Global Filipinos And Property Boom

Creba Speaks

By CHARLIE A.V, GORAYEB

June 20, 2012, 3:24pm

MANILA BULLETIN --- The property sector is enjoying its most prolific cycle in recent history. The cityscape is enjoying a major facelift. Old districts are transforming into new buildings featuring state-of-the-art construction and even green designs. Vertical villages have emerged as the practical and value-for-money address for urban dwellers. Building means growth; investments convey progress; good business leads to an upsurge in economic activity; and domestic growth always spells good news for the country.

The Philippines’ diaspora of Global Filipinos continues to fuel a boom in the real estate market back home. Estimated at close to 12 million or a tenth of the total Philippine population, the magnitude of their contributions have long been a major force in the national economy in terms of remittances, property acquisition and creating businesses. It is estimated that Pinoy expatriate worker send back home about US$ 20.116 billion, as of 2011 in foreign remittances which is continuously growing every year. Reports from the banking sector even states that this figure is an understatement since an average of 30 percent is sent to their local beneficiaries through other means outside the banking system. The global community is likewise appreciating more the best in Filipinos on all fronts: From entertainment, business and architecture, to tourism and BPO.

Since five years ago, US$5 billion of OFW funds were spent in real estate, and this is expected to increase some more as remittances grow. It is also observed that their wants have changed too from low-cost housing units to mid-range homes, houseand- lot packages, townhouses, or condominium units with cost ranging from Php 3 to R7 million.

The Pinoy expatriates are now aware of the benefits these properties could give them, its higher resale or lease value − not to mention the location, which is almost always on prime sites.

More property developers are now enjoying a “booming market.” Most are claiming that more than 60 percent of their sales went to OFWs, and are opening more new projects eyeing OFW clienteles. The unprecedented growth has even sent big property developers abroad for sales stints targeting the Pinoy overseas worker.

With the revenue in the real estate industry growing by almost 50 percent annually since the last five years, there is no doubt that the property sector shall have the crown of having the fastest growth rate among various industries in the country.

With the increasing spending power of the middle-class, a strong and conservative banking sector, a stable homebuyers market that is free from speculators, plus billions in remittances from abroad, we see no end in sight for the industry’s flourishing growth.

This is the centerpiece of the upcoming 21st Annual National Convention of the Chamber of Real Estate & Builders’ Associations, Inc. or CREBA – the largest Philippine umbrella organization of the real estate and housing industry composed of property developers, builders, contractors, suppliers and manufacturers of construction materials, real estate service practitioners and other professionals and entities engaged in 68 allied fields.

The convention will be held from Oct. 18-20 at the Legend Hotel, Puerto Princesa City, Palawan with the theme “Global Filipino: Key to Conserving Growth Through Sustainable and Strategic Real Estate Development and Practices.”

The 21st Annual CREBA National Convention hopes to unlock and link together sustainable and strategic approaches to keep the impressive growth path, and in the process, reinforce the commitment of industry stakeholders to advance land and housing as a primary catalyst for economic and social progress.

Set on a tropical paradise such as Puerto Princesa, the “City in a Forest” that is home to the world wonder Subterranean River, the convention shall provide the needed perspectives on global concepts and tap into the unlimited opportunities on emerging and fast-expanding markets.

E-mail us at creba_national@ yahoo.com.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

PH property market is best in 20 years: CBRE

ABS-CBN, 20 June 2012 - The Philippine real estate market is now the best it has been in 20 years, according to property consultant CBRE Philippines.

CBRE Philippines chief executive and chairman Rick Santos said the Philippines is "no longer the sick man of Asia but now the sweet spot for investors."

"I've been back in the Philippines for 20 years now and this is the best real estate market we've seen. We think this market has legs and we're confident in the next 5 years. All eyes are now moving from BRIC (Brazil, Russia, India, China) economies into TIP (Turkey, Indonesia, Philippines) markets," he said, in a press briefing on Wednesday.

The housing sector continues to benefit from strong demand, as more Filipinos are able to buy houses due to low interest rates and affordable financing schemes.

"The Philippines is going through a democratization of the housing industry - from a nation of renters, we're going to a nation of owners," Santos said.

Pre-leasing is back
A bright spot for the Philippine property market is the office sector. For the first time in years, companies are pre-leasing office space in buildings that have yet to be completed. This is attributed to the continued expansion of the business process outsourcing (BPO) industry in the country.

"There's so much demand in the office sector, buildings are 100% leased, not just small buildings but large buildings are 45% to 50% leased, which is incredible. Most buildings don't even lease up until 1 or 2 years after completion," Santos said.

