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BUBBLE Debate: Is there a Bubble in PH Property?

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SUMMARY

Main Point:

"The country's property market is booming, transforming the Philippines into a real estate investment hotspot."

 

http://www.lamudi.com.ph/whitepaper-2017

 

Lamudi Real estate market report 2017

 

+ Philippines 6.7% GDP Growth is the fastest in the region

Thanks to regulatory reforms which have come to fruition over the past 15 years, the Philippines’ real estate landscape has turned into a haven for foreign investors and local buyers alike. 4 years ago, the Philippines began to make a name for itself as a highly reputable market among the Big Three credit rating agencies, first Fitch, the Standard & Poor, and finally Moody. With its new status came new success, and since then, the Philippines’ real estate market has been flourishing. In spite of natural disasters over the years, the Philippines has shown itself to be highly resilient.
. . .
Two years ago, global real estate consulting firm JLL recognized Metro Manila as one of its Top 30 Real Estate Investment Cities in the world in its Commercial Attraction Index. According to JLL, the key qualities that make a city successful in real estate are sustainable momentum, adaptability, and the ability to reinvent itself. Metro Manila definitely possesses these qualities.
By 2030, JLL predicts that Manila will be one of the world’s top 18 cities in terms of GDP.

===
Mostly, it looks back at 2015 vs 2016, and discusses trends, and facts that are well-known by now.
Also discusses the rising use of the Internet, social media, & mobile phones in searching for Real Estates

Some comparative numbers, from Lamudi's databanks, like this:
Average price of condo & Rentals per sqm, based on Lamudi’s 2016 listings

CITY Ave. / Condo Price : Rental : Yield % :
(2016) /sqm
Makati -------------- : 160,345 : 918 : 6.87 %
Taguig -------------- : 135,977 : 894 : 7.89 %
Pasay --------------- : 109,294 : 878 : 9.64 %
Mandaluyong ------ : 96,905 : 736 : 9.11 %
Manila --------------- : 87,652 : 610 : 8.35 %
Quezon City -------- : 82,224 : 614 : 8.96 %
(Partial List)

The paper then goes on to talk about the Demographics of Lamudi Users.
+ Slightly more Females than males
+ Slightly more single than married

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TOPPING SIGNS - from at least one analyst

 

Property prices are plateauing... according to Pinnacle.

(and they are basing on this the BSP Phil Real Estate index)

 

http://www.businessmirror.com.ph/housing-developments-continue-amid-plateauing-market-price/

 

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

 

iStock_000021561814XSmall2.jpg

"Make hay while the sun shines"

 

TWO POINTS come to mind in reading that article:

 

/ 1 /

"Citing data from Bangko Sentral ng Pilipinas (BSP), Pinnacle Real Estate Consulting Services, Inc. (Precsi) Director of Research and Consulting Jojo Salas said that the country’s residential property values slightly grew by 1.1 percent in the first three months of this year, from the same period in 2016.

The Residential Real Estate Price Index edged higher by 1.3, from 115.9 in the January-to-March period last year to 117.2 in the similar quarter in 2017."

 

They must be looking at Secondhand prices rather that Primary (New) market prices - which the developers are pushing up at a dizzying pace

- like 10-15% per annum, or more!

 

/ 2 /

"Pinnacle’s study estimates that the units of residential condominium projects in Metro Manila could aggregate to 240,000 by December 31."

 

+ SM launching between 15,000 and 18,000 units this year
+ Ayala has 16 new projects underway, with P100 bn this year, and P40 bn of "housing inventory"
+ Megaworld has P146 billion of projects, with P30 bn in San Fernando, Pampanga
+ Vista Land has boosted its launches from P30 bn to P42 bn this year

The banks are being accommodating, with P1.31 trillion of loans extended in Q1-2017, up 21.5% yoy

 

Are developers pushing up prices so fast, because they are in a sort of panic-crisis mode and want to 'make money while the sun shines' - pushing up prices, to lock in as many high priced sales as they can, while hoping that some of the price rise will stick, and they will not need to cut prices below costs to make future sales.

 

If that is what is happening, the strategy may backfire...

Gun_Backfire.gif

BACKFIRING could happen if Buyers turn their backs on new projects, and instead seek out purchases in the (far cheaper) secondary market, where prices are often 15-20% cheaper, and even 25%-30%. cheaper or more. If banks decide that it is less risky for them to finance 60-70% of the cheaper secondhand price, than lending 60-70% of the expensive primary price - then the practice of cash buyers moving into to Secondary market could accelerate. Eventually, as the availability of lower prices and decent finance in the 2nd Market becomes widely recognized - then ALL smart buyers (including OFW's with a bit of savings) might decide they prefer genuine bargains to the "glitz" of buying a new property which will lock them into far higher mortgage payments.

