Slowdown in low-cost housing unlikely

Updated December 13, 2008 12:00 AM

Catering to the “need market,” the low cost housing segment of the real estate industry is not looking at a possible slowdown next year despite threats brought about by the current global financial crisis.

“The low cost housing segment caters to a need market so there is very little speculative buyers because most of our buyers buy a house to live in and not just as investment. There is a deeper and basic purpose on why they buy a house so we remain bullish with this market segment,” said 8990 Housing Development Corp. chairman and president JJ Atencio.

Atencio, who is also a member of the Subdivision and Housing Developers Association (SHDA) believes that the segment in the housing sector that could be hit by the current global financial crisis is the higher to mid-end markets.

This is because these segments exhibit a larger portion of the speculative buyers who invest on real estate according to the cycles of the economy, said Atencio.

“When the economy suggests that it will be risky to invest, these markets usually cancel or pull-out their investments. With today’s crisis, they rather stay liquid because credit is tighter and foreign exchange is volatile so cash is the key so they veer away with real estate investments. Those who can afford would rather hold on to their cash,” he explained.

He said that one major reason why the upper scale and mid-end segment of the housing sector would experience slowdown of sales is that there is a larger degree of foreign-based sales composed of homebuyers from OFWs and foreign residents.

“More than 50 percent of the foreign-based sales are from the US and it’s going to be telling next year especially that the US government has recently accepted and announced that their economy has been under recession,” said Atencio.

He said that this situation will inversely throw a negative effect to the high-end segment but they are not afraid it could trickle down to the low cost housing segment.

“We still have to find out to what extent this crisis could affect the real estate sector but it will not trickle down to our level because we cater more on the domestic market. In times of global crisis, the domestic market will save you,” he added further.

He said that for their company, only less than eight to five percent of their sales could be directly attributed to the OFW and foreign-based sales.

He said that despite the glooming crisis, Cebu is still one of the growth markets in the country for real estate especially the low cost segment because there are still a lot of people who do not own their homes, said Atencio.

“There are still a lot of people in Cebu who do not own a home and our mission is to provide affordable homes so that everybody could be called a home owner and so that they can make a move and not rely into just renting for all their lives. The earlier they do it, the better especially that present interest rates for a Pag-Ibig loan could not go any lower,” he added. — Rhia de Pablo

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Cebu deemed recession proof

By Ehda M. Dagooc Updated December 12, 2008 12:00 AM

Starting next year, one would feel "luckier" that he lives in Cebu, as the island province is considered as one of the few "recession proof" City economies in the world that will benefit from the worsening global economic meltdown.

Based on its extensive survey, the world's largest commercial and real estate services firm, CB Richard Ellis Group, Inc. projected that Cebu's economy will be saved by its booming Business Process Outsourcing (BPO) and tourism sectors, this optimism will not only benefit Cebu, but domino effects will go down to the rest of Southern Philippines' economy.

In an economic briefing hosted by CB Richard Ellis Philippines, the company's chairman presented a rosy picture of Cebu economic development starting next year, backed up by realistic figures and extensive market study.

According to CB Richard Ellis Philippines chairman Rick Santos Cebu is seeing "life" amid the gloomy global economic prospects, and Cebuanos will expect abounding opportunities for employment and other money-making activities next year.

"As companies' revenues are under pressure Multinationals [firms] look to save costs and move offshore to the Philippines as it's easier to save a dollar than make a dollar. Moving them to multiple outsourcing destinations, and looking beyond to find lower labor costs and land values, make the outlook good for Cebu City," Santos said.

In the South East, people come to the Philippines for political stability and Cebu is the most stable, he said.

After the Mumbai attacks more BPOs in India will be inclined to set up secondary operations and back-up or mirror sites in the Philippines. "More India BPO's will follow WIPRO and Infosysis lead and look to set up in Cebu, here in the Philippines," he added.

The amount of money, and job opportunities that will be brought by the outsourcing companies to Cebu, will benefit the whole economic spectrum of the province, that will boost, retail, domestic tourism, services, transportation, telecommunication, education sectors, among others.

The unfortunate incidents recently happened in Mumbai, India, and in Thailand, would technically favor Cebu's economy. Thailand, as one of the top tourist attraction in the ASEAN is losing thousands of tourists that are now considering the Philippines, specifically Cebu, as alternative destination.

Fortunately, Cebu had been able to position itself as ICT/BPO and tourism destination, these two powerful sectors will drive up Cebu's economy in long term, that will shield the province's tendency to be "contaminated" by the effects of the global crisis.

Cebu being dubbed recently by the American Chamber of Commerce and Industry as the "The best BPO and lifestyle destination in the World" will see a turn-around of economic growth, while other countries and cities in the world will have their share to struggle and cope with the global recession.

Santos dismissed impressions that the Obama-led US government will bring threats to the BPO sector, saying "as long as there is an open telephone line" nobody could stop technology, even as powerful as Obama.

