The business process outsourcing (BPO) industry will be hiring 500 workers a day in the next few years as the Philippines expand its coverage in the global BPO space, Oscar Sanes, president of the Business Processing Association of the Philippines (BPAP), said,
Given this demand, Leo Riingen, chief executive officer of Informatics Philippines, said the Commission on Higher Education (CHED) should reconsider its plan to impose a moratorium on information technology (IT) courses,
Riingen said what is needed is to revamp the IT education system. It has stagnated in some schools, resulting in the mismatch of skills and employability.
Sanez said the local BPO industry is currently creating 300 jobs a day or about 135,000 a year.
In the next six years, global BPO will require 3.4 million workers.
BPAP is targeting 1.3 million workers by 2016, or thrice the size from 446,000 workers in 2009.
Sanez said the IT-BPO industry is expected to bring in $25 billion in revenues by 2016, representing a 10 percent market share in global BPO and 9 percent of the gross domestic product.
This is double the sector’s contribution to the economy in 2009.
"We are creating 300 jobs a day. We want to escalate this to 500 in the next few years. But we want to make sure that players have a pool of workers," Sanez said.
He said only five of 100 walk-in applicants interviewed by BPOs are hired.
Riingen said IT schools should consider offering more high-value courses so the country can ride the fresh wave of demand for outsourced jobs in multimedia, digital arts and even forensic.
Riingen said IT schools have been offering the usual courses for decades such as BS Computer Science, BS IT and BS Information System.
"The world has changed. More skills are needed. Schools should start introducing such courses while encouraging more students to take up these new courses," Riingen said.
These, he said, will also promote the long-term goals of the Philippine BPO industry.
Jobs in web design, animation and digital arts pay more than medical transcription or call centers.
To address the short term needs of the BPO industry, both Sanez and Riingen support efforts of the Technical Education and Skills Development Authority (TESDA) to offer short IT-skills training since it is easier to rollout than to revamp a curriculum.
Programs initiated by TESDA in cooperation with BPAP are highly successful, with seven of 10 graduates landing a job in six months of less.
In yet another initiative of the private sector on IT education, Informatics Philippines, yesterday launched a corporate responsibility program aimed to improve overall IT education.
TESDA is putting in P20 million to kickstart the initiative called SHIFT or Society for Higher Information Technology Education.
Fueled by the immense growth potential in IT-BPO, SHIFT hopes to enable non-government organizations, local and national government units, BPO companies, students and other volunteers to invest in IT education and take advantage of the high demand.
"The current mismatch of what is being taught in schools and what the industry is looking for hinders us from realizing our true potential as a leader in the offshore sector. There is a need to adjust to the rapid growth that the IT-BPO industry is posing. It all starts with quality education," Riingen said.
Informatics graduates enjoy the highest success rate in getting IT jobs in the country at 70 percent, according to the 2010 TESDA Job Absorption Rate Review.
An IT employee in the country earns an above-average annual salary of $8,448 (P363,264), according to the ZDNet Asia IT Salary Benchmark Survey 2009. This is more than double the average family income estimated at P172,0001 in 2006.
"It’s all about a shift in the way we view things. Access to a high-value industry, such as Information Technology, has already been presented to us Filipinos. By merging expertise and with combined efforts, we will be able to heighten the productivity and success of our workforce," Riingen stressed.
The P20 million will be used by BPAP to train qualified near-hires. Graduates from this program will be referred by BPAP to its BPO-member companies.
BPAP will come up with a reimbursement system to sustain the scholarships.
Source: Business Insights, 07 December 2010
RA 9646, popularly known as Real Estate Service Act ( RESA ) has been approved for implementation when its Implementing Rules and Regulations ( IRR ) was published on July 24 2010 at Philippine Daily Inquirer and Philippine Star. For details on the RESA Law, visit www.ra9646.com, the central repository of all updates on RA 9646.
Tuesday, December 7, 2010
PH: Condo projects, BPO spaces to drive property sector growth
CONDOMINIUM units for the middle market segment and office spaces for business process outsourcing (BPO) will continue to drive growth in the real estate sector in Metro Manila, experts said yesterday.
Growth is expected in rent, land value and property prices until 2015, officials of global real estate service firm Jones Lang LaSalle Leechiu (JLLL) said in a press briefing.
JLLL sees increasing demand from “end-users,” investors and BPO locators amid low interest rates and a prudent flow of funds into the country.
“We are anticipating that in 2012 onwards, rents will start to rise again,” Lindsay Orr, chief operating officer of JLLL, said in the briefing.
“A lot of cheap, quality stocks in the market have already been taken up,” David Leechiu, country head of JLLL, told reporters.
