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Bargains#2: Makati & BGC Properties - P 4million & Up

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Bargains#2: PHP 4 million & Up:

Makati & BGC, includes secondhand

 

Find and Discuss property bargains, and the secondhand market here.

 

5cm8XGy.gif

 

I must be frustrating to deal with (for some property agents eager to sell expensive new properties.)

 

I have real problems accepting the (high) prices that I am seeing on new projects being offered nowadays

- like P170k to 200k per sqm, and higher - mainly because Rents are not rising, and so Yields are falling

But I have my reasons, and I think that they are sound and logical

 

Here's why I am resisting high prices:

=========

1. Prices of new projects have moved up too fast imho, especially when you consider the current oversupply (with vacancies estimated to be 16%!! by Colliers by the end of 2017. And the data shows that Rents have stopped rising and are now falling at maybe 5-10% a year. (And the PHP has been weak too - down 7% during Du30's first year in office.)

.
2. According to Colliers, Average Rents (for 3 BR flats) are now down to P830 psm. Last time we saw that, mean capital values were P 100k psm. AND Colliers expect average rents to fall further to P800 psm in one year. When we last saw that in Qx-2000 capital values were just P100psm. So I find it impossible, to ignore this reality, and pay up. Colliers reports capital values at XX as of Q4-2016, or a mean of P1XX psm. Even if you knock out some of the super luxury prices (as I do in my own statistics), you still get a mean of just over P150k. I don't want to pay even that much... when prospective rents are drifting lower.

.
3. I bought my own properties on 2014 and 2015, and on three properties, I paid an average of P109k psm (126k, 105k and 96k). They are not all in the most prime locations -though two are, but they are all three from good developers, and I expect to make a decent yield of perhaps 7-8% or more when I rent them out. Why should I accept a lower return on new purchases. and dilute my overall returns?

.
4. Agents are telling me that there are many properties for sale in the secondary market. And they say that good properties in good locations can now be had for P120-125k psm, and even less if there are distressed sellers, or sellers in a hurry. I am not seeing a lot of detail of what's on offer, but this is what I have heard

.
5. Two friends of mine bought resales in 2016, at about 115k psm (in One Central, and subtracting out the value of a parking space, perhaps 100k psm), and about 110k psm (in The Rise, taking over a sellers payment schedule.) Both sales were from "motivated sellers". and I think they were sourced through OLX. So it CAN be done, and in theory, the bargains should get even better in 2017 and 2018, given rising vacancies and softer rents. Having said this, the market is opaque, and it is not easy for a non-agent to see what is on offer.

I have started this thread, to capture information on apparent bargains, as I see them. Some of the properties that I mention may be more than 3-5 years old. I think the older properties, even beyond 10 years should be suitable for investing, so long as they are in prime locations, and the buildings are well-maintained.

 

If these properties are beyond your price range, I have another thread for properties prices at P 4 million and below:

> http://www.greenenergyinvestors.com/index.php?showtopic=21400

Readers here are encouraged to add to the discussion, and post any sales opportunties they think may fit the "prime location, bargain price" critera
=======

 

I would consider buying more property, but only if I am fairly certain that I can rent it out easily, and obtain a decent yield.

and also that I will not be facing a large and near-certain loss, if I decide to sell in the next 3-5 years.

 

My want of finding something suitable is to bargain-hunt in the secondary market.

But are there really bargains to be had?

Let us see what we can develop...

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Kicking off the Bargains#2 thread with a property in BGC

 

(Note: see the Bargains#1 thread for more properties, mostly under P4 million)

 

This one looks cheap at P 135k psm !

- An interesting discount to the Developer's recent prices - so I thought I should show it here)

Near the Hyatt - and by the same developer

madison7.jpg

 

RESALE-MADISON PARK WEST, VERITOWN FORT, BGC

SUPERB OPPORTUNITY-CONTRACT RESALE with next to no units left for sale from the developer and this unit priced below the developers last for sale price this is an opportunity to buy a high quality BGC condo at an incredible 135,000 PHP per square meter Turnover 2018.