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BUYERS WAKING UP ?

(Per Viber conversation, with W.)

 

The revolt of OFWs based in SG haha. ..

SMDC getting a bashing on the forums after inviting people at the Novotel to a Property Event showcasing new line up of projects.

It's a comical read, but it's in English and Tagalog.

Is this the start of OFWs waking up and realising not just blindly throw money into PH real estate? ...

 

INVESTMENT OPPORTUNITIES section, on the Pinoy Singapore Forum

> https://pinoysg.net/discussion/9777/investment-opportunities

 

COMMENTS, excerpts / much of it is in Tagalog

==========

+ Im a condo owner in manila and as mentioned nga properties talaga nde ka lugi. Of course consider checking the developer. I am now connected with SMDC and we have wide choice of good investment for you all to check. I hope we can invite you for a talk in Aug 19 in Novotel Clarke Quay. Free dinner will be served. No commitments

 

+ Word of Caution on SDMC.. ang pangit ng mga units, at mahirap pa ibenta. Dami din ako friends nag invest sa smdc. kunware tumataas nga pero hindi na man ma benta. Porket tinaas ang developer ng price, as an investor you'll never get that selling price in the public market. so ngayon yung mga frineds ko na nag invest puro empty mga units. saying lang pera na hinulugan nila. ginagamit na lang nila pag uuwi or pa minsan meron din air bnb, pero di sapat ang kita sa nilabas nilang pera./ SS

 

(In edit / TRANSLATION:

"Units are not nice/ugly and hard to re-sell. I have many friends who invested in SMDC. They (developers/smdc) create the impression that prices are increasing but no is able to sell (at that price). Developers are increasing the price but you won't get that price in the secondary/public market. Now, my friends who invested have empty units. They wasted their money. They now just use the units when they go home or some air bnb. But, not commensurate to the money they invested on it" )

  • to follow SS 's warning, yung mga OFW na makikipagmeet sa mga ahente ng mga real-estate company sa Pinas for Condo "investment", eto yung mga dapat niyo bantayan sa mga sasabihin nila sa inyo.

    1.
    Claim: Yung monthly amortization ma cocover ng rental income the moment ma transfer na sa inyo yung unit at napaupahan na.
    Fact: Sa dinami dami ng condo na para ng kabute sa metro manila,...t. At ang rental rate ay most likely hindi sapat to cover yung monthly amortization ng loan, dahil nga sa sobra ang demand ng units, ang baba ng rent. Kaya yung iba sa Airbnb ang bagsak, at tanungin niyo yung management ng condo niyo kung i-allow ba nila ang Airbnb, kasi yung iba ayaw gusto nila sila mag manage ng pagpapa upa.

    2.
    Claim: Luxury living dahil sa amenities, security, at management ng condo
    Fact: Strict rules ... invite sa amenities.
    Management sucks ... After sales is non-existent ...

    Rude pa ang mga guard at mga tao sa management office ng condo na daig pa mga may ari ng unit kung umasta, tratuhin kang tenant instead of resident.

    3.
    Claim: Investment, maibebenta ng malaki after X years.
    Fact: GOODLUCK! after X years, mas marami na ang condo kesa sa 7/11 and MiniStop outlets combined ...
    .... SMDC and DMCI notorious ang reputations online from disappointed condo unit owners. / T

+ Poorly made and poorly managed, only a matter of time magiging literal tenement talaga mga SMDC condos / T

===

 

Sounds like buyers have been unhappy with SMDC's quality, management, and after-sales service.

Also (without translating the Tagalog), it sounds like the Rental Income, is NOT COVERING the loan installments.

So people are realizing that Yields have fallen, as prices has been pushed higher

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SUPPLY Concerns : Manila Bay & maybe Air / Rise

 

Business World headline / & a look at Forecast Supply figures

Metro Manila condominium rents fall, selling prices plateau

 

(based on Colliers latest report)

 

+ VACANCY RATES will likely pick up further over the next 12 months with new supply

+ Consequence: Rental prices fell, capital values are plateauting

+ Vacancy rates at high-end condos were 10.9% at the end of June - Colliers expects rates to "hover between 11.0 & 11.5%"

+ Metro Manila's total condo stock is 96,000 units, with an addition of 2,300 units in Q2

+ For 2017 as a whole, Colliers sees an addition of 16,100 units, and a takeup of 7,500 units - hence the rise in the vacancy rate

