Tag Archives: interest rates

Property business is also for young and not-so-rich

Philippine Daily Inquirer
By Michelle V. Remo
August 25, 2012

With interest rates at historic lows and supply being abundant, the time is ripe for investing in real properties.
Contrary to common notion that it is fit only for big enterprises and the extremely rich, the property business is also something the young professionals and the not-so-rich can engage in.
“While an individual is young, that is the best time to start building one’s property portfolio,” Carl Dy, Property sales coach and Ayala Land Premier sales director tells SundayBiz.
Ayala Land Premier is the developer of the group’s most expensive projects.
At 34, Carl already has several properties in his portfolio from which he earns extra income, mostly from rent.
The property sector in the Philippines has continually grown over the past three years as evidenced by the growing number of condominium buildings among other real assets.
Because Asia is seen to continue driving global economic growth in the years to come, emerging markets in the region like the Philippines are expected to be keeping a robust growth as well.
Carl says that at a time of economic boom, the property sector is one of those that benefit the most. As incomes rise, he says, demand for properties grows as well.
Given this backdrop, he says, business-minded individuals should easily see the income opportunity over the medium to long term from investing in real properties.
“Stars are aligned right now. Because of the economic boom in Asia, the benefits are trickling down to the Philippines. Almost all sectors are enjoying good business, and the property sector is not exempted,” Carl says.
Carl, who grew up in Binondo in Manila seeing his parents run a hardware, says even a young professional like himself can engage in the property business. The business is actually much easier than other types, he opines, as it requires less management effort compared to, say, running a restaurant.

Medium to long-term return
However, Carl says, running a property business requires patience as far as generating income is concerned. Unlike other businesses that could generate profits within the short term, the property business is meant for those who have the patience to wait over the medium to long term to generate significant income.
For instance, one way to earn from the property business is to buy a piece of land, let its value appreciate over the years, and then sell it. He says the increase in the price of land can be significant over the years. Such a strategy does not entail too much management effort, but requires the skill of waiting, he says.
Another way to earn from the property business is to buy an asset—be it a house and lot, a townhouse, or a condominium—and have it rented.
A young, self-supporting professional may not be able to buy a property in cash, and so what he can do is pay for the property in installment basis.
He may not earn significant income in the initial years, Carl says, especially since monthly amortization is still being paid. The income generated from rental of the property will mostly be used to pay for the amortization, he adds.
But once the years of amortization are over, Carl says, the owner may fully enjoy passive income from his property, the value of which will have already increased significantly over the years.
“One just needs patience. Instead of thinking of not being able to generate profit in the initial years, one should think that he is able to fully pay for a real property at almost no cost (because the one renting is the one effectively paying the amortization),” he says.
Depending on appetite and financial capacity, Carl says, an individual may opt to buy a few properties and rent those out to generate much more income in the years to come.

More tips
Carl says there is an option for property owners to rent their assets as fully furnished ones. Furnishing a residential property gives it much more value and allows owners to impose higher rent and thus generate better income.
The property expert also says owners must learn the value of taking care of tenants. If tenants have requests, say household repairs, the owners should agree as long as those are reasonable. It could be regretful if a tenant, especially one who religiously pays rent, leaves because of dissatisfaction, he says. Having no rental income for a month or two because a tenant has left and because a replacement has yet to be found could be much costlier than having granted the old tenant’s minor request, Carl adds.
The cheapest is not always the one that gives the best value for money
On choice of property to invest in, Carl says one should not solely consider price of an asset. Not all cheap properties give the best value for money. He says a property that is of good quality and is comfortable to stay in could easily attract potential tenants and could give better income opportunity in the future.
“A cheap property is not always the one with good value,” he says. He says this is the reason a buyer should also take into account quality of the property because one that has good quality also appreciates faster in value over the years.
Carl, who is an architect by education, says another important thing to remember in being in the property business is the need to know a product before buying and investing in it. Knowing the product means knowing the developer, the profile of its location and of the people living in the area, and the cost of living in the location of the property, among others. Knowledge of said information helps better determine accurate pricing for a property, he says.

Properties vs Portfolio assets

The beauty of buying properties instead of liquid assets, such as securities, is that real assets are difficult to lose and waste, Carl says. Because selling a property takes much more time than withdrawing cash from a bank or selling a stock, the investor is forced to be engaged in an investment for the long term.
“Unlike in the case of cash or portfolio assets, one does not have the urge to sell a real property just so he could buy stuff he wants but does not really need. Investing in real property forces one to become a long-term investor,” Carl says.
Investing for the long term can generate significant income that could help secure one’s future, he says. Since the property business is a long-term venture, starting out young gives one an edge over the others, the property guru adds.