CBRE has seen a surge in pre-leasing commitments in the central business districts, not just in Makati, Bonifacio Global City and Quezon City, but also in Cebu, Davao and Clark. Pre-leasing activity usually happens within 6 months before a building is completed.

John Corpus, CBRE director for global corporate services, said there is tight supply of office space in the business district with an average 96% occupancy rate, and there's no sign of a slowdown.

Companies, particularly those in the BPO industry, are scrambling to secure much-needed office space. Of the 293,000 square meters of anticipated office supply to be available this year, around 232,000 square meters have already been pre-committed.

For instance, in Makati, Glorietta 2, which is set to open in the fourth quarter of this year, and Glorietta 1, which will open in the first quarter of 2013, are both already 100% pre-leased.

In Bonifacio Global City, Megaworld's Science Hub 1 and 2 are already 100% pre-leased, while Eight Campus A and B, which will open in the 4th quarter of 2012 and 2nd quarter of 2013, are also 100% pre-leased.

Other buildings such as SM Megamall BPO and Filinvest EDSA in Ortigas; UP Ayala Technohub K in Quezon City and Two Ecom in Bay Area, Pasay, are likewise leased out.

"We urge developers to push through with their planned projects and to avoid any delays and to capture all potential investments in the country... Office market will continue to be active and the next 2 years is guaranteed to be at its peak," Corpus said.

Potential in 'green' buildings
As more multinational companies open BPO offices in the Philippines, CBRE anticipates a growing demand for "green" buildings in the Philippines.

Santos said a large portion of the take-up of new office space is from BPOs, and 75% of that would be from multinational companies. "The multinational companies, like Bank of America, HSBC, WellsFargo and JPMorgan, a lot of them would want LEED buildings. This will create a large market for LEED buildings," he said.

LEED refers to Leadership in Energy and Envrionment Design, the mostly widely used green rating system in the world.

Joanie Mitchell, director for global corporate services, said there is a misconception that going green would entail more costs. "Cost is perceived to be the biggest barrier to building green (buildings) but sustainable construction is now near cost-neutral," she said.

There are only 5 LEED certified buildings in the country, including the Asian Development Bank, Nuvali One Evotech, Shell Shared Services Office and Texas Instruments in Baguio and Clark.  Zuellig Building in Makati, which will open in October, and BTTC Centre in Greenhills are both pre-certified LEED Gold.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

No more Noynoying

by Ducky Paredes, Malaya, 30 May 2012

‘Key government agencies such as the NEDA, DOF, DOTC and various LGUs are moving and private sector players impatient for raising the bar for the standards in Philippine public utilities are sitting up and taking notice.’

AS we await the judgment of our Impeachment Court, this letter from a Pinoy Immigrant to the Land of Oz came in: “Here in NSW, Marcus Einfeld a justice of the Federal Court of Australia and of the Supreme Courts of New South Wales, was sentenced to 3 years in prison for trying to cover up a traffic speeding violation he committed while driving his car. The Australian justice system may not be perfect, but if Australia with its convict past can achieve that kind of impartiality, so can the Philippines! Always enjoy reading your articles. Keep them coming!” -- Charlie Moraza

***

No one’s Noynoying. In fact, ending his second year in office, President Benigno Simeon Aquino’s government is showing signs of newfound urgency and efficiency. Key government agencies such as the NEDA, DOF, DOTC and various LGUs are moving and private sector players impatient for raising the bar for the standards in Philippine public utilities are sitting up and taking notice.

The Marubeni-DMCI consortium’s announced that it had signed an engineering, procurement, construction contract with Universal LRT for the Metro Rail System (MRT5) and Intermodal Transportation Terminal of the MRT-7 Project.

MRT-7 is a 22-kilometer train line with 14 stations from San Francisco del Monte in Bulacan to North Avenue and Epifanio de los Santos (EDSA in Quezon City). MRT-7 ill connect to the existing MRT-3 train line and the Light Rail Transit (LRT) line 1 through a common station on North Avenue.

Universal LRT is a railway firm managed and controlled by San Miguel Corporation,

Another announcement came from the Ayala Corporation and Metro Pacific Investments Corporation (MPIC), which is in Tollways, Power Distribution, Hospitals and Water Utilities. They announced that their partnership has been awarded the extension of the LRT 1 line from where it now ends at Baclaran to Cavite as well as the MRT-3 upgrade and rehabilitation,

The LRT-120.7 kilometer railway in Metro Manila will get an additional 11.7 kilometers by 2015, during the last year of the Noynoy presidency,

This new line will increase the LRT service to the riding public from its present 500,000 to 700,000 daily. It will also provide faster and more convenient travel for residents south of Manila in Cavite, Las Piñas and Parañaque.