"Recently, the bulk of demand for new office space has come from the Cebu based operations of multinational companies, call centers and BPOs which are expanding to Cebu, and foreign IT companies who have made Cebu a base for their Philippines operations," said Joey Radovan, CB Richard Ellis vice chairman and head of Global Corporate Services report.

"We've also seen companies expanding here from India, in order to have a base of operations in both outsourcing hubs," Radovan said.

Santos added that large corporations are being hit hard by the US recession. "They're searching for a safe haven for their investments, and having doubts about security in India. Cebu is an ideal choice," Santos added.

In tourism, the company is confident that Cebu will post double-digit growth next year, while other destinations are projecting slowdown of arrivals.

"The current slowdown in global tourist travel as a result of the worldwide economic recession had been acknowledged by market commentators, but its tough to spot evidence of a slowdown in Cebu," said the company's general manager Trent Frankum.

"The City is well positioned for growth—hotels are at maximum capacity, and the right infrastructure is in place," Santos stressed.

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Real estate still growing

INVESTORS are flocking to real estate amid the deepening global crisis and in Cebu, prospects remain to be bright, according to an international commercial real estate services firm.

CB Richard Ellis (CBRE) Philippines chairman Rick M. Santos said opportunities still exist in the Philippines as the country’s real estate industry has remained stable amid the crisis.

“Opportunities continue to abound (amid the crisis)…(and the) property (industry) provides a safe haven,” he said during a press conference yesterday. He added that CBRE is “bullish” in southern Philippines and “very optimistic” for Cebu in 2009,

which is why it is opening a full service office in Cebu that will also serve the rest of the Visayas and Mindanao.

Santos said the Philippines has not been spared by the global economic crisis but the increase in the prices of gold, which boost the country’s mining industry, and a stable real estate sector prevented further adverse effects on the economy.

Stability in real estate can be traced to continuous growth in the business process outsourcing (BPO) sector, he said, adding that Cebu stands to attract more BPO companies.

Mumbai, Thailand incidents

He said the terrorist attacks in Mumbai, India and civil unrest in Thailand will benefit the Philippines and Cebu, in particular.

After Mumbai, more BPO companies are expected to look to the Philippines as tourists would re-think plans to go to
Thailand and consider the archipelago’s 7,100 islands as the better destination.

Santos said CBRE expects more Indian BPO companies to follow Wipro, which has established operations in Cebu.

Trent Frankum, general manager of CBRE Philippines, reported that off-shoring and outsourcing, which include BPO companies, continue to drive the demand in most real estate segments, particularly office space. Tourism and remittances sent by overseas Filipinos also contribute to the development of the country’s property industry, he said.

He said about 115,623 square meters of new office space is scheduled for completion in 2008 across Metro Cebu, to address the demand caused by BPO companies and the traditional office market.

He said that aside from the BPO sector, the tourism industry also continues to grow, resulting in expansion of retail space and accommodation facilities (hotels and resorts).

Industrial space

However, Frankum noted that there is declining demand for industrial space.

“For a year and a half now, the country’s industrial output has been on a successive decline, which is unprecedented in history,” he said, citing data from the National Statistics Office. He described the industrial property sector as a “laggard.”

Still, he identified Metro Cebu, along with Clark and Subic, as “bright spots.”

He said that growth in the industrial sector is moving farther out of urban centers. He added that rising occupancy costs (rent and power) hinder the entry of most multinational manufacturers to the Philippines.

Joey Radovan, CBRE Philippines vice chairman, also pointed out that public spending in infrastructure has been able to sustain economic growth in the country. He cited the South Coastal Road, the North Coastal Road, Cebu Trans-Axial Highway and the upgrading of airports outside Metro Manila.

CBRE officials also dismissed speculations that the United States (US), under the leadership of President-elect Barrack Obama, will impose restrictions on companies outsourcing or off-shoring certain services to keep jobs within the US.

Santos said the economic factors that make a company decide to outsource or off-shore certain functions or services are “very compelling.” He pointed out that the high salaries and health care costs, as well as labor union issues, are just some of the factors that make a company in the US resort to off-shoring or outsourcing.

Victor Asuncion, director for research and consultancy of CBRE Philippines, said it is “politically correct” for Obama to declare that jobs in US-based companies should be for Americans, but the issue of whether to outsource or not is a matter of economic viability on the part of companies.

“Unless Obama provides margins (for these companies), which he cannot do (at this time), he cannot stop them from (establishing) global operations,” he said in the same press conference.

He pointed out that the US Government has to deal with multi-billion dollar bailouts of its financial sector.

Radovan said CBRE even expects a surge in outsourcing to the Philippines in 2009. He said more companies in the US are expected to outsource services as the economy experiences a recession.

He dismissed fears that the financial turmoil in the US has resulted in the displacement of workers in the Philippine BPO industry. (LAP


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Great Opportunities at Scary Times

by Joey Concepcion

The world continues to face a financial crisis equal to an intensity-10 earthquake that has never been experienced before. While this disaster does not directly bring danger to human lives, it has directly damaged wealth.