For the office segment, vacancies will rise to 248,087 square meters (sq. m.) next year from 129,883 sq. m. this year.
But this will drop to 144,313 sq. m. in 2012 and 111,606 sq. m. in 2013.
“Our advise to developers is that if they want to do something, do it now so they will be in the market at the right time,” Mr. Orr said, adding that BPO businesses will drive demand in areas like the Bonifacio Global City in Taguig, and business districts in Makati and Ortigas Center in Pasig.
“We are confident that even if there is no change [in policy], nothing happens in the [government’s] public-private partnership [scheme], and tax collection levels do not improve, the demand will stay constant at 300,000 sq. m.,” Mr. Leechiu explained.
The supply of office space for 2008 to 2014 was estimated at 2.02 million sq. m.
In terms of rental prices, Mr. Leechiu said: “Prices are going up in the next five years, the way we saw them in 2003 to 2008.”
For the residential segment, Claro d.G. Cordero, Jr., head of research, consulting and valuation of JLLL, said: “We are expecting more than 100,000 units in the next five years ... the composition is more of the middle segment development.”
Condominium units in the middle market segment are valued at P1.5 million to P10 million each, with average unit size at 160 sq. m.
Jones Lang said middle market units will account for 94% of total development in the residential sector, with only 3% or 3,187 units in the high-end segment.
“The decision to build [more condominium units] is due to improvement in the economy and manifestations of real demand,” Mr. Cordero said.
JLLL said the annual growth rates in condominium rentals is at 8% or P420 per sq. m. per month.
The investment yield in Metro Manila, meanwhile, is at 6.36%, higher than the 0.78%, 2.38% and 6.13% for 91-day, 364-day, and 10-year Treasury bonds, respectively.
“It makes property investments more enticing. Land value is increasing at phenomenal rates,” Mr. Cordero said.
Jones Lang LaSalle Leechiu is one of the country’s leading property consulting firms.
JLLL sold P4.5 billion worth of properties in Metro Manila and managed 100,000 sq. m. of construction fit-out projects in the 10 months that ended in October.
Source: Business World, 07 December 2010
---------------------------------------------------------------------------------
Global real-estate services firm Jones Lang LaSalle Leechiu continues to see strength in the Philippine residential condominium sector, with the next four years to be driven by new supply catering to the mid-end segment.
Moreover, the office space leasing sector— buoyed by business process outsourcing (BPO) companies—is expected to see an uptick in rental rates following an expected supply shortfall by 2012, the firm said in a press briefing on Tuesday.
For the residential sector, Jones Lang country head David Leechiu said another 100,599 condominium units in the mid-end segment are expected to come on-stream by 2014 on top of the existing 55,526 units built since 1999.
Demand for these types of units, priced from P1.5 million to P10 million, is also expected to remain steady with the favorable interest-rate environment, ready financing from banks and overseas Filipino buyers, he said.
“In 2005, no one could have imagined how deep the mid-end residential condominium sector actually was. It will continue to be a source of growth for many developers up to at least 2014,” Leechiu said.
The bulk of new mid-end condominiums is expected to come from Metro Manila, mainly in the Makati business district (28 percent), Quezon City ( 27 percent), Ortigas, Pasig and Mandaluyong (17 percent) and Bonifacio Global City in Taguig ( 11 percent), the firm added.
With the housing deficit estimated at 4 million, units various developers have been positioning themselves to tap buyers in the mid-end segment.
Among publicly listed residential condominium developers, Jones Lang sees Sy-led SM Development Corp. to lead the pack with a 22-percent market share over the next five years from the current 4 percent.
Megaworld Corp. follows with a 14-percent market share, Ayala Land Inc. with a tenth and Robinsons Land Corp. with 8 percent.
Jones Lang said the average annual growth rate in Metro Manila since 2005 is pegged at 8 percent, with the exception of certain areas like Bonifacio Global City and Makati City which exceed this figure.
The value of units in this segment has also gained moderately in the last five years, with the annual average at 13 percent, or P78,122 per square meter (sqm). As with rental rates, Bonifacio Global City and Makati City outpace industry growth at 18 percent and 14 percent, respectively.
Jones Lang sees residential rental rates to remain stable, given the large influx of supply.
In the office segment, however, Jones Lang sees the reverse given an expected supply shortfall beginning late next year.
“In all probability, office [rental rates] will go back to 2008 level. Prices are going to keep going up in the next five years,” Leechiu said, noting that prices have bottomed out in 2009. “There is significant growth in the BPO industry.”