The LRT, built during the Marcos years, will be improved at a cost of about P30 billion for the additional tracks, new stations and other facilities. Another P30 billon mostly for the additional coaches will be borne by the government through funds from the Official Development Assistance or ODA, which has lower interest rates than funds available through private financing.

This government is doing the right thing. We clearly need to maximize whatever we have in the way of transport infrastructures. How else can we boost other components of the economy such as tourism, agriculture, industry, jobs, and so on if we’re constantly stuck in traffic and hamstrung by aging and inefficient transport systems?

Many more private sector players, including foreign investors, are surely as interested as San Miguel MPIC and Ayala to participate in infrastructure projects. Many, however, are hampered by red tape and other blockages. This is one reason our Asian neighbors are far ahead of us in getting their private sector to participate in public sector projects.

Partnerships such as that between Ayala and MPIC are rare between competitors. (Ayala and MPIC compete in telecommunications, water and power). Both, however, clearly cooperate out of a mutual desire to invest in capex in key transportation infrastructure so sorely needed by this country.

DOTC Secretary Mar Roxas fully supports the Ayala-MPIC alliance, explaining that the government welcomes companies with huge capitalization, who have a good track record of delivering large infrastructure projects, and who clearly have access to the most advanced technology, manpower, management and the skill needed to successfully deliver projects.

Of course, a government must always be cautious and methodical in weeding out the chaff from the grain among interested investors. Isn’t it a relief that top firms are working with government on its projects and not the charlatans and carpetbaggers who used to capture most government contracts?

Hopefully, we are forever free from the “flippers’” those who bid low on a contract only to sell it to some other group, Stuff like these only delays implementation. Unfortunately, this was common practice in the previous administration.

What government has to watch his time around is that it could get too careful, so much so that delays in the decision-making process could discourage interested investors, many of whom are right now raring to go.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

Philippines plans to tap funds from foreign institutions to develop slum areas

Gulf News - The plan includes provision for government-guaranteed access to credit to the poor to buy homes, and help eradicate slum areas in urban areas, says Vice-President Jejomar Binay
The Philippines is tapping international financial institutions to help private businessmen and government jointly undertake mass housing projects for the poor. The plan also includes provision for government-guaranteed access to credit to the poor to buy homes, and help eradicate slum areas in urban areas, Vice-President Jejomar Binay said.

“We must fill a deficit of 3.6 million homes [for urban poor and informal settlers in Metro Manila] between now and the end of 2016,” said Binay at the Global Housing Finance Forum of the World Bank in Washington DC, where he talked about his country’s ambitious plan to eradicate slum areas.

The deadline for providing homes to illegal settlers, one of the aspects of the pro-poor agenda of the United Nations’ Millennium Development Goals, must be met by member states in 2015, said Binay, adding, “The fast rate of urbanisation, the changing roles of stakeholders, and the increasing competition for funding compel us to innovate and adopt new approaches and strategies.”

As chairman of Housing and Urban Development Coordinating Council (HUDCC), Binay has a very big problem to solve.

Over 60 per cent or 53 million of the country’s 90 million live in urban areas nationwide. By 2030, the country’s urban population is estimated to hit 96 million, with three of every four Filipinos living in urban areas.

In Metro Manila, more than 3 million of 10 million residents are informal settlers in more than 200 urban areas.

More than 1.4 million belong to the category of two or more households living in one small housing unit in Metro Manila; others live in marginalised housing units in danger zones, exposed to the natural and to criminal or anti-social elements.

Metro Manila accounts for almost 40 per cent of the Philippines’ GDP and 13 per cent of the country’s total employment. It ranks 14th among the world’s 20 megacities.

In comparison, the annual growth rate of real estate development per capita GDP in the Philippines remained low, starting a sharp decline in the early 80s, according to the Asian Development Bank.

The average annual public expenditure on housing in the Philippines is 0.089 per cent of GDP, the lowest in Southeast Asia, compared to Bangladesh, 0.354 per cent; Malaysia, 0.383 per cent; Thailand, 0.742 per cent; and Sri Lanka, 0.758 per cent, ADB said.

The government is encouraging the private sector to participate in mass housing projects. The public sector provides 75 per cent housing finance through housing loans primarily provided by the Home Development Mutual Fund or Pag-Ibig, and the National Home Mortgage and Finance Corporation, said Binay.
Philippine government agencies have offered mini mortgages to low and mower middle income borrowers who have no access to housing finance.

