closer... uh... to work 'no. We're also building one at the Intercon site primarily because we are not selling any of the flats (units). We wanted to optimize... uh... the GLA. We feel that the demand, given the location, would be strong in that particular area.

====

> SSC : http://www.skyscrapercity.com/showthread.php?t=1994288

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NEW versus Secondhand

(this is an Excerpt from a conversation on Viber... with a bit of paraphasing added)

A:

i heard somewhere that Asians prefer new over 2nd hand

B:

New is nice when you want to live in it - but you can also renovate or redecorate, to get "like new" condition.

If you BUY NEW, when you go to sell it will be secondhand... and you will suffer maybe a 20% price drop.

Isnt it better to buy AFTER the price drop rather than in front of it?

A:

As for myself, i don't mind 2nd hand because i can renovate but i was also brought up in a western country where everybody renovated their houses

B:

Frankly, I have owned many flats: old and new, and I never got the silly obsession with new. I think people let themselves get seduced by the marketing pitch. I am a serious investor, and do not like overpaying by 20% or whatever. Why? Because my yield will usually be better when I buy cheaper secondhand properties. And I will not see that 15-20-25% premium evaporate when I want to sell it.

However, when the premium is tiny, I will definitely consider new.

I bought one property in HK, where new pprices were BELOW secondhand

A:

yes agree. With secondhand units, you can inspect them and more easily see the flaws, if any.

Our condo has leaks, elevators are always breaking down. doors don't close properly. We won't notice these issues when buying new.

B:

How old is it? Who is the developer?

A:

5 years old, It was built by Megaworld.

(He goes on to talk about how he likes the designs of the some the more recent Megaworld condos, like One Central & GB Hamilton.)

I do not intend this as an anti-MEG post. But one must consider issues like design, maintenance,...

as well as the advantage of being able to inspect an actual unit before you buy it.

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If you BUY NEW, when you go to sell it will be secondhand... and you will suffer maybe a 20% price drop

 

It's a good reasoning and for most properties in most places, this is the rule.

However for the hot spots, especially the new upcoming business districts,

which most people cannot discern yet, -- buying properties

during preselling at launch date will still be a very profitable investment,

and the second hand price might NEVER drop below the initial launch price.

 

Breeze residences had a launch price of about 3M for a 27sq meter unit

with balcony facing ameneties/Manila bay, and I believe it was raised

to3,2Million about 1 year later. Right now, according to manilacondostore.com

the official price if rent to own is about PHP5Million and if cash perhaps 4,5M.

For the condo's facing Makati, Malate, the price is about ,5Million less I believe.

 

https://www.facebook.com/breezeresidences.residences

 

Yes -- based on yield alone -- it is quite unrealistic to even "think" that these

units might decline to 2,5Million in price, as you seem to be suggesting.

Of course there might be the occasional "fool" who not knowing the market

might sell his unit for 2Million or less, but it will be a very rare occurance.

 

On the following facebook link, we can see an Asian?? unit owner who is

asking PHP30,000 in rent for his unit and I can assure you, these rental

rates are quite realistic for this area. So if he is able to get a 100pct occupancy

rate thru short term rentals his gross rental return is about 11pct.

 

But if the price were to drop 20pct from the developers price, --

as some investors here -- wrongly in my opinion - seem to assume

then the rental yield would spike to 14,5 - 15pct.

 

This is completely UNREALISTIC.

In my opinion, the chance of that occuring is one in a TRILLION.

 

In other words, waiting for prices to fall and to buy those units in

the secondary markets might work for not so prime areas and

transportation hub units and mass market units like the Grace

residences video which I have shown in another thread,

but those investors who had the foresight, courage and discipline

to ignore the perma bearish real estate forecasts,

might come out as big winners, - GLORY TO THEM -

and those procastinators who are still hoping for prices to fall

got slapped in the face again. They will live in an illusion

forever they they can buy those units at 20pct less than

the developers's starting price, while prices escalate slowly

higher year after year.

 

This is not so say that we should not look at second hand properties.