The company executive explained that the average demand line for office space is at 75,000 sqm per quarter. Total supply in 2010 is expected to increase by 283,973 sqm, and by another 276,587 sqm in 2011.
But by 2012 the number will drop to 163,313 sqm. A deficit of 100,000 sqm is expected in three years, and further to 200,000 sqm by 2014.
source: Business Mirror, 07 December 2010
RA 9646, popularly known as Real Estate Service Act ( RESA ) has been approved for implementation when its Implementing Rules and Regulations ( IRR ) was published on July 24 2010 at Philippine Daily Inquirer and Philippine Star. For details on the RESA Law, visit www.ra9646.com, the central repository of all updates on RA 9646.
Growth is expected in rent, land value and property prices until 2015, officials of global real estate service firm Jones Lang LaSalle Leechiu (JLLL) said in a press briefing.
JLLL sees increasing demand from “end-users,” investors and BPO locators amid low interest rates and a prudent flow of funds into the country.
“We are anticipating that in 2012 onwards, rents will start to rise again,” Lindsay Orr, chief operating officer of JLLL, said in the briefing.
“A lot of cheap, quality stocks in the market have already been taken up,” David Leechiu, country head of JLLL, told reporters.
For the office segment, vacancies will rise to 248,087 square meters (sq. m.) next year from 129,883 sq. m. this year.
But this will drop to 144,313 sq. m. in 2012 and 111,606 sq. m. in 2013.
“Our advise to developers is that if they want to do something, do it now so they will be in the market at the right time,” Mr. Orr said, adding that BPO businesses will drive demand in areas like the Bonifacio Global City in Taguig, and business districts in Makati and Ortigas Center in Pasig.
“We are confident that even if there is no change [in policy], nothing happens in the [government’s] public-private partnership [scheme], and tax collection levels do not improve, the demand will stay constant at 300,000 sq. m.,” Mr. Leechiu explained.
The supply of office space for 2008 to 2014 was estimated at 2.02 million sq. m.
In terms of rental prices, Mr. Leechiu said: “Prices are going up in the next five years, the way we saw them in 2003 to 2008.”
For the residential segment, Claro d.G. Cordero, Jr., head of research, consulting and valuation of JLLL, said: “We are expecting more than 100,000 units in the next five years ... the composition is more of the middle segment development.”
Condominium units in the middle market segment are valued at P1.5 million to P10 million each, with average unit size at 160 sq. m.
Jones Lang said middle market units will account for 94% of total development in the residential sector, with only 3% or 3,187 units in the high-end segment.
“The decision to build [more condominium units] is due to improvement in the economy and manifestations of real demand,” Mr. Cordero said.
JLLL said the annual growth rates in condominium rentals is at 8% or P420 per sq. m. per month.
The investment yield in Metro Manila, meanwhile, is at 6.36%, higher than the 0.78%, 2.38% and 6.13% for 91-day, 364-day, and 10-year Treasury bonds, respectively.
“It makes property investments more enticing. Land value is increasing at phenomenal rates,” Mr. Cordero said.
Jones Lang LaSalle Leechiu is one of the country’s leading property consulting firms.
JLLL sold P4.5 billion worth of properties in Metro Manila and managed 100,000 sq. m. of construction fit-out projects in the 10 months that ended in October.
Source: Business World, 07 December 2010
---------------------------------------------------------------------------------
Global real-estate services firm Jones Lang LaSalle Leechiu continues to see strength in the Philippine residential condominium sector, with the next four years to be driven by new supply catering to the mid-end segment.
Moreover, the office space leasing sector— buoyed by business process outsourcing (BPO) companies—is expected to see an uptick in rental rates following an expected supply shortfall by 2012, the firm said in a press briefing on Tuesday.
For the residential sector, Jones Lang country head David Leechiu said another 100,599 condominium units in the mid-end segment are expected to come on-stream by 2014 on top of the existing 55,526 units built since 1999.
Demand for these types of units, priced from P1.5 million to P10 million, is also expected to remain steady with the favorable interest-rate environment, ready financing from banks and overseas Filipino buyers, he said.
“In 2005, no one could have imagined how deep the mid-end residential condominium sector actually was. It will continue to be a source of growth for many developers up to at least 2014,” Leechiu said.
The bulk of new mid-end condominiums is expected to come from Metro Manila, mainly in the Makati business district (28 percent), Quezon City ( 27 percent), Ortigas, Pasig and Mandaluyong (17 percent) and Bonifacio Global City in Taguig ( 11 percent), the firm added.
With the housing deficit estimated at 4 million, units various developers have been positioning themselves to tap buyers in the mid-end segment.