+ Coming supply: 20,000 units in 2018, 8,000 units in 2019

+ Take-up rate is projected to be 8,000 more each year

 

Highest vacancy rates were: BGC = 14% (12%); Makati: 12.7% (11%) - prior rates at Q1 shown in (brackets)

 

Prices rises are slowing:

+ Makati CBD : +3.1% (was + 3.2% in Q1),

+ BGC / Ft. Bonifacio : + 0.2% (+ 2.7%)

 

Growth of supply in fringe areas, as impacted on rents and selling prices in the CBD's, since home buyers and tenants have other options

 

SUPPLY FORECAST (Revised from end-2016)

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

========= : End'16 : -2017 : -2018 : -2019 : -2020 : '17-20 : End'20 : % chg.
Ft.Bonifacio 24,200 : 4,100 : 8,200 : 3,000 : 0,000 : 15,300 : 37,500 : +63.2%
Makati CBD: 22,000 : 3,500 : 1,800 : 0,500 : 0,300 : 06,100 : 28,100 : +27.7%
Rise/Air Res: 00,000 : 0,000 : 0,000 : 0,000 : 6,400 : 06,400 : 06,400 : Infin.
Ortigas Ctr. : 16,200 : 1,400 ; 0,700 : 0,500 : 0,600 : 03,200 : 19,800 : +19.8%
Manila Bay : 08,800 : 5,500 : 8,500 : 2,600 : 2,100 : 18,700 : 27,500 : +212% !!
Rockwell Ctr: 04,100 : 0,000 : 0,500 : 0,700 : 0,000 : 01,200 : 05,300 : +29.3%
Other Areas : 00,000 :
>> TOTAL-- : 91,100: 16100: 21300 : 8,100 : 3,100 : 00,000: 140,100 : +53.8%

Mak+Rise/Air: 22,000 : 3,500 : 1,800 : 0,500 : 6,700 : 12,500 : 34,500 : +56.8%

 

After this year, the supply rise in Makati's CBD falls sharply - but are we seeing the whole picture?

Collier's seems to ignore the Huge lump of supply (6,400 units) from The Rise and Air Residences,

which I think will hit the Rental market in 2019 or 2020 - but Colliers seems to leave it out - Why?

 

If you include Air & Rise with Makati CBD, the combined rise is 57%, which is in line with the rise of 54%

for Greater Manila. Still, the big jump from these two in in 2019 or 2020, is bound to generate some sort of hiccup.

I hope it is a brief one. Allowing AirBNB in one or both buildings may help absorb the excess supply there faster.

 

The big jump in supply in Manila Bay (+212%) is a bigger concern to me,

We see + 8,500 units expected in 2018 - that's 97% of the end 2016 Supply of 8,800 units.

Can Manila Bay really attract so many new tenants, so quickly? I truly doubt it.

There is bound to be a disruption of Rents and also hotel occupancy.

Don't be surprised if Hotels push back by trying to restrict AirBNB activity.

 

SM may be especially keen to demand some restriction because they are said to planning to build a hotel

in Manila Bay. Will SMDC wind-up c"cutting off the legs" of their condo-buying customers?

 

I suggest extreme care in investing, and maybe analyzing the Supply situation more deeply that I am doing here.

If you do that, and agree or disagree, please share. This site is about truth seeking, not mere promotion.

=

> Excerpt from post on the DATA thread: http://www.greenenergyinvestors.com/index.php?showtopic=18811&page=17

 

Summary - increase in Condos units: over 2017-2020
BGC/theFort: +63%
Makati CBD : +28%
Manila Bay : +212%!!!
--- Overall : +54%

However that Mak.CBD # does not include The Rise & Air Residences.
If you add on the 6,400 units at Rise & Air, you get:
Mak+Rise/Air: +57%
THAT much may be manageable, but will bring some temporary hiccups, I reckon.

The huge jump in Manila Bay may be more problematic IMHO.
In one year (2018, with 8,500 units) M-Bay will add as many units as they have now!
Can the rise in M-Bay tourism really absorb that? It might really hit the hotels.

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A bizarre headline in The Manila Times... needs explanation

PH Property Yields luring investors

(What!? Colliers says Rents are falling on excess supply)

"Higher gross yields from the Philippines property market continue to entice foreign investors,a recent study by property consultancy firm Colliers International shows"

+ Q2-2017 rental yield of 7.7 percent in PH, outshines Asia's average of 3.8 to 5 percent at prime locations

+ Higher than Shanghai's 5%, Tokyo's 4.5%, Singapore's 4%, and Hong Kong's 3.8%

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Here's how Bloomberg sees it:

Traffic Is So Bad in Manila Workers Are Moving Into Dorms

800x-1.png

Ayala Land Inc., which built Manila’s financial district, is expanding into workers’ dormitories as developers target people fed up with battling some of the world’s worst traffic.