==

1 Bedroom

1Baths & Toilet

Floor Area: 39 sqm

Selling Price: 5.300,000

MADISON PARK WEST – OVERVIEW

Madison Park West at Veritown Fort is inspired by the stunning architecture, grand lobbies and sublime designs of the Grand Hyatt. Souring above Fort Bonifacio, your luxury address is an exemplar of modern architecture.

World-class amenities for the sophisticated few...

 

(A friend has the listing. Can provide more info. Send PM to me if interested)

 

This seems to be the right FLOORPLAN

 

I reckon I can find some bargains that seeming "newbies" like Peter won't tell you about - haha
Grand%2BCentral%2BWest3.png

==

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https://www.property24.com.ph/1-bedroom-condominium-for-sale-in-makati-city-111686947

 

Hi

 

 

There's a second hand flat available in Jazz Residences, now for 3,2Million

from ZUMI HEIDI,

 

That's way lower than the market price of Jazz Residences, as advertised on manilacondostore.com

which is probably around 4,5Million now if bought from the developer.

 

http://www.manilacondostore.com/jazz-residences

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That's pretty interesting - and a big discount

 

(approx. P 1 million - 25%+ - discount to the developer's price of about P 5 million)

 

Here's another:

 

The Rise, north end of Ayala Avenue
Cheapest seller now at the rise? At P 4.2 Million
1BR 37G North Wing
26.49 SQM, no balcony
Selling Price: 4.2M / 26.49 = P 158.6k per sqm

 

(The developer is now offering 1BR flats at P5 - 5.2 million.)

 

Question is:

WHY do people continue to buy from Developers when such big discounts are available?

 

Possible answers:

=======

1. People prefer to buy from developers, because the marketing staff is aggressive in pursuing the business

2. People cannot buy unless they can use the developer's financing schemes - ie the don't have cash, or access to bank finance

3. Potential buyers are scared off by "unknown risks" in buying in the secondary market - they don't know how to do it

4. Buyers are simply unaware of the bargains they can get in the secondary market

==

 

For those who the answers are #3, or #4, then maybe Makati Prime can help !

 

(in edit):

I have started a new thread on The Rise, and there is an easy-to-remember link:

http://RiseMakati.com

3o4ee5B.png

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WHY is the Secondary market so LOW and so Inefficient?

 

Many find this frustrating...

 

(THIS was posted on the Makati Meetup Viber chat)

 

Very interesting question...

I sold a pre-owned condo in instalment payments at an agreed price which is a little 1m below than developer's price of their new stock.

I tried offering it close to developer's price since it has better view than what they had in stock but it just did not move for nearly a year until i gave the 1m discount and terms for 24 months with a certain down payment.

 

I did that because upon talking to brokers in that area they say my price was not competitive because a lot of similar condos being offered in the market both bnew from dev and from 2ndry market

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Why seek Bargains? Beyond the obvious...

Your Mortgage payments might be far lower, if you need bank finance

 

TOPPING SIGNS - from at least one analyst (thanks to ECB)

 

Property prices are plateauing... according to Pinnacle.

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

http://www.businessm...g-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."

 

The 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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A Creative solution could lead to unique Buying Opportunity in a Prime Makati location.

 

mapsn3.jpg

The property I write of here is not one of the two above, nor was it built by Megaworld - but it is on the map, very close to Greenbelt mall.

 

This seems like an opportunity that could be brought into Reality, using a creative structure with risk-sharing features.
(I won't give the full details yet - I need to get a green light from the Agent. The property exists, and I saw it this week.

I liked it enough to work up an innovative solution to the property marketing problem.)

Mk2SUgU.jpg

The TARGET is Not the property at the center of this photo, but it is nearby.

 

I am referring to a 2BR Penthouse apartment just 3-5 minutes walk from Greenbelt. Size is about 100 sq meters

+ The property has been owned by a bank, and offered for sale for almost 5 years - and has not yet been sold!
+ The asking price has been P 13 million, or about P 130k per sqm, well below the price of newer properties in the same area.
+ Buyers show interest, but then back down when they see a crack running through the wall which separates the Living Room and Master BR
+ The bank/ owner insists the crack does not represent a serious structural issue, but no buyer was yet ready to take the risk at that price
+ The agent has passed on to the owner at least one Offer from a serious Buyers, but at just below P 10 million. The bank/seller turned it down at that time, insisting that they were sticking to their P 13 million target. Perhaps the buyer's bid was too far from the asking price for the bank to make a counter offer.