Among publicly listed residential condominium developers, Jones Lang sees Sy-led SM Development Corp. to lead the pack with a 22-percent market share over the next five years from the current 4 percent.
Megaworld Corp. follows with a 14-percent market share, Ayala Land Inc. with a tenth and Robinsons Land Corp. with 8 percent.
Jones Lang said the average annual growth rate in Metro Manila since 2005 is pegged at 8 percent, with the exception of certain areas like Bonifacio Global City and Makati City which exceed this figure.
The value of units in this segment has also gained moderately in the last five years, with the annual average at 13 percent, or P78,122 per square meter (sqm). As with rental rates, Bonifacio Global City and Makati City outpace industry growth at 18 percent and 14 percent, respectively.
Jones Lang sees residential rental rates to remain stable, given the large influx of supply.
In the office segment, however, Jones Lang sees the reverse given an expected supply shortfall beginning late next year.
“In all probability, office [rental rates] will go back to 2008 level. Prices are going to keep going up in the next five years,” Leechiu said, noting that prices have bottomed out in 2009. “There is significant growth in the BPO industry.”
The company executive explained that the average demand line for office space is at 75,000 sqm per quarter. Total supply in 2010 is expected to increase by 283,973 sqm, and by another 276,587 sqm in 2011.
But by 2012 the number will drop to 163,313 sqm. A deficit of 100,000 sqm is expected in three years, and further to 200,000 sqm by 2014.
source: Business Mirror, 07 December 2010
RA 9646, popularly known as Real Estate Service Act ( RESA ) has been approved for implementation when its Implementing Rules and Regulations ( IRR ) was published on July 24 2010 at Philippine Daily Inquirer and Philippine Star. For details on the RESA Law, visit www.ra9646.com, the central repository of all updates on RA 9646.
PH: Our BPO Status
No Free Lunch : We are No. 1
By Cielito Habito cielito.habito@gmail.com
NEWS BROKE out last week that the Philippines has surpassed India to become the world’s global leader in business process outsourcing (BPO), of which call enters are the most prominent.
In its Global Location Trends annual report, IBM Global Business Services reported that in business support functions, defined to include shared services and BPO, the Philippines generated over 15,000 new jobs in 2009, against India’s 13,000. It must be clarified that the report appears to be referring only to the jobs generated within the year, and not to the total size of the industry, where India apparently remains on top. Industry figures estimate revenues generated from the BPO sector in 2008 at $6.8 billion for the Philippines, while India made $11 billion. It is thus unlikely that we’re already on top in terms of total BPO industry output—at least not yet.
But we are indeed No. 1 if we’re looking only at call centers or “voice-based support services,” according to the Call Center Association of the Philippines (CCAP). According to CCAP, there are around 350,000 Filipinos working in call centers, against India’s 330,000-strong workforce. Revenues are projected to reach $5.7 billion this year, against $5.58 billion expected for India. The IBM report points to the Philippines as an appealing outsourcing destination due to its well-educated workforce, good language competencies and a strong work ethic. In voice-based services, in particular, a paper by a US BPO executive observed that Filipinos speak idiomatic American English better than Indians, and their accent is more neutral. In seeming affirmation of this, major Indian outsourcing companies are now setting up operations in the Philippines. Last week, Tata Consultancy Services, the information technology services, business solutions and outsourcing arm of India’s giant Tata Group, opened its first BPO center in Southeast Asia at the Bonifacio Global City in Taguig City.
For some time now, BPO has been reputed to be the fastest-growing industry in the world. The broader industry goes beyond call centers to include other services such as business back-office operations, including finance, logistics and accounting; medical and legal transcription; software development and maintenance; animation; and engineering and architectural design. Around the world, the industry is seen to be still developing, as more and more organizations discover the cost-saving advantage that comes with off-shoring and outsourcing of services. A study by international investment consultancy firm McKinsey & Company valued the potential global market for BPO at $450 billion, with only 10 to 12 percent penetrated so far. Hence, the potential for growth is enormous. Recent experience also proved the industry to be resilient and relatively recession-proof; when the global economic crisis hit, many companies actually turned to outsourcing as a cost-saving coping mechanism against the downturn.
In the Philippines, the BPO industry has reportedly been zooming at annual growth rates of up to 46 percent since 2006, with call centers leading the way. Most of the BPO facilities are located in Metro Manila and Cebu, but firms have also sprouted in Baguio City, Angeles City (in Clark), Dagupan City, Lipa City, Urdaneta City and Legazpi City in Luzon; Tacloban City, Dumaguete City, Iloilo City and Bacolod City in the Visayas; and Davao City, Cagayan de Oro and Iligan City in Mindanao. The industry employed an estimated 435,000 workers at the end of 2008 (from 372,000 in 2007). The industry goal is to expand it to a $25-billion industry employing 1.3 million people by 2016.
