Ingredients for a Real Estate Boom

manny villar r

here’s an interesting article by one of the philippines top real estate developer, manny villar who was way ahead of the low cost market segment catering to millions of filipinos on ingredients for a real estate boom ( haven’t we been going through one ? ) in fact, it’s been a longer cycle than expected as the variables of the world economy has drastically changed from the european crisis and great american bailout at the start of president obama’s term.  now we have the on going war at the gaza strip.  anyway, i firmly believe we have a lot of growth to look forward to if we could just get our acts right, specifically the government !!! corruption, red tape, etc… and to think the the 2016 presidential election is not far away.  oh well, there’s always hope, isn’t there ?

Ingredients for real estate boom

by Senator Manny Villar :

I am so bullish about the real estate industry that I can say this – that, except for a dramatic decline in economic growth, I don’t see anything that will stop the growth of the industry.

This view may contradict those who feel that the industry, after years of continuous growth, has already reached its peak and is headed for a decline. Such concerns are based on a narrow perspective, which compares the real estate industry with itself.

Perhaps mindful of the impact of the 1997 Asian financial crisis, particularly the collapse of property prices, on local banks, the Bangko Sentral ng Pilipinas recently issued regulations to restrict lending to developers.

Viewed from an Asian perspective, however, real estate development in the Philippines still lags behind Malaysia and Thailand. The lag becomes wider when we look at the stage of real estate in Singapore, Hong Kong, Beijing, or Shanghai. Comparing the Philippines to these places, in terms of real estate, makes us feel really a Third World country.

We are still catching up with our neighbors, so there’s still a lot of room for growth. This is good news. And still another good news, which supports my expectations for the real estate industry, is that we have the ingredients for its continuing development. These include the robust growth of the Business Process Outsourcing (BPO) industry, the growing remittances from overseas Filipino workers (OFWs), low interest rates and manageable inflation, and a strong economy.

The increasing employment in the BPO and information technology companies and the increasing number of successful entrepreneurs are contributing to the growing middle class population, providing an expanding market for housing and office buildings.

In its latest report on the IT-BPO industry, the Bangko Sentral ng Pilipinas (BSP) said employment in the industry totaled 769,932 in 2012, reflecting a 13.3-percent increase from 679,494 in 2011.

 

If we assume a conservative increase of 10 percent a year from 2012, employment in the IT-BPO industry would be at least 931,627 this year. According to the BSP report, average compensation for an employee in the IT-BPO industry was P373,662 a year in 2012. That’s more than twice the annual salary of a minimum wage earner in the National Capital Region, who receives a maximum P466 a day, which translates to about P145,959 a year.

OFWs, which number more than 10 million, sent home a total of $9.4 billion during the first five months of 2014, reflecting a 5.7-percent increase from $8.9 billion for the same period last year. Their remittances do not only support the increase in the country’s foreign exchange reserves and fuel spending for cars and appliances, they also make up a big share of the market for real estate.

The real estate industry, too, continues to benefit from investor confidence, which helps attract foreign investments despite uncertainties in the global economy.

The BSP reported that net inflows of foreign direct investments (FDIs) surged to $597 million in April 2014, four times higher than the $149 million recorded in April 2013. For the first four months of 2014, net FDI inflows totaled $2.4 billion, up 9.1 percent from $2.2 billion year-on-year.

Notwithstanding strict regulations, real estate is still a significant portion of banks’ loan portfolio. In a separate report, the BSP said residential real estate loans of universal, commercial and thrift banks in March 2014 stood at P326.92 billion, reflecting a 17.04-percent growth from P279.31 billion in March 2013. And last week, the BSP raised its overnight borrowing rate to 3.75 percent and its lending rate to 5.75 percent, from the record lows of 3.5 percent and 5.5 percent, respectively. It was the first increase since 2012.

I don’t expect the 25-basis-point increase to translate to a significant increase in interest rates on the real estate sector. In addition, prices remain manageable, except for the spikes triggered by bad weather in recent days. Inflation is expected to stay within the BSP’s target range of 3 to 5 percent this year.

In sum, I am confident that we have not seen the end of the real estate boom. This is good for the industry, good for the economy and good for employment!

manny villar

have a great day !

robert

Robert G. Sarmiento Properties
Professional Affiliation :
Real Estate Broker’s Association of the Philippines
President, Greenhills Chapter 2008-2009
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