The company is investing 3 billion pesos ($58 million) building five dormitories on four sites in the Makati and Taguig business districts, comprising 1,500 units that can house as many as 6,000 people, President Bobby Dy said in an interview. The first dormitory will be ready next year, and has received interest from firms wanting to lease entire floors to keep workers close, he said.

“It caters to a segment of the market who would want to stay close to their place of work to improve their productivity and their quality of life,” Dy said. “There’s really a need for this kind of product if you look at the commute times in the last couple of years.”

Metro Manila was voted the world’s worst city to drive in

> https://www.bloomberg.com/news/articles/2017-10-26/manila-s-gridlock-spurs-dormitory-demand-to-keep-workers-close

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REACTION - to the latest Colliers Report : Q3-2017

FALLING YIELDS - again in Q3-2017. How savvy are the buyers?
Since the recent peak Yields of 7.02% - in Q4-2015 when Rent's peaked at P883 psm.
Rents have fallen by 8.4% to just P 809 per sqm.

Nevertheless, Condo Buyers ignored the trend in Rents, and kept bidding up the prices of new condos.  In the same period, the average Condo in the index was up from P151.2k to P167k psm, a rise of 10.4%.
Consequently, Yields have fallen even more than Rents.
Gross Yields (on 3BR units) are down to just 5.81% - that's a 17.2% drop - on a 8% drop in Rents

Meantime, prices keep rising, and interest rates are stable-to-rising.

Who propping this market up?

Probably potential own-use / family-use buyers from the OFW, and Mainland Chinese who are buying (somewhat naively?) for safe-haven reasons.

Here's Colliers own comment:

"Modest decline in rents as prices still on a plateau The additional supply and rising vacancy have pushed rents down as the rental market has become more competitive. Options within and outside CBDs have increased and have provided alternatives to tenants in the market. Among the three top locations for prime condominium units, Makati showed the biggest decline in rents, albeit still a modest 1.0% decline quarter on quarter to P809 per sq m per month (1.50 USD per sq ft per month). It was followed by Rockwell which declined by 0.50% to P886 per sq m per month (1.65 per sq ft per month) and Fort Bonifacio by 0.12% to P811 per sq m per month (1.51 per sq ft per month).

Among the three locations, Rockwell Center commands the most expensive rent. Understandably, the contained environment of Rockwell Center has largely kept the consistency of products within the area, softening rental impact through time. Meanwhile, the sizeable stock in both Makati and Fort Bonifacio has tightened competition among various developments.
The secondary market prices in major CBDs continued plateauing. Although still in an uptrend, the velocity of capital appreciation slowed down in recent quarters"

> http://www.colliers.com/-/media/files/marketing%20reports/3q2017_colliers_quarterly_residential_final.pdf

COMPARE:

4Q /2015 : 151.0k : 7.02% : 0,883 : +0.91% : +5.37% / 0,600 - 1,166 / 0,688 - 1,094 / 0,814 - 1,094:

1Q /2016 : 152.0k : 6.82% : 0,865 : - 2.04% : +2.00% / 0,590 - 1,140 /
2Q /2016 : 147.6k : 6.95% : 0,855 : - 1.16 %: - 0.11% / 0,580 - 1,130 / 0,660 - 1,050 / 0,800 - 1,100 :
3Q /2016 : 146.5k : 6.88% : 0,840 : - 1.75 %: - 4.00% / 0,570 - 1,110 / 0,655 - 1,040 / 0,790 - 1,080 :
4Q /2016 : 150.6k : 6.67% : 0,837 : - 0.36 %: - 5.21% / 0,560 - 1,100 / 0,640 - 1,020 / 0,780 - 1,070 :
1Q /2017 : 154.6k : 6.39% : 0,823 : - 1.67 %: - 4.86% / 0,560 - 1,080 / 0,630 - 1,000 / 0,760 - 1,050 :
2Q /2017 : 161.5k : 6.08% : 0,818 : - 0.71 %: - 4.33% / 0,540 - 1,080 / 0,610 - 1,010 / 0,760 - 1,010 :
3Q /2017 : 167.0k : 5.81% : 0,809 : - 1.10 %: - 3.70% / 0,530 - 1,080 / 0,600 - 1,000 / 0,730 - 1,040 :
Qtr /Year. : Mak-Mid. Yield : Rent : QonQtr : YronYr / Lo - Makati - H / L-Bonfacio-H / L-Rockw- H /

VACANCIES have risen into the mid-teens in many Manila locations (such as 14.1% in Makati & 15.3% in BGC;
they are lower at 11.5% in Rockwell, and lower still, at just 6.4% in Ortigas), but a slowing of Condo completions in 2018, may turn these figures around and bring them lower in 2018 and 2019, in Makati at least.
Colliers still expects Rents to continue to fall "for years", but the falls may be highest in the 3BR and above size range. I am seeing signs of stable and even rising rents in the Studio size range. As an example of this, Avida has NO STUDIOS available for rent in Makati, as I was writing this.