Right now, the main obstacle to achieving that growth is a growing shortage of qualified personnel relative to the needs of the industry. The industry requires a relatively high level of education and skills, particularly high proficiency in English and computer literacy. Except for entry-level jobs in animation, almost all positions in the industry require a college education and additional training on specific areas. The problem is that the bulk of our country’s unemployed, numbering some 2 to 3 million, are mostly not qualified for BPO jobs. While jobless Filipinos are predominantly young (80 percent below age 34), statistics show that they mostly attained only a high school education or less. Sustaining growth in this industry therefore requires deliberate efforts to maintain a pipeline of trained qualified workers to respond to the industry’s growing demands. Meanwhile, BPO is not the answer to providing gainful employment to our large pool of jobless Filipinos; we need to look elsewhere for that.
While there is already a pipeline of talent in the school system, the Business Process Association of the Philippines (BPAP) estimates this to be sufficient to support growth of only about 15 percent per year. This is far short of the 40 percent annual growth needed to achieve the industry’s targets. The industry association has thus begun looking into tapping alternative labor pools, including housewives, retirees, non-graduates and career-switchers. They are also increasingly looking beyond Metro Manila, and going to the Visayas and Mindanao as well. BPAP has identified at least 13 additional locations that can support operations of more than 5,000 employees, and five cities that could serve as hubs employing up to 3 to 10 times as much.
And so, while we already lead in call centers and are poised to wrest the lead from India in BPO within a few years, there is much homework to do to get there, and even more to stay there. Meanwhile, we can now rightfully and proudly call ourselves the call center capital of the world.
Source: Philippine Daily Inquirer, 07 December 2010
RA 9646, popularly known as Real Estate Service Act ( RESA ) has been approved for implementation when its Implementing Rules and Regulations ( IRR ) was published on July 24 2010 at Philippine Daily Inquirer and Philippine Star. For details on the RESA Law, visit www.ra9646.com, the central repository of all updates on RA 9646.
By Cielito Habito cielito.habito@gmail.com
NEWS BROKE out last week that the Philippines has surpassed India to become the world’s global leader in business process outsourcing (BPO), of which call enters are the most prominent.
In its Global Location Trends annual report, IBM Global Business Services reported that in business support functions, defined to include shared services and BPO, the Philippines generated over 15,000 new jobs in 2009, against India’s 13,000. It must be clarified that the report appears to be referring only to the jobs generated within the year, and not to the total size of the industry, where India apparently remains on top. Industry figures estimate revenues generated from the BPO sector in 2008 at $6.8 billion for the Philippines, while India made $11 billion. It is thus unlikely that we’re already on top in terms of total BPO industry output—at least not yet.
But we are indeed No. 1 if we’re looking only at call centers or “voice-based support services,” according to the Call Center Association of the Philippines (CCAP). According to CCAP, there are around 350,000 Filipinos working in call centers, against India’s 330,000-strong workforce. Revenues are projected to reach $5.7 billion this year, against $5.58 billion expected for India. The IBM report points to the Philippines as an appealing outsourcing destination due to its well-educated workforce, good language competencies and a strong work ethic. In voice-based services, in particular, a paper by a US BPO executive observed that Filipinos speak idiomatic American English better than Indians, and their accent is more neutral. In seeming affirmation of this, major Indian outsourcing companies are now setting up operations in the Philippines. Last week, Tata Consultancy Services, the information technology services, business solutions and outsourcing arm of India’s giant Tata Group, opened its first BPO center in Southeast Asia at the Bonifacio Global City in Taguig City.
For some time now, BPO has been reputed to be the fastest-growing industry in the world. The broader industry goes beyond call centers to include other services such as business back-office operations, including finance, logistics and accounting; medical and legal transcription; software development and maintenance; animation; and engineering and architectural design. Around the world, the industry is seen to be still developing, as more and more organizations discover the cost-saving advantage that comes with off-shoring and outsourcing of services. A study by international investment consultancy firm McKinsey & Company valued the potential global market for BPO at $450 billion, with only 10 to 12 percent penetrated so far. Hence, the potential for growth is enormous. Recent experience also proved the industry to be resilient and relatively recession-proof; when the global economic crisis hit, many companies actually turned to outsourcing as a cost-saving coping mechanism against the downturn.