Congress has passed laws allowing local government units to handle housing projects for the poor.
The local government code of 1991 allows government to issue municipal housing bonds to access the private capital market for development projects; and to issue permits and licensing of land development in their respective areas.

The Urban Development and Housing Act of 1992 allows local government units to undertake partnership with the private sectors, spend for resettlement of informal settlers and protect informal settlers.
The Philippine Climate Change Act (2009) created the Philippine Climate Change Commission that promotes local government units’ awareness on climate change and comprehensive land use.

The Disaster Risk Reduction and Management Act imposed on local government units to integrate climate change adaptation measures into development plans.

In July 2012, the National Home Mortgage Finance Corporation will issue the country’s first-ever retail housing mortgage-backed securities under the securitisation law.

In October 2012, the National Home Mortgage Financial Corporation will issue the first-ever Community Mortgage Programme — Asset-Backed Securities (CMP-ABS) in the market.

Meanwhile, President Benigno Aquino has called on Congress to pass a law creating the Department of Housing and Urban Development.

It will work with environmental planners, builders and community beneficiaries, to ensure a holistic strategy in addressing access to and affordability of housing units. The department will regulate the mobilisation of public and private sectors for the building of housing units.

All these developments will make the Philippines ripe for a public-private investment on mass housing which the World Bank supports, Binay said.

The World Bank’s meeting in Washington DC, “Housing Finance in Emerging Markets”, was a continuation of its support to housing finance in emerging markets following economic slowdown and the mortgage crisis in many developed economies in 2008.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

Proving IMF And HSBC Wrong

NUMBERS DON'T LIE

By ANDREW JAMES MASIGAN

June 11, 2012, 3:10pm

Last month, I wrote about how the IMF saw the Philippines posting one of the slowest growth rates in the region this year. The Washington-based bank projected Philippine growth within the vicinity of 4.2 percent, trailing Thailand, Malaysia, Indonesia and Vietnam. As if on cue, the same forecast was parroted by other financial institutions including the DBS Group of Singapore, Standard Chartered Bank and the Citi Group.
I personally thought that the prognosis of these financial institutions did not do us justice—4.2 percent was too low considering that exports made a dramatic rebound over the first quarter, as did OFW remittances and tourism receipts. Even government spending was on overdrive given the effects of the R72 billion stimulus package launched last year. All things said, I thought that growth of 5.2 to 5.7 percent was about fair.

DTI Sec. Greg Domingo also thought the IMF sold us short. When I spoke to him last month, he said that most financial institutions only take global economic trends into consideration and not the latest developments in the local landscape. The Secretary was confident that we would surpass the IMF forecast. His estimate back then was between 4.5 to six percent.

Last week, NEDA finally announced our first quarter stats and pegged our growth at 6.4 percent. This exceeded everyone’s expectations including Sec. Domingo’s most optimistic forecast. Even better was that we are proving the IMF wrong by a long shot. Not only did we outdo the bank’s forecast by as much as 2.2 percentage points (equivalent to R32 billion worth of goods and services), we also outperformed Vietnam which grew by just four percent; Thailand, which grew by .3 percent; and the current darling of the investment world, Indonesia, which grew by 6.3 percent. Redemption, even a tentative one, is sweet indeed.

A New Respect
But even before our first quarter stats were released, I could already feel a new “curiosity”, and shall I say, respect, for the recent advances we’ve made as a nation. No doubt, the good news about our reform program is resonating in many business circles overseas.

Last week, I attended the Global Leadership Conference of the Entrepreneur’s Organization (EO) in Manama, Bahrain, a gathering of at least 300 prominent entrepreneurs from 37 nations. The Philippines has always been an active chapter in the EO circuit being one of the oldest chapters in the region. I have the honor of being one of the founding members in the Philippines, having helped launch the organization in 1996.
E.O. has several international conferences every year and the Philippine chapter never fails to be represented. I myself have attended more conferences than I can count. For some reason, we Filipinos have become known as the most approachable and fun chapter, having the unique ability to connect with fellow Asians, North Americans and Latinos. It just comes naturally to us, perhaps even to the chagrin of other chapters.

But despite being “popular”, we’ve never seen a genuine interest from our fellow entrepreneurs on the goings-on in the Philippines. As far as I can remember, I have never interacted with people interested in our economy or how it is to do business here. Not until Manama, Bahrain.
Throughout the conference, I was pulled aside, on several occasions, by colleagues from Latin America, Europe and the States to share my views on our economy and the opportunities that may be available for them. This has never happened before. Apparently, news is reverberating that the Philippines will be the next investment-grade economy, following Indonesia. Typically, keen entrepreneurs want to position themselves before everyone else.