A strong position thing is that Household formations in PH are continuing to rise faster than Condo completions of Metro Manila as a whole.
The ability of developers to sell Condos at higher and higher prices, suggests that demand is still healthy, buyers are not put off by lower yields

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TELLING Turns (in stock prices) maybe?

CPG etc. Needs watching, in any case

Century Property is back under pressure, as other PH property stocks look as if they may be rolling over (from their highs)

CPG / Century Property ... 5-yrs : 2-yrs : 6-mos / 10d / Last: P0.46 - key support at P0.40

pltwgss.gif

Compare:

ALI / AyalaLand ... 5-yrs : 2-yrs : 6-mos / 10d / Last: P41.75 - key support at P39.00 (peak was: P46.)

tv9iAG8.gif

Compare:

MEG / Mega World ... 5-yrs : 2-yrs : 6-mos / 10d/ Last: P5.10 - key support at P4.50

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Overall market comments:

===========
1 / The market is hot as a pistol now,  Mainland Chinese buyers have upset the supply/demand balance, and Ayala (&others) reacted by pushing their prices up fast.  Second tier developers have followed the price rises where they can - and the secondary market has heated up too


2 / In just two short years at Arca South, Avida become priced like Ayala Premier was recently  - Given the difference in branding, I find it remarkable!.  After last Sat's meetup, 3-4 of us decided to do some real life investigation.  A., M. and I went to... visit an Avida showroom.  I was pretty shocked at how fast they have been pushing up prices everywhere, and at Arca South in particular.  I used to think of P180-200k per sqm as the price "domain of Ayala premier".   Now most of the remaining stock in Avida projects seems to be priced at - wait for it - at about P190k psm!  That is almost double what I paid for my own avida san Lorenzo unit just 2 1/2 years ago.  But I have recently had an offer on my SanLo unit at about P 120k psm, so probably I am pricing it too cheap.  I am now thinking of asking P130k-140k.  At P150k, I would get P3.3 million, which is over the current VAT threshold.  An Avida agent told me I should target P3.4-3.5 million if the VAT threshold disappears.  I will consider that

=====

VERTIS NORTH in Quezon City, site visit :

kSY4xith.jpg

I visited AyalaLand's Vertis North project in Quezon City today.  It was the first time I had seen it in person, after looking at maps, floorplans, and other images for about two years.  In fact, it looked better than I had expected, and I think a good investment case can be made.  But you may have to move fast, for reasons I will explain.


Here are some reasons I am predisposed to like selected opportunities in VN:


+ The Transport angle:  Vertis may turn out to be the "best connected" location in PH. Within the next 5-10 years all of Manila's major railways may connect thru Vertis: The EDSA/MRT-1 line (at North Station), The LRT, MRT-7 to Bulacan (& maybe going on the Clark, and probably the first station of the recently approved Mega-Manila subway. MRT-1 now services North station, and there is room for major improvements on that line when the new contractors take over in 2018 (as expected.)   The big improvement in connectivity to the airport will be in maybe 5-6 years if the Mega-Manila subway is completed "on time." Then, the journey to NAIA might be something like 30-40 minutes, with easy connections to Clark airport sometime in the future.
+ Offices & Jobs: With so many connections, it will be a suitable place for big companies to put their Northern Headquarters, or even their PH Head offices.  Something like 70% of the space in the whole of Vertis is reserved for offices.  Three BPO's will open in the first half of 2018.  Many more office buildings are coming there. (# offices to be obtained from Ayala contacts)