In the Philippines, the BPO industry has reportedly been zooming at annual growth rates of up to 46 percent since 2006, with call centers leading the way. Most of the BPO facilities are located in Metro Manila and Cebu, but firms have also sprouted in Baguio City, Angeles City (in Clark), Dagupan City, Lipa City, Urdaneta City and Legazpi City in Luzon; Tacloban City, Dumaguete City, Iloilo City and Bacolod City in the Visayas; and Davao City, Cagayan de Oro and Iligan City in Mindanao. The industry employed an estimated 435,000 workers at the end of 2008 (from 372,000 in 2007). The industry goal is to expand it to a $25-billion industry employing 1.3 million people by 2016.
Right now, the main obstacle to achieving that growth is a growing shortage of qualified personnel relative to the needs of the industry. The industry requires a relatively high level of education and skills, particularly high proficiency in English and computer literacy. Except for entry-level jobs in animation, almost all positions in the industry require a college education and additional training on specific areas. The problem is that the bulk of our country’s unemployed, numbering some 2 to 3 million, are mostly not qualified for BPO jobs. While jobless Filipinos are predominantly young (80 percent below age 34), statistics show that they mostly attained only a high school education or less. Sustaining growth in this industry therefore requires deliberate efforts to maintain a pipeline of trained qualified workers to respond to the industry’s growing demands. Meanwhile, BPO is not the answer to providing gainful employment to our large pool of jobless Filipinos; we need to look elsewhere for that.
While there is already a pipeline of talent in the school system, the Business Process Association of the Philippines (BPAP) estimates this to be sufficient to support growth of only about 15 percent per year. This is far short of the 40 percent annual growth needed to achieve the industry’s targets. The industry association has thus begun looking into tapping alternative labor pools, including housewives, retirees, non-graduates and career-switchers. They are also increasingly looking beyond Metro Manila, and going to the Visayas and Mindanao as well. BPAP has identified at least 13 additional locations that can support operations of more than 5,000 employees, and five cities that could serve as hubs employing up to 3 to 10 times as much.
And so, while we already lead in call centers and are poised to wrest the lead from India in BPO within a few years, there is much homework to do to get there, and even more to stay there. Meanwhile, we can now rightfully and proudly call ourselves the call center capital of the world.
Source: Philippine Daily Inquirer, 07 December 2010
RA 9646, popularly known as Real Estate Service Act ( RESA ) has been approved for implementation when its Implementing Rules and Regulations ( IRR ) was published on July 24 2010 at Philippine Daily Inquirer and Philippine Star. For details on the RESA Law, visit www.ra9646.com, the central repository of all updates on RA 9646.
ASIA: Asia set for drip-feed of property regulation
SINGAPORE - Asia’s property markets are set for a continuous drip feed of tighter regulations in coming months as authorities try to take the froth out of surging home prices without triggering a crash.
Last week Hong Kong announced its fifth set of measures this year as it struggles to curb speculation in its property markets. China, Singapore, Taiwan, Thailand and Malaysia have also unveiled more stringent regulations in recent months.
But Asian investors’ appetite for property seems far from sated with prices continuing to climb that will likely prompt governments to raise mortgage requirements again, increase land supply and - in the case of China - impose property taxes.
"My baseline scenario is we will need more measures - the current set worked but their impact is transitory," said Tim Condon, head of research at ING Financial Markets in Singapore.
Authorities’ ability to curb speculation is hindered this time round by the abundant liquidity in the market and central banks’ reluctance to raise interest rates too fast amid a patchy global economic recovery.
Many investors, particularly at the luxury end, are coming to the market flush with cash, meaning measures such as putting a cap on mortgages relative to the value of a property aren’t as effective as usual.
Hong Kong luxury home prices are now above the peak they reached in 1997 before the Asian financial crisis struck, fueled in part by rich mainland Chinese buying flats in the city.
Read the newspapers in Singapore and you’ll see a string of stories showing new condo developments selling all of their flats on the first day of asking.
"We’re entering into unchartered waters because just one set of the measures introduced so far this year would have worked in previous times - but what we have right now are markets filled with liquidity and historically lower interest rates," said Donald Han, vice chairman at Cushman & Wakefield in Singapore.
Residential prices in Hong Kong climbed 25 percent from mid-2009 to mid-2010 while those in Singapore rose 37 percent, according to property agency Knight Frank.
Asian policymakers know the dangers of property bubbles all too well. The 1997 financial crisis began in Thailand’s real estate markets and led to a crash in property prices across the region, while the US subprime mortgage meltdown and ensuing financial market chaos dragged much of Asia into recession.
In the aftermath of the 1997/98 crisis Asian authorities led the way in designing "macro-prudential measures" to curb credit growth for housing long before the term became the buzzword of regulators in the west.