Second hand is how I learned the tricks of the trade, but some

opportunities are only available during the very early stages of preselling

and they will never be as good later on.

 

By 2030 this tiny 27sqmeter flat of this Asian owner is more likely to be

worth 10Million than 2,5Million.

 

As an aside, you also talk about falling values for existing/finished/completed

buildings but Anchorland's Admiral Baysuites -- just keeps raising its price

despite being completed 2,5 years ago. The developer's price has increased

from 4,2 to 6,5Million for units facing Manila Bay and 3,5 to 5,5 for the other units.

 

Admiral Baysuites in the Bay Area is what Grand Hyatt is to BGC. It is an iconic

structure that seems to mesmerize people so that they lose control and start

overspending/overpaying on their real estate purcase, and yes, I think

the Bay area will eventually overtake even BGC as the next business hotspot.

All real estate values/building close to these hotspots then suddenly start to

appreciate in value. It is the reason why Prisma's residences is more expensive

then Lumiere residences since Prisma is closer to Grand Hyatt BGC.

It is the only reason that Avida's flats can fetch such outrageous prices in BGC.

Only because of this. (some commentators call those Avida units military units)

I am seeing the same escating price explosions in both areas.

Breeze +50pct in two years/Admiral Baysuites +50pct in 4 years.

This is almost similar to the Federal Land "8 Park avenue" price phenomenon.

 

http://www.skyscrapercity.com/showthread.php?t=1254573&page=17

On this page we can even see the Bangko Central Philippines together

with Admiral Baysuites.

 

Also because bay area condos have a better air quality, -- it is negatively charged

air caused by the sea while car exhaust is highly positive air which will slowly

kill you and those units facing the bay area are quite scarce. I mean that is

what Huanggua also wrote about before on the skyscrapercity forum,

that bay area units always seem to fetch the highest values.

People instinctively move to those areas where their long term survival is the highest.

 

So that's the problem with the San Lorenzo Place and the Travis Kraft building

in San Lorenzo Village. Transportation is good but you'll die a slow death not

knowing the cause.

 

Wow, quite a detailed/major comment.

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"

Breeze residences had a launch price of about 3M for a 27sq meter unit

with balcony facing ameneties/Manila bay, and I believe it was raised

to3,2Million about 1 year later. Right now, according to manilacondostore.com

the official price if rent to own is about PHP5Million and if cash perhaps 4,5M."

 

Yeah, but that is still buying from the developer.

Have you checked OLX for genuine secondhand prices? (when the seller is NOT the developer)

 

There are some examples, where early buyers can capture an actual profit by flipping before completion, but not many if you bought two years ago.

You could have bought a "double discount property" at The Rise about two years ago for maybe P 3million, and there's a decent chance you could sell today for cash at P4-4.2 million.

The developer is offering similar at P5-5.2 million, and that P1million discount might be enough to find a buyer.

 

I expect that "P1 million" discount to narrow as we get closer to completion, since a cash buyer will be easier to find when the building tops out, and is within a few months of turnover.

I am aiming to monitor prices for The Rise on a special thread:

> http://www.greenenergyinvestors.com/index.php?showtopic=21503

 

M-Bay Area:

"... bay area units always seem to fetch the highest values."

I wouldn't buy there now - too much supply coming, and not enough high paying jobs.

I still think M-Bay has potential to be a train wreck. But I may be wrong.

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"

But if the price were to drop 20pct from the developers price, --

as some investors here -- wrongly in my opinion - seem to assume

then the rental yield would spike to 14,5 - 15pct."

 

We are seeing discounts that large and larger already

 

At Trevi, you can buy a 24 sqm 1 BR unit (that includes the balcony of maybe 2 sqm, and part of the walls) at under P 2million.

That's under P100k psm.

There's is not loads of supply, just 1-2 units being offered cheap. That's how bargains come, from motivated sellers.

I think the developer has sold similar units at P130k -140k not long ago - and is now sold out.

At P 2million, the units can be rented at P14-15,000 bare, and maybe P18,000 furnished/

 

If you budget P200k for furniture, so P2.2 million, you get a 9.8% gross yield at P18,000 monthly

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SUMMER MADNESS in the Property market?