Property boom transforming Philippine skylines

Written by AFP
The Daily Tribune
July 23, 2012

As a Philippine property boom gathers pace, even Paris Hilton, Donald Trump and high-fashion house Versace are getting a piece of the action.
The good times are into their fourth year, fuelled by steady economic growth, Western firms offshoring jobs to the Philippines, the buying power of millions of Filipinos working abroad and low interest rates.
“It just so happens that today the stars are aligned… we have never seen the economy this bullish,” said Antonino Aquino, president of Ayala Land, one of the country’s biggest property developers.
Ayala Land is one of the main players in what industry figures describe as an unprecedented construction boom that is transforming the skyline of the nation’s capital, as well as many provincial cities.
In Manila, formerly sleepy pockets such as the Fort army base and the rundown Eastwood industrial zone have become chic, new business districts, catering mainly for the fast-growing outsourcing sector.
At the Fort, Ayala Land this year broke ground on its $714-million One Bonifacio High Street project, which when completed in 2017 will host the Philippine Stock Exchange, a Shangri-La hotel, and retail outlets.
The project also has a 63-story residential tower, with 298 suites ranging from $500,000 to $1.9 million that sold out last month in 96 hours, according to the company.
Across the country, more than 850,000 square meters of office space and 14,000 residential units will enter the market this year, property consultants CBRE Philippines said in a report.
It said many of the residential units catered for a growing middle-class on the fringes of Manila and other urban centers.
The building boom has also spread to hotels, shopping malls and casinos, triggering hopes of a long-anticipated take-off of the underdeveloped tourism industry.
Three of the world’s biggest gaming industry leaders are building a $4-billion, 100-hectare Entertainment City complex of casinos on Manila Bay. The first of the casinos are set to open early next year.
Meanwhile, Trump, the New York mogul, has put his name to a $150-million, 56-story, curtain-glass-walled Trump Tower that broke ground in the financial district this year.
“High-end buyers look for key differentiated features,” said Robbie Antonio, managing director of Century Properties that is behind the Trump Tower development.
He said 70 percent of the 220 residential units, which are worth up to $1.86 million each, have been sold.
The firm is putting up a nearby tower designed by the Versace fashion house — the first of its kind in Asia — featuring individual wading pools as well as its iconic Medusa-head brand imprinted on lamp shades and cutlery.
Century also flew in socialite and hotel heiress Hilton to Manila last year to help design and promote a suburban Manila residential project that features a man-made beach.
Industry players say the property boom reflects the overall status of the nation’s economy as it picks up steam after decades of underperforming compared with many of its Asian neighbors.
The economy grew 6.4 percent in the first quarter, the stock market has surged 20 percent this year to hit all-time highs, and the country’s credit rating has been bumped up to just a step below investment grade.
The central bank’s benchmark interest rates are also at historic lows — 4.0 percent for the benchmark borrowing rate — ensuring large piles of cheap cash for property development.
Aside from the macro economic picture, real estate analysts point to the outsourcing phenomenon as one of the key drivers of the property boom.
From virtually nothing a decade ago, outsourcing now employs more than 600,000 people and is worth $11 billion annually, according to the main industry association which is forecasting 15 percent growth in the years ahead.
Many of the skyscrapers are being built to cater for the outsourcing workforce, which performs a myriad of tasks from call center duties to designing architectural plans for foreign firms.
Meanwhile, roughly nine million Filipinos who work overseas are sending large chunks of the $22 billion they earn — equal to 10 percent of the nation’s gross domestic product — back home, often investing in real estate.
The frenetic building pace has some quarters anxious over a potential property bubble, with the global economic woes adding to concerns.
But Rick Santos, CBRE Philippines chief executive, remains bullish, in large part because of the expected continued growth in the outsourcing sector.

Binay pushes lower interest for housing

November 12, 2010

Housing czar Vice President Jejomar Binay is drawing up measures toward addressing the housing backlog that now stands at 3.7 million units.

Binay, chairman of the Housing and Urban Development Coordinating Council (HUDCC), said interest rates for housing loans, for example, could still be lowered from the current 6 percent for units that cost P400,000 and below.

Binay said in an interview at the sidelines of yesterday’s inauguration of the Accenture facility in Fort Bonifacio that government is hoping to triple to 150,000 the targeted housing units to be built in 2011.

This number includes units for relocated informal settlers, said Binay.

Binay said the government would encourage more development of socialized housing units at a lower cost of P70,000 to P80,000 per unit from the current P100,000.

“The low-cost housing segment addresses middle-end market where the units cost between P600,000 and P3 million. What we need is more socialized housing, with units of less than P100,000,” he said.

Private developers, he said, are doing their part by complying with the requirement of allocating 20 percent of their projects to socialized housing.

But Binay said the interest rates can be tweaked further to 5 percent for housing loans of P300,000 and below and 4 percent for P200,000 and below.

He also said HUDCC is asking the active participation of local governments in addressing the housing gap, especially outside Metro Manila.

“What the local government can do is to provide the lots as their counterpart because what makes housing expensive is the house and lot as a package,” Binay said.

He suggested the creation of a Department of Shelter to take care of problems on boundaries and titling of properties.