These included the use of loan-to-value ratios to cut the size of mortgages people could borrow compared to the value of their house, and limits on foreign currency borrowing.
But despite this experience observers say authorities are still struggling to keep up with pace of the price rises this time round.
"They’d like to think they have learnt the lessons of previous crises but the way the price rises have gone over the last 18 months or so show that even in a command economy such as China you can’t always control prices as much as you’d like to," said David Green-Morgan, head of Asia Pacific research at DTZ in Sydney.
"In hindsight, the authorities should have started releasing more land for construction in 2008 but that was during the global financial crisis when it wouldn’t have been an obvious policy choice," he added.
Using regulation to control property prices is notoriously tricky because of the spillover effects such moves can have on the rest of the economy.
Federal Reserve Chairman Ben Bernanke argued against measures to rein in the US property market in the years preceding the 2008-09 financial crisis, saying it could have a negative impact on the rest of the economy.
It’s not hard to see why many economists now argue that was the wrong approach, but Asian authorities are still likely to tread carefully.
"If China is aiming for around 10 percent annual GDP growth, a big part of that depends on a healthy property market," said Han at Cushman & Wakefield.
"So rather than taking a sledge-hammer to the market governments will be issuing new measures on a bi-monthly or quarterly basis to weed out excessive speculation," he said.
So what measures should investors expect and where?
Singapore, Hong Kong, Taipei and various cities across China are highlighted as the areas still most vulnerable to a build up of pricing pressures.
Hong Kong has already gone in hard and is now expected to give its latest measures some time to take effect before going back for more some time next year.
Singapore has hinted that it’s likely to implement further measures, and is likely to release more land into the market as well as introduce more measures that curb speculation such as higher rates of stamp duty for people who sell properties soon after purchasing them.
"Those who are buying multiple properties, those who are buying for investment, are the investors who are on a higher risk of facing more regulatory measures," said Cushman & Wakefield’s Han.
China faces an even tougher policy balancing act due to the huge regional disparities across its property markets.
An analysis by Standard Chartered shows that cities such as Shanghai, Shenzhen and Chengdu are still facing huge upward pressure on prices while some "second tier" towns such as Dalian and Tianjin could see home prices fall as a host of new supply comes on to their markets.
This means authorities are expected to roll-out property taxes they’ve been recently piloting in cities where the markets are still frothy, while refraining from any fresh measures elsewhere.
That, though, is likely to be easier said than done when authorities are still struggling to keep up with what’s actually happening in the markets they’re trying to control.
"Introducing such a tax is strewn with technical and political difficulties," said Standard Chartered’s head of China research Stephen Green in a recent research note.
A recent property tax proposal by Shanghai was reportedly turned down by the State Council because Shanghai had not done an adequate survey of all the apartments involved, a task that would take months, if not years, he added.
Authorities are still expected to press ahead with these taxes but at a fairly low level, setting progressive rates of between 0.3 to 0.6 percent of market value per year.
But the bottom line though is that while most Asian property markets have managed exchange rate regimes and relatively low interest rates, authorities will struggle to control the market via regulation alone.
"Until and unless you fix the undervaluation of currencies the pressure is always going to be there - in that sense, these property measures will only deal with the symptom and not the cause," said ING’s Condon. – Reuters
Source: Business Insights, 07 December 2010
RA 9646, popularly known as Real Estate Service Act ( RESA ) has been approved for implementation when its Implementing Rules and Regulations ( IRR ) was published on July 24 2010 at Philippine Daily Inquirer and Philippine Star. For details on the RESA Law, visit www.ra9646.com, the central repository of all updates on RA 9646.
Last week Hong Kong announced its fifth set of measures this year as it struggles to curb speculation in its property markets. China, Singapore, Taiwan, Thailand and Malaysia have also unveiled more stringent regulations in recent months.
But Asian investors’ appetite for property seems far from sated with prices continuing to climb that will likely prompt governments to raise mortgage requirements again, increase land supply and - in the case of China - impose property taxes.
"My baseline scenario is we will need more measures - the current set worked but their impact is transitory," said Tim Condon, head of research at ING Financial Markets in Singapore.
Authorities’ ability to curb speculation is hindered this time round by the abundant liquidity in the market and central banks’ reluctance to raise interest rates too fast amid a patchy global economic recovery.
Many investors, particularly at the luxury end, are coming to the market flush with cash, meaning measures such as putting a cap on mortgages relative to the value of a property aren’t as effective as usual.
Hong Kong luxury home prices are now above the peak they reached in 1997 before the Asian financial crisis struck, fueled in part by rich mainland Chinese buying flats in the city.