+ I reckon that with rents falling, and other secondhand properties on the market now, the bank may be willing to be a bit more flexible.

(Note: this notion of flexibility is untested as of the time I am writing this.)

I have an idea how to solve the impasse, and the seller's agent has told me that he/she may be willing to pass on this suggestion to the bank / owner. If the bank accepts the suggestion, someone may be able to buy a good property with less risk, and at an attractive price (for its area).

 

Right now, I am not the right person to take the financial risk on this idea - the P 10 million-plus property is a bit too large and too expensive for my own risk appetite, Maybe someone reading here will find the "solution" appealing. If you do, Let me know by PM, and I may be able to provide more detail on this property, and also provide the necessary introductions.

Here's my idea - which is admittedly a bit complicated and it requires some mental effort to understand, but it believe it will solve the bank's 5-year selling challenge. Do they really want to let their selling effort drag on as rents remain under pressure? I think not.

 

I am starting with the assumption that the bank owning it, is reluctant or unwilling to spend any more of their own money to fix the problem. So I need to find a way to induce someone else to risk a smaller amount of money to fix the obvious problem. Of course, this party whom I call the Risk Partner will want an option, and/or a piece of the upside as an inducement to take some financial risk on the project.

 

Essentially, the Risk Partner will be "buying an option" by putting up some money to fix the problem.

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

 

(The following figures, I believe are realistic. But final figures will need to be negotiated, before a Risk Sharing & Marketing - "RSM"- Agreement can be signed.)

 

1. The Risk Partner ("RP") provides a plan to: Repair the Crack, to add a Kitchen (without the white goods), and to clean and repaint the flat, The plan, and the budget is agreed with the bank, and is specified in the RSM agreement. Once agreed, the work is done within a 4-6 weeks period. The work (assumed herein to cost P500,000) is financed by the RP, in return for being granted the options specified herein. After the work is completed, a Marketing Period begins, and this is assumed to be Six Months, subject to the agreement of both parties.

/

2. The RP is granted a "Minimum Purchase Option", so that if the property remain unsold after an agreed Marketing Period assumed to be six months, then RP has an option to purchase the property for the Minimum Purchase Options price, assumed herein to be P 10million. If this option is exercised, then the cost to RP is; P500,000 for the upgrading works, plus P10 million, plus a commission to be agreed between RP and the Agent who offers this opportunity to the Risk partner.

/

(This is not what the bank wants, but as the following shows, the bank may be able to achieve a better price.

The bank may offer the upgraded property for sale at a higher price, such as P13 Million. It should be easier to sell after the upgrade work.)

/

3. Exclusive marketing period : 3 months for?

How bank, RP & lead agent split the Purchase proceeds

/

4. Non-exclusive marketing period : another 3 months?

How bank, RP, lead agent & other agent... split the Purchase proceeds

/

5. Bank can terminate, but with penalty payments

/

(still working up details of #3,4, & 5, above.

Exclusive marketing period revenues, Might work like this:

At P 11 million, RP gets P500k cost plus P250k return, agent gets P250k, bank gets P 10 million

At P 12 million, RP gets P500k cost plus P400k return, agent gets P400k, bank gets P 10.7 million (b: 70%)

At P 13 million, RP gets P500k cost plus P500k return, agent gets P500k, bank gets P 11.5 million (b: 70-80%)

At P 14 million, RP gets P500k cost plus P250k return, agent gets P250k, bank gets P 12.4 million (b: 70-90%)

I assume the bank will pay for legal fees and all capital gains tax on sale of the property

 

WHY this is attractive :

+ For the bank: the Bank gets another party to pay the cost of the upgrade, making it easier to sell the property.

The work is planned by a party who will have an economic interest in enhancing the value of the property

+ For the RP; the Risk Partner may get an opportunity to buy an attractive property BELOW MARKET, in return for putting

up something like 5% of the value of the property, where the RP plans upgrade, and manages the work

+ For the Lead agent, there would be a very high probability that they will earn a commission for the sale of the property,

and the commission will be enhanced if the sales price is high enough

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