+ Quezon City is huge: QC has a rich history, having once been the capital city of the PH.  Living within the city are lmany wealthy people and they are served by a few large malls (Trinoma and SM's mall, come to mind.)  But the city lacked a main CBD, business center.  Ayala's Vertis North should provide that within 5-10 years as the office buildings are completed and rented out.  People working in the CBD will provide tenants, and possible future buyers of properties at VN, raising the probability of a profitable exit
+ VN with have a nice green park at its heart: this will make it a nice place to meet, to relax, and to do outdoor sports, such as jogging.  People will want to live on or near the park, when they work nearby, or if they use the transport connections to commute to jobs elsewhere.  The Ayala salespeople call it "the next BGC" (a title also claimed by Arca South), but VN's size, its great transport links, probable high paying jobs, and ability to build higher - actual skycrapers - may give a better chance of mimicking BGC than Arca.  BTW, the transport links at VN are BETTER than those at BGC


+ Vertis Style: Visit the Seda hotel at VN, the "largest Seda hotel" and the next door Vertis North mall and you may get a sense of the style and branding that Ayala is aiming for at Vertis.  There is also a casino coming into VN, to be run by Solaire

 

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Central bank property index (RREPI) up 1.8% over year to Q3

The BSP's Residential Real Estate Property Index (RREPI) is computed using a chain-linked index, which s based on the average appraised value per sqm of NEW housing units:

+ It rose from 109.6 a year earlier, to 111.6 as the end of Q3-2017 - that's 0.0%

+ Prices of townhouses were up 7.3%, and Condos up 3.6%

+ Single detached home prices were up only 0.8%, and Duplexes dropped 8.6% year-on-year

Prices were up both inside (+2.0%) and outside (+1.8%), the NCR.  Single detached & duplex homes were down in the NCR, but the rises in prices of townhouses and condos, dragged the NCR average into the positive region.

The secondary market is NOT in these prices.  The BSP watches new homes most closely because 76.7 percent of mortgage loan are secured on New homes.  By type of housing unit, 48% of residential property loans were for condos, and 41% were on single family detached homes.

Too bad that prospective, buyers, lenders, and the BSP have such little good data on the secondary market.

 

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HOUSING Backlog at 7 million units by 2020, says Developer's org

"The country's housing deficit is estimated to reach a staggering 7.67 million by 2022... according to the Organization of Socialized Housing Developers of the Philippines." - at a Lamudi forum.

+ Affordable housing is classified as homes below P3 million

+ Within that, homes prices at P1.7 - 3 Million are called "low cost housing"

+ Homes at P450k - P1.7 million are called "economic housing"

+ Under P450,000 is called "socialized housing"

+ Living spaces at P3 - 6 million are called "mid-cost", and those costing over P6million are called "high-end".  These top two segments are where most of the bank lending is going.

Banks find it very difficult to lend in the lower end "affordable housing", and especially in the (<P450K / ie <$9k) "socialized housing" sector.  No doubt the potential headaches of monitoring loans and foreclosing, if needed, make this uneconomic for most banks.

===

There seems to be an obvious "fix" imho. 

Make it easier for Sellers (of secondhand homes) to finance the sale... and take viable collateral.  And easier to access the courts, if they need to

 

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Property Developer / QUESTIONS - concerning stock weakness

LOOK AT DMCI ! this is a good quality developer  - and the chart looks like it is already rolling over. If the market was as fundamentally strong as Colliers is pretending it is, would the chart be so weak? I doubt it

DMC / DMCI Holdings ... update

qevmRK1.gif

2. CPG / Century Property Group ... Last P0.435 (new low)

Have you seen the chart for Century Properties recently?

Today, it made a new Low for the year at P 0.435

3. MEG / Megaworld ... 12-months's range : P3.38 - 5.85 / last: P4.79

MEG is also near a low for THIS year, 2018.

4. FLI / Filinvest Land ... 12-month's range : 1.60 to 2.25 / last: P1.79

Filinvest Land is near recent Lows, & only about 10% off 2017's Lows.

5. ALI / Ayala Land Corp ... 12-mo's range : 33.05 to 47.50 / 43.95 - 2.55%

ALI 's chart is more healthy. They are a Blue Chip developer. Along with SMPH.

ALI announced its profits for 2017 yesterday : Up 21% to 25.3 Billion. Properties revenues rose 13% for the year, with growth accelerating (+17%) in Q4.

But overall, these charts do not seem to be consistent with the Record Property prices -- and the record prices & big price rises we are seeing in Condos

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It is TIME - to make the Bear Call!


The Bear Case looks compelling now... Very!
Five Big Bear factors

1. Mind the Gap! Prices have shot up ahead of lower Rents
2. Aggressive Buying driven by foreigners, largely mainland Chinese
3. PH Governments interest rates are shooting up - 10 yr Zeros hit 6%
4. PH banks are becoming increasingly restrictive; balloons may not get financed
5. Future Supply is heavy, especially in Manila Bay, and BGC
==
Already, the stocks action in two key property stocks, ALI & MEG is looking negative
> (will add charts): http://www.greenenergyinvestors.com/topic/21885-the-bear-case-looks-compelling-now-very/
==

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http://www.bsp.gov.ph/statistics/keystat/rrepi.htm

 

There has been an OFF THE RICHTER SCALE price increase in especially condominium units in 4Q 2017

 

The growth rate of prices of condominium units in NCR = YoY 15pct, QoQ 10.9pct.

