Banner year for real estate
5 January 2013
IF THERE is one industry that posted a stellar performance in 2012, it is real estate.
Players are optimistic that 2013 will be a banner year for the industry as well.
Cebu Holdings Inc. president Francis Monera said the real estate industry recorded a revenue growth rate of 18.8 percent in the third quarter in 2012, making it the fastest growing of all industries.
Jose Soberano III, chief executive officer of Cebu Landmasters Inc., said the real estate industry experienced “unprecedented growth” in 2012 in terms of new projects being launched and completed, increases in booked sales and rental income due to higher volume turn-over, and upward price movements.
“This actually continued the growth pattern already felt in 2011 but with a more frenzied take-up rate,” he said.
Remittances sent home by Filipinos working abroad and the booming outsourcing industry were major factors behind the growth of the industry. The liquidity in the market propped by available credit and financing support from the banking sector also fueled real estate’s performance in 2012.
“At no time in our economic history was credit so readily available for medium and long-term housing needs that it opened an influx of buyers from the low to medium strata of our economy,” Soberano said.
In the residential front, Monera said strong and steady influx of remittances, complemented by a healthy investing environment and low interest rates have encouraged more Filipinos to buy property.
Cash remittances in the 10 months to October 2012 reached $17.5 billion, up 5.8 percent from 2011’s $16.5 billion.
“OFWs are a lot smarter now. They look at the future value of their investment and the best place to put money where investment appreciates,” said Cebu Investment and Promotion Center managing director Joel Mari Yu, referring to the growing interest of OFWs who buy condominiums apart from building houses in their hometown.
Moreover, the entry of BPO players buoyed by the country’s strong position as a top outsourcing provider has fueled the growth of commercial buildings in the city.
CBRE Philippines noted that multiple credit rating upgrades, government support and a positive outlook for the Philippine economy encouraged international companies to expand operations here.
But the growing list of developers in Cebu has led to a more intense market competition in the residential market.
“From my end, I try to overcome this stifling competition by continuing to scout for exciting locations and partnering with landowners who want to be part of the action rather than selling outright their properties,” said Soberano.
The entry of Megaworld Corp. in Cebu is one of the key highlights in the real estate landscape in Cebu in 2012.
The Tan-led property developer announced that they will be pouring in P10 billion over the next six years to develop a 16-hectare property in Mactan into a mixed-used commercial development called The Mactan Newtown.
The development is patterned after Eastwood City, the country’s first master-planned township development that will house residential buildings, office buildings, boutique hotel, and commercial strips.
Ayala Land Inc. (ALI) brands were also bullish in Cebu in 2012.
High-end brand Ayala Land Premier (ALP) and subsidiary Cebu Holdings Inc. (CHI) announced the construction of a 38-storey residential tower on top of Ayala Center Cebu’s soon-to-be-completed wing. ALP set aside some P2 billion for the construction of Park Point Residences ALP’s second high-end residential tower in Cebu.
Another ALI brand, Avida, also earmarked P4 billion for the five-tower condominium development spread in the next four to five years at the Cebu IT Park. The project is named Avida Riala.
The Gokongwei group also joined Cebu’s progressive real estate industry.
Big players in town
Robinsons Land Corp. (RLC) said it will be building residential condominiums on a 4.6-hectare master-planned development in the North Reclamation Area of Cebu. The firm is currently putting up Robinsons Galleria Cebu, a seven-story mixed-use building, which will have a shopping mall, a 153-room budget hotel and BPO offices.
Unafraid of the entry of big players, homegrown developers remained upbeat about the industry.
Some local firms diversified their businesses and ventured into real estate, seeing its growth potential. Other real estate developers opted to venture into niche-development, catering to specialized markets.
The JEG Development Corp. for instance, built 14 townhouse units in Talamban that solely caters to the Japanese market.
Contempo Holdings Inc., on the other hand, launched Bamboo Bay, a new vertical project. The firm is spending close to P1 billion for the development of three residential buildings.
Known for its chain of retail stores, the Gaisano Grand Group of Companies ventured into real estate with the launching of its first medium-rise condo project, the Grand Residences.
Industry players believe the robust development all around Cebu is a testament of a thriving economy.
“The real estate industry is expected to grow even faster and a positive outlook is seen for 2013,” said Monera. He noted that the BPO sector will continue to be one of the major drivers of the industry this year.
“With the growth of the BPO sector, which brings high disposable income, and coupled with low interest rates, the country will also experience increase real demand across all market segments,” Monera added.
Soberano noted that Cebu makes up five percent of the country’s total housing figures.
He said that if the national housing backlog is 3.2 million households, Cebu must have an estimated backlog of 160,000 houses, mostly from the economic market segment with house prices between P400,000 and P1.25 million.
He added the high-end market, whose houses are P6 million and beyond, also remains an “interesting” market and a “challenging” sector to penetrate for developers, as the market potential continues to be high for those buyers who want multiple homes.
“This year will be another banner year for the industry,” said Soberano.
“More foreign direct investments mean more employment and more affordability to our market, which still has a huge housing backlog,” he said.
While overseas remittances continue to be the main driver of the local economy, real estate players downplayed the effects of the appreciation of peso on buying homes.
The peso has appreciated more than seven percent so far in 2012, making it Asia’s best performing currency.
“Although this (appreciation of peso) may affect the value of remittances OFWs send to their families, we believe that the desire to buy or build a home in their native land remains strong,” said Monera. “We believe that the shift in the value of dollar will not significantly curb the demand enough to deter Filipinos from their desire to own a home.”
Soberano agreed with Monera and added that on the supply side, the strengthening of the peso has lowered the importation cost of construction materials and housing-related supplies.
Soberano foresees that the low market (within the P1.25 million to P3 million price range) will dominate sales this year, but there will be some solid interest for the middle to high-end market as Cebu continues to be an “exciting” location for main or even secondary homes for rich individuals.
Monera said OFW remittances are powering the low-end to mid-range residential property market, while the increasing demand from BPO employees and expats will drive the upper residential market.
Another trend to watch out this year is the development of industrial parks by homegrown developers.
According to Yu, there is a growing interest among local developers who want to build industrial parks to cater to the “reviving” manufacturing sector, particularly for light engineering companies.
He noted that AboitizLand is looking for locations for a new industrial park. Primary Structures, on the other hand, has also expressed interest and is also exploring areas for possible development.
The minimum requirement of an industrial park is five hectares.