Read the newspapers in Singapore and you’ll see a string of stories showing new condo developments selling all of their flats on the first day of asking.
"We’re entering into unchartered waters because just one set of the measures introduced so far this year would have worked in previous times - but what we have right now are markets filled with liquidity and historically lower interest rates," said Donald Han, vice chairman at Cushman & Wakefield in Singapore.
Residential prices in Hong Kong climbed 25 percent from mid-2009 to mid-2010 while those in Singapore rose 37 percent, according to property agency Knight Frank.
Asian policymakers know the dangers of property bubbles all too well. The 1997 financial crisis began in Thailand’s real estate markets and led to a crash in property prices across the region, while the US subprime mortgage meltdown and ensuing financial market chaos dragged much of Asia into recession.
In the aftermath of the 1997/98 crisis Asian authorities led the way in designing "macro-prudential measures" to curb credit growth for housing long before the term became the buzzword of regulators in the west.
These included the use of loan-to-value ratios to cut the size of mortgages people could borrow compared to the value of their house, and limits on foreign currency borrowing.
But despite this experience observers say authorities are still struggling to keep up with pace of the price rises this time round.
"They’d like to think they have learnt the lessons of previous crises but the way the price rises have gone over the last 18 months or so show that even in a command economy such as China you can’t always control prices as much as you’d like to," said David Green-Morgan, head of Asia Pacific research at DTZ in Sydney.
"In hindsight, the authorities should have started releasing more land for construction in 2008 but that was during the global financial crisis when it wouldn’t have been an obvious policy choice," he added.
Using regulation to control property prices is notoriously tricky because of the spillover effects such moves can have on the rest of the economy.
Federal Reserve Chairman Ben Bernanke argued against measures to rein in the US property market in the years preceding the 2008-09 financial crisis, saying it could have a negative impact on the rest of the economy.
It’s not hard to see why many economists now argue that was the wrong approach, but Asian authorities are still likely to tread carefully.
"If China is aiming for around 10 percent annual GDP growth, a big part of that depends on a healthy property market," said Han at Cushman & Wakefield.
"So rather than taking a sledge-hammer to the market governments will be issuing new measures on a bi-monthly or quarterly basis to weed out excessive speculation," he said.
So what measures should investors expect and where?
Singapore, Hong Kong, Taipei and various cities across China are highlighted as the areas still most vulnerable to a build up of pricing pressures.
Hong Kong has already gone in hard and is now expected to give its latest measures some time to take effect before going back for more some time next year.
Singapore has hinted that it’s likely to implement further measures, and is likely to release more land into the market as well as introduce more measures that curb speculation such as higher rates of stamp duty for people who sell properties soon after purchasing them.
"Those who are buying multiple properties, those who are buying for investment, are the investors who are on a higher risk of facing more regulatory measures," said Cushman & Wakefield’s Han.
China faces an even tougher policy balancing act due to the huge regional disparities across its property markets.
An analysis by Standard Chartered shows that cities such as Shanghai, Shenzhen and Chengdu are still facing huge upward pressure on prices while some "second tier" towns such as Dalian and Tianjin could see home prices fall as a host of new supply comes on to their markets.
This means authorities are expected to roll-out property taxes they’ve been recently piloting in cities where the markets are still frothy, while refraining from any fresh measures elsewhere.
That, though, is likely to be easier said than done when authorities are still struggling to keep up with what’s actually happening in the markets they’re trying to control.
"Introducing such a tax is strewn with technical and political difficulties," said Standard Chartered’s head of China research Stephen Green in a recent research note.
A recent property tax proposal by Shanghai was reportedly turned down by the State Council because Shanghai had not done an adequate survey of all the apartments involved, a task that would take months, if not years, he added.
Authorities are still expected to press ahead with these taxes but at a fairly low level, setting progressive rates of between 0.3 to 0.6 percent of market value per year.
But the bottom line though is that while most Asian property markets have managed exchange rate regimes and relatively low interest rates, authorities will struggle to control the market via regulation alone.
"Until and unless you fix the undervaluation of currencies the pressure is always going to be there - in that sense, these property measures will only deal with the symptom and not the cause," said ING’s Condon. – Reuters
Source: Business Insights, 07 December 2010
RA 9646, popularly known as Real Estate Service Act ( RESA ) has been approved for implementation when its Implementing Rules and Regulations ( IRR ) was published on July 24 2010 at Philippine Daily Inquirer and Philippine Star. For details on the RESA Law, visit www.ra9646.com, the central repository of all updates on RA 9646.
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