We made a bid for the Philippines to host the next EO Global Leadership Conference in April 2013 and was in competition with Thailand and Japan for the privilege. I am proud to announce that we won by a landslide. It seems those in the know want a piece of the Philippines now.

Drivers Of Growth
I was glad to see that this time around the country’s growth was driven from multiple sectors and not just from one source. This tells me that the economy is growing holistically. Still, I am worried that foreign direct investments still contribute pittance to our overall growth equation. Fine, it increased 154 percent in the first two months of the year, bringing in $850 million in fresh capital, but it is still not enough to make a significant dent in our growth numbers.

In any event, growth is growth and I am just happy that economic expansion exceeded population growth two times over. For curious minds like mine who want to know where our growth stemmed from and how each area of the economy fared, here is a summary according to subsector.

The services sector, which contributes more than half of total domestic output, grew by a healthy 8.5 percent. Among its subsectors, wholesale and retail grew by 8.9 percent, other services grew by 10.5 percent, and real estate grew by 7.9 percent. Supporting growth in this sector is the 1.15 million tourist arrivals, which provided increased economic activity in transportation, communication, hospitality (hotels and restaurants), as well as recreational, cultural and sporting activities.

The industrial sector, on the other hand, grew by 4.9 percent. Again, a closer look into its subsectors reveal that manufacturing grew 5.7 percent, primarily due to strong demand here and abroad for Philippine-made furniture, apparel and food products. Utilities grew by 8.0 percent and construction by (only) 3.6 percent. Apparently, private construction contracted by -9.9 percent and was only offset by substantial increases in public construction.

After several quarters of decline, merchandise exports rebounded and grew by 7.1 percent while service exports (mainly from the BPO industry) grew by 11.1 percent. Net exports receipts was the second highest contributor to growth after the services sector.

Agriculture was somewhat a disappointment, growing by only one percent. As usual, OFW remittance was our main source of liquidity, growing at 5.4 percent, pumping in $4.8 billion into the system. No surprise household consumption grew by 6.6 percent.

All factors taken into account, our impressive growth would not have been possible without the massive increase in government spending. Thankfully, DBM’s early release of budget allocations last January paved the way for government agencies to fast-track the implementation of their respective infra projects. This allowed government spending to increase by 24 percent.

To the man on the street, all these facts and figures translate to 1.101 million new jobs and increased dispensable income per household.

Can Growth Be Sustained?
Again, some financial institutions think not. Both HSBC and the DBS Group think that the worsening situation in Europe and our dicey relations with China could weigh heavy on our export performance for the rest of the year. As mentioned earlier, net exports are our second driver of growth so a damper on this could drag down our performance for the entire year. HSBC’s regional economist, Trinh Nguyen, doubts whether government can sustain its high spending rate. While some financial institutions like Japan’s Nomura Securities have increased their 2012 growth projections for the country to 5.1 percent, HSBC maintains that we can only manage 4.4 percent growth for the entire year.

Even if government set a fighting target of between five to six percent growth, both NEDA Sec. Balisacan and DTI Sec. Domingo think we will surpass it.

Their optimism is predicated on our performance in April and May, a period where Europe was in the doldrums of its crisis. NEDA noted that despite the serious credit crunch in the western hemisphere, initial data indicate that our exports in fact increased so much so that they are looking at a 10 percent year on year uptake.

In addition, Sec. Baltican believes there is still considerable room to accelerate government spending.  On top of the continued capital expenditures of the DPWH and the DOTC, there are now 22 multi-billion projects ready for bidding at the PPP Center (from just under five projects this time last year). As to whether they will actually see public bidding this year or not is another story. The point is, the Secretary stresses, the projects in the PPP pipeline will be rolled out eventually and the economy will surely feel its ripple effect.
On the social infrastructure side, Balitacan disclosed that an additional R9.02 billion will be spent over and above what was already allocated in the national budget, on projects to benefit public health, education and social welfare. Balitacan believes that this should be sufficient to cover any negative effect the Eurozone crisis might bring.

For his part, Sec. Domingo is optimistic that substantive investments will begin to pour in this year. He has been busy going on road shows and entertaining investment missions into the country, with very promising results. He tipped on a new multi-billion dollar investment in the shipbuilding industry due to be finalized in the next few months.

And so, it all boils down to HSBC’s word against that of our government technocrats. As we have done with the IMF, I hope we prove HSBC wrong yet again.


Andrew is an economist, political analyst and businessman. He is a 20-year veteran in the hospitality and tourism industry. For comments and reactions, e-mail andrew_rs6@yahoo.com. Follow Andrew on Twitter @aj_masigan.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.