 

MwyaEVg.png

 

"135k to 156k per sqm" - that's +15.5% in One day*!

 

*CORRECTION:

This was not really a true price rise, No one was able to buy units in the development at P135k per sqm.

That was an "expected" Launch prices, which before it was actually offered for sale, The price was amended

to a new official Launch price. But nevertheless it suggests a big jump from phase one, Union Square.

To the new phase 2 at ARCA South, which is called: V---.

(This info comes to from an Avida agent, Christelle, who was well informed about the matter.)

 

A friend told me:

"Avida has raised the price for at ARCA South from 135k p sqm to 156k and some buyers have backed out".

Nevertheless many others are still expected to buy at the (higher) new price. - It seems there are some panicky buyers around - Is Avida trying to SPIKE the market up, into a Peak? That sounds like madness, but it would describe what we are seeing. Since RENTS are not rising, these high prices do not look sustainable

 

When will Buyers WAKE UP, and realize they should be buying in the Secondary market?

That's how to beat these insane price rises

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

 

J. - REPORTING from the Property seminar at Glorietta (on the MM Viber chat)

=====

 

"My key takeaway here the growth of the online gaming industry (Generating strong) demand for real estate on the bay area."

SLIDE - shows:

590,960 SQM : Demand for FY 2017
"Pre-commitments & under negotiation"
A total of 124K SQM (21%) from Online Gaming
Locations: 61% in BGC/Taguig, 23% Alabang, 16% Bay area

 

"And this slide is interesting. This is demand as per q2 2017"

 

DrB:

I think you are maybe talking about businesses renting Office space, and bringing jobs to those areas - ???

 

J: (Yes.)

Theyre causing high demand for office space.

And since they employ 90% chinese ppl - Those ppl will also need housing Near the area

 

DrB:

1. Will the Jump in Office space rentals, also bring Residential demand - I would say: very probably

2. Are these grabs for Office space by new online businesses sustainable - or will all the new Online gamers compete fiercely and then canabalize each other.

The surge may be followed by a bust in gaming business (that is reasonably likely imho)

 

J: I think so too

From what i heard ...those online gaming companies are sorta importing chinese workers

So theyll need housing

 

DrB:

IMPORTING CHINESE WORKERS? Why?

The whole idea of this industry was to bring Jobs to PH workers, not to make profits for SM, MEG and FLI - the condo builders. Or am I wrong ?

 

J:

Think target market is chinese gamblers... So they need to speak chinese

 

DrB:

Sure. But Du30 does not like gambling - and now his govt welcomes n Chinese gamblers, and Chinese workers to man Chinese gambling call centers? Is there real logic in this?

Unless maybe they come for 3-6 months, and TEACH LOCALS to speak Chinese

Could THAT be it? If so, the landlords may see good rents for 3-6months, and then comes the shakeout

 

J:

SLIDE: showing... 1BR Condo at One Central was P4.62M in 2012, an P7.47M now
That is a 37.22% price increase - 7.44% every year, for 5 years

 

DrB:

7.44% per annum Rise is not unreasonable - but 15.5% in One Day - per my friend's report on Avida seems outrageous. That's two years worth of rises in just one day!

Crazy stuff - which I am calling "summer madness"

 

(In edit - Alveo's Circuit is joining the "summer madness" move, apparently):

 

kZWVOtE.png

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http://www.philstar.com/business/2017/07/08/1717361/taiwan-group-eyes-biggest-ecozone-tallest-building-philippines

 

Roxas Boulevard is what Champs Elyses is to France. It is the road which is going to known to foreigners the most.

And here we have another landmark building -- 85 stories -- this is huge -- which will be built along ROXAS Boulevard.

An IT building, -- so software/and other kind of services. Landmark, iconic buildings have a value increasing effect

on the entire neighborhoud. Also if the city of pearl is going be completed, it will further boost values alond the Bay Area.