This is the highest growth rate I believe since they have created this index.

 

Maybe this coincided with the top in the equity markets in late january and we could go down hard from here.

 

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"There has been an "OFF THE RICHTER SCALE" price increase in condominium prices in the MM NCR.

 

Part 2.

Here is anecdotal evidence from Skyscrapercity that people accept the higher prices, and are keenly

aware that they pay maybe 20-40pct more for new construction than a few years ago.

 

1) Shore 2 residences - SMDC

http://www.skyscrapercity.com/showthread.php?t=1817408&page=3

Ang swerte ng mga early buyers nito. We got in really very late in the game. 

24sqm 1 bedroom is priced at 5.3M (deducted na yung 10% promo nila now). Even if, we still reserved a unit..

Just hope na Shore2 will still command good rental investment in future.

 

2) Prisma residencs - DMCI

http://www.skyscrapercity.com/showthread.php?t=1842164&page=12

Just reserved a unit 1BR Type C for 3.7M already closing fees for Celeste Tower. Ok kaya? I regret missing the 1st tower last year. That's almost a Million increase today =/

 

So there are the stories of real people who admit and know that they re paying more for new units from the developer than a few years ago.

 

FYI.

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THE CRUNCH will come... if there is going to be one,

When they get the keys and try to rent out these expensive units (& generate a reasonable return.)

Of even earlier, when they try to get a bank loan to finance those 70% or 80% due after Three years

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https://www.prosperna.com.ph/real-estate-bubble-philippines/

EXCERPT
"

Firstly and without a doubt, 2015 was the best time to buy especially Off Plan upmarket Condos. The average price for such a condo was around PhP 130,000 (USD $2,600) per square meter and in 2017 it’s now PhP 200,000 (USD $4,000) per square meter or higher with Ayala Land Premier and Rockwell Proscenium selling at an estimated PhP 270,000 per square meter and above. However, the average rental price for these condos is the same as 2015 and could even be argued that it is less, as more and more Pre-Selling Condos complete and their inventory becomes available on the market. For example, the Milano Residences, a Century City property, and the Park Terraces, an Ayala Land Premier property, both in Makati are good indicators of this.

So what does this mean for a real estate investor?

In simple terms, it means that in 2015, a real estate investor was getting about 8% net Yield and today an investor is probably getting only about a 5% net yield or even less if they buy at Rockwell or Park Terraces"

(DrBubb: That's Nick Stuart, writing for Dennis Velasco's website - I know them both - had lunch with Nick recently.)

> Prosperna thread on Mak-Prime

 

 

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http://bworldonline.com/q4-home-price-hike-biggest-in-three-quarters/

Q4 home price hike biggest in three quarters

EXCERPTS:

HOUSE PRICES rose faster in 2017’s last three months from a year ago, marking the biggest increase in three quarters as duplex and condominium prices surged by double-digit pace, according to data the Bangko Sentral ng Pilipinas (BSP) released on Wednesday.

Prices rose by 5.7% year-on-year from October to December, clocking the fastest pace since a 6.5% climb in 2017’s first quarter, according to the latest BSP residential real estate price index (RREPI). The 2017 fourth-quarter pace compares to the preceding three months’ 1.8% and the year-ago 3.3% rise.

On average, housing prices rose by 3.6% for the entire 2017, roughly flat from 2016.

2 /

Central bank officials have noted sustained strong demand for commercial and living space in the Philippines, showing that price increases are driven by actual demand and allaying fears of a bubble. A bubble forms as a perceived rising demand for houses drives developers to build more units, and is said to “burst” as consumption stagnates and causes an abrupt drop in prices that could jolt exposed banks.

The BSP limits a bank’s real estate exposure to 20% of its total loan portfolio. Philippine banks handed out P1.801 trillion in real estate loans last year, with home loans accounting for a third at P608.142 billion, according to latest available BSP data.