 

http://www.scmp.com/news/hong-kong/economy/article/2101902/hong-kong-architect-bags-contract-massive-development

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http://www.philstar.com/business/2017/07/08/1717361/taiwan-group-eyes-biggest-ecozone-tallest-building-philippines

 

Roxas Boulevard is what Champs Elyses is to France. It is the road which is going to known to foreigners the most.

And here we have another landmark building -- 85 stories -- this is huge -- which will be built along ROXAS Boulevard.

An IT building, -- so software/and other kind of services. Landmark, iconic buildings have a value increasing effect

on the entire neighborhoud. Also if the city of pearl is going be completed, it will further boost values alond the Bay Area.

 

http://www.scmp.com/news/hong-kong/economy/article/2101902/hong-kong-architect-bags-contract-massive-development

 

.

We have, I think heard this plan - and plans like it before :

 

Hong Kong architect wins tender for massive development on artificial island off Manila

City of Pearl being touted as one of the biggest ‘Belt and Road Initiative’ projects; the man-made island off the coast of Manila will be the size of 20 Victoria Parks.

 

new-manila-bay-city-of-pearl-project-v26

 

=====

 

Does it really make sense? And will people BUY or Finance it?

I reckon it will need some great infrastructure to be put in place before it will happen

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Are there TWO separate REALITIES in PH property?

 

16246757.jpg

 

Hi

 

The high price phenomenon also exists in the bay area now, with most SMDC 1-Br flats under construction now

already costing 190K+ per square meter. This is absolutely insane. I have found a facebook page

that only offers resale units, so we can somehow gauge the secondary market - in action.

I just wished they had doubled the residential stock in the Bay Area, to keep prices down.

Why has SMDC raised its prices soo much with all this new supply?

. . .

The facebook page is called: BEST OFFER from SMDC Resale Condo Units

https://www.facebook...e Condo Units

 

Thanks for that.
I think we have TWO Separate Realities, and you seem to be focused on the one that seems "less real" to me.
1 / Future Dream : Prices asked by Developers for Properties to be completed in the future
2 / Today's Reality : Rents asked, and concluded & the actual prices achieved when selling in the secondary market
==
You and I can BUY in the "future dream" market, but we cannot sell there. Only the developers can do that & they book fat profits when they do.
Moreover, their "future dream" prices are supported by extensive advertising, massive marketing teams, and financing structures.

I strongly recommend that you TRY TO SELL one of your properties in the secondary market, so you can see how different prices in the "today's reality" market are from the "Future Dream" market. I think trying to sell may prove very eye-opening for you. (you need not actually sell, just seeing what happens when you try amy prove the point I am making.)

I am watching people trying to sell properties, and they are finding it hard-going. My own experience is limited. One of my properties I bought for cash at about P 3million two years ago, when the "normal" price under a payment scheme was P3.8 million. Today, the developer is selling something very similar one floor lower at P5.2 million (/28 = P186k psm). I found an agent who claims to have buyers for such flats, and was willing to pay P3.7 million - ie P100k below the developers price of two years ago. I sent him a message offering my flat at P 4.95 million. I did not even get a response.

What is maintaining the illusion of the strong market?
As best as I can tell, there are many mainland Chinese buyers, who are buying in their own names, or through friends, families, and business connections. They seem to like the monthly payment schemes offered by developers. And like some OFWs seem to focus on getting "low" monthly payments, and seem less aware of the total price, and the sort of actual yield they will achieve in the future.

BTW, I would really like you to tell us something about the Rents you are achieving on your properties. To me, that is what we should all be focusing on, not the artificially high prices that developers are pasting on their new projects.

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History Lesson

- The Asian Financial Crisis of 1997-98 and Events leading to it

 

(based on Special sections in today's 30th Anniversary issue of Business World):

Prelude : How Reforms helped the PH transform into a tiger cub economy - BW, 24 July, S5

 

From 1992, new president Fidel V. Ramos addressed some historic problems:
+ Power Crisis: Dept of Energy created with licenses given to create IPP's & power stations
+ Infrastructure development: introduced Build-Operate-Transfer (BOT) for tollways, light rail, power plants, etc
+ Economic Reforms: 10% VAT tax introduced, and tax base was broadened
+ Liberalization of telecommunications, banking, civil aviation
+ Privatization: of Petron Corp, with 40% sold to Aramco for US$502 million
+ Bases conversion, such as 214-hectare project in BFC going to a consortium

 

Sidebar on

Makati PH property prices

These reforms, and rapid growth in other Southeast Asian Economies helped to trigger a property boom:

 

j69Nwdm.gif

The Boom peaked in 1997-98 and then property prices collapsed by about 35%, back to where they were in 1995.

Real prices fell even more, from 1996 to 2003-4, by perhaps 50%

Asian financial crisis changes Philippines' trajectory - Business World, 24 July 2017

 

PH was said to be "one of the least effected" by the AF Crisis, but there was a shock in some areas (like property)
As the crisis began, PH seemed about ready to shake off its reputation as "the sick man in Asia"
During FVR years, it went "from a bleak landscape frequented by power outages, to a beehive of activity"
PH ended 1996 with a 6.8% growth rate (& soaring property prices), up from 5.7% in 1995.
For 1997, PH was targeting 7-8% growth, and govt economists were predicting a budget surplus.
Ramos was heralding that PH "had reached newly industrialized country status"

Drops often come fast after important peaksPhilippines-Peso-per-1-US-Dollar-2015-07

+ Onset of the AF crisis began July 2, 1997, with Thailand floating the Baht, and seeing its value drop 18% in a day
+ Panic selling of the PHP followed with people concerned it would follow the path of THB
+ Overnight interest rates shot up from 15% to 20%, then to 24%, before peaking at 32%
+ Regulators floated the PHP currency on July 11, 1997 when it was P26.40. It ended the year at P 40.116

 

PSE-Index. / PH:PSEI ... All-data : 5-yr : 2-yr : 6-mo // All-Data-vs-PSE

dJFfaJo.gif

-

+ The stock marlet had hit an all time high in Feb., at 3,447.60.
+ The low in 1997 was 1,722.01 (-50%), and that was a four year low. By year end, trading volume was cut by 30%
+ Interest rates went crazy, with overnight rates hitting as high as 170%, and the 91d Treasury rate averaged 11%
+ With hgher rates, consumer spending stalled. Car and parts manufacturers were podnering layoffs
+ Foreign companies called off their expansion plans in PH
+ Property related lending growth fell, from a truly overheated rise of 97.2% in 1996 to a rise of "just" 42.6% in 1997
+ Meantime, manufacturing-related loans grew at "only" 17.3%, down from 42.5% in 1996
+ The public sector deficit ballooned to P23 billion, instead of the P5.6 billon surplus that had been expected
+ Public sector borrowings shot up to, hitting P 35.3 billion by year-end 1997
+ Growth for 1997 was below original expectations, at 5.8%
+ FVR had to warn about worse problems in 1998, talking about "a loop of decline", while advising against panic
+ As 1998 began there were 431 notices of layoffs and almost 20,000 jobs were lost

The next administration faced a huge budget deficit and growing public debt levels

Estrada Administration
Joseph E Estrada declared he inherited a bankrupt economy, using some hyperbole, an also said:
"We are deeply convinced we are in a better position than some of the neighboring economies"
+ The currency crisis was declared over in May 1998, but not the economic crisis
+ Unemployment rose to 8.9% from 8.7% in the previosu year
+ THe Estrada administration lowered rates, and by year-end 1998, 91d treasury rates were down to 13.3%
+ For 1998 as a whole, the country barely eluded a full recession, posting GNP growth of just 0.1%,
+ But GDP growth was negative, at minus 0.5%, the first negative reading since 1991
+ The deficit for the year was P53 billion, and the country's debt stood at P1.5 trillion, up from P1.461 trillion
+ By January 1999, the IMF declared that the AFC was over
+ But the banking system remained lumbered with troubled loans: non-performing loans shot up from 5.8% (01/98) to 11% (11/98)

 

(Overall Comment) : it seems like Du30 has brought a period of reform and building like that of FVR's time as President.

The property boom we are seeing now, may be followed by a full or near-full retracement of the price gains.

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