 

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NO APOLOGIES from the Bubble Creator (SMDC)


I went to visit Mall of Asia, to have some food yesterday.
While there, I could not resist stopping by the SMDC showroom.
The showroom looked the same as the last time, but the prices on offer are MUCH higher
Examples/
Project: Compl.: Cost-- : Sqm : PerSqm
Air Res :  2020 : P6.80M : 26.4 : P258K :
Shore3 :  2022 : P7.38M : 26.1 : P280K :
RedRes:  2023 : P7.17M : 26.0 : P275K :
Lush - :  N/A- :
Note: Costs include 12% VAT & Miscellaneous
====
I found the prices rather shockingly high, since they were maybe 20-25% lower than the last time I had seen them.
The agent was surprised, and did not know how to react when I asked her what the Shore Residences unit could be
rented for - that's a 26sqm 1BR.  her colleague said: for P30-35K per monthly, and then it was my time to
be surprised.  I asked it she had some way to demonstrate or prove that, and after 20 minutes, she came
back and showed me an OLX ad at P35,000 (semi-Furnished)


P35k x 12= P420k / P7.38M = 5.7% Yield BEFORE paying for A/C etc needed for "semi-furnished" status

OLX Available
Shore1 : 1BR : 27.7sqm : P35,000 : FFurn., Amenity Fl
Shore - : 1BR : 27.7sqm : P35,000 ; FFurn., 19th Fl, w/balcony, seaview
OLX Seeking
Shore - : 1BR : 27.?sqm : P30,000 ; SemiF., Seeking 10 units, "cheapest price", quotes P30k

Rentpad Avail.
1BR: 26sqm at 30-32,000 monthly - FFurn
1BR: 27sqm at 32-35,000 monthly - FFurn

 

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There are still better deals available on the secondary market.

breezeresidencesmanila___Location.jpeg

Many Breeze residences units (27sq m units ) are sold on the secondary market for 3,6 - 3,7 - 3,8 million PHP, around PHP145K to PHP150K per square meter, (according to OLX.ph) while the official price is around PHP6- 6,2Million for units facing amenities/MNL Bay.

The price per square meter around MOA is perhaps around PHP170K to PHP180K and likely not more for the moment.

 

Anybody who is paying these developer prices is at risk of a big loss if the market heads south.

It s an almost 50pct price difference between PRIMARY and SECONDARY markets, IMO.

 

The facebook page MAKATI - BGC BROKERS has a lot of listings of units that are for sale in the secondary market

and which are shared amongst these BROKERS.

 

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ECB,

I agree with you that staying away from the P 200K+ per sqm NEW Properties makes sense

Especially when you can get something NEW or ALMOST NEW from the secondary market.

The question is:  WHAT IS THE BEST WAY to access the Secondary Market.

Looking at OLX or other property websites (which sites?) may be one way, but others have have found better & more creative way

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Greater Fools are the ones buying now

 

/ in edit, by drBubb: Here's a second video, where he gives reasons why Canadian prices MUST come down -

basically, incomes and rents have to rise to sustain the higher prices.

And the government may prefer to put restrictions on buying by Foreign Speculators, mainly from China /

Real Estate "Breaking Point" - Prices MUST go Down!

 

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Dr Bubb, when is the Philippine Real Estate market going to run out of bigger fools???

Is there a way to measure the number of bigger fools in PH real estate? I read somewhere that around 400,000 people could already qualify for a PHP1, TO php1,5Million loan, but for bigger amounts, you are looking at a very small number of bigger fools. (I mean local Philippines based individuals).

Dr Bubb is a "numbers guy". Maybe he knows the exact number of bigger fools and based on this number one/he might be able to predict when the market will fall.

Of course, it is made more difficult by the "international" fools who also operate in this market.

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A good video from our (new) friend in Canada who likes making videos - more here, near bottom of page.

Can Real Estate Drop 50% ?

Toronto prices peaked at C$920,000 in Spring 2017.

Can a 50% Drop happen Manila, Philippines?

"Anything can happen" is a pretty good mantra for markets anywhere.  I do not expect that to happen for Manila as a whole. But there are some areas where it might happen. 

(Manila Bay, Supply snapshot):

Area SUPPLY : 12/2017: 2018 Completions : 2019 Completions > 2018-19 :
Manila Bay--- : 11,000 : 11,900,  + 108.2% :  + 2,600,  + 23.6 % > +131.8 %

For example, if a 1 BR unit in the Manila Bay, which SMDC sells Today for P7.4 million (or P280k psm), could go back to the P3.5 million level where it was just 2-3 years ago.

I will explain WHY I think that is possible on the next page

tRpNS8J.gif

My quarterly chart shows inflation, and the inflation-related price for Makati is just P120,000 per sqm. And Manila Bay with a glut on Condos will have to compete with Condos in Makati and BGC, which will arguably be more desirable for investors

 

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