Over the past months, I have come across friends and family who have lost so much of their personal and family wealth during this financial crisis. I would say that close to 100 percent of those I know have lost so much. The range just depends. Maybe the luckiest person I know would have lost only 15 percent, but a number have lost up to 50 to 70 percent of their investments. If I were to name them one by one, my column space would run out. Many of them had placed a lot of their trust with their bankers to guide them on their investments. The problem is that many of these bankers use sophisticated instruments and derivative structures like accumulator, equity link notes, etc. The worse thing is that many were encouraged to leverage their portfolios to increase the returns of investments. When people borrow and leverage, their portfolio and assets drop in price. It is a certainty that they will be on margin call. This means that they have to add cash, or else the banks will start selling their assets to meet margin calls.

To some extent, Filipinos are more of bond investors than stocks, unlike investors in Hong Kong, China and India who have a higher weight on stocks. But still, a lot of Filipino investors have invested in emerging market bonds that have dropped to levels that were never seen before. Even investment grade bonds have also dropped tremendously. I would consider the Philippine bonds as an exception, since we have fared very well as compared to other Asian bonds.

The only ones spared in this crisis are those who have stayed in cash, or those who have invested only in the Philippine corporate and government bonds. The Philippine stock market has gone down to current levels of 1,900, from its high of about 4,000 index. Ayala Corporation, BPI and PLDT are coming close to the lows of the 90s. Even our own RFM Corporation is trading at 0.23 cents. That results to a market capital of 900 million pesos. The funny part is that our 50 percent share in Selecta with Unilever alone is worth more than P1.5 billion today, excluding the many other parts of RFM. You can see the amount of paper wealth destroyed in the past six months. It is sad to say that if this continues next year, we should see property values coming off. Many have been hurt in their investments. If margin calls will be made, people will be forced to sell their prime real estate.

Who do we blame for all these? The banks that we trusted have a great role in this mess, aside from the many complicating structures they have created for their clients. Banks have paid a price for these mistakes. Many of the banks, if not all the banks in the world, are trading at half of their values and some even at 20 percent of their high. If not for the support of the Feds last week, Citibank would have been in serious trouble. Hopefully, banks and investors will learn from this.

A good friend of mine who did very well buying Benpres sees the Dow Jones at 4t next year. Another chartist who I have listened to and who follows the Elliot Wave (a way of reading the charts) feels the same way too. There is a lot of fear that the worst will happen in '09, which happens to be the Year of the Ox. We are indeed in scary times, but I still believe that the Philippines should still come out as one of the Asian stars that will perform in '09.

My appeal is for those who want to change our constitution before 2010, we suggest people to start first the debate in 2009 on what is the best form of government. Maybe let us also get a provision to state that in 2010, those elected in the senate and congress will form into a constitutional assembly. But, let the people decide if they want Con-ass or a Constitutional Convention. Whichever is voted, full implementation on political changes should only happen in 2016. The needed changes on economic provisions of the constitution can be made effective immediately. There is nothing wrong in reviewing the constitution, but timing and perceptions must be considered. Any form of amendment before 2010 become negative to a lot of Filipinos, since they look at it with suspicion in extending the president's term. As I explained to friends from the opposition, PGMA will not extend her term. She wants to see our democracy continue, especially in times like this. But yes, it's time to start the debates on whether Mar Roxas' Concon or Conass should be the way to review and change the constitution and what provisions must be revised to adjust to the current environment.

Last Friday, I was invited to attend the launching of Sen. Manny Villar's "Pondo sa Sipag, Puhunan sa Tiyaga." It is basically a program that will search for microentrepreneurs nationwide who have been doing well, amidst the challenges they face. Under the program, the awardees will be given P100,000 financial assistance that could give them a better chance to move up from micro to small. As I was listening to Sen. Manny Villar's message, I noticed that it was exactly the same message I tell people during our caravans. He talked about the need for a change in attitude, which is what Go Negosyo wants to see. Manny's line "Sipag at Tiyaga" is very similar to what Go Negosyo promotes in Filipinos. These are the values of many Filipino-Chinese entrepreneurs. As Go Negosyo was born, it came along with the line "sagot sa kahirapan." The need for a new revolution, an entrepreneurship revolution, is what this country needs. While I work as a consultan t on entrepreneurship for PGMA, I believe that we need to see more men and women realize that the solution to poverty is the creation of more negosyos.

It is important that every presidential candidate has a clear vision on how they intend to solve poverty, and on how they would encourage and support microentrepreneurs to move up the ladder. Governor Vilma Santos-Recto also has a good handle on how to create a negosyo climate. Governor Lray Villafuerte, as well, is a very enterprising leader. We saw that same intensity in the Negosyo programs of Jon-jon Mendoza of Bulacan. My thrust is to get local governments to take the lead in developing a negosyo climate in their respective provinces. The local officials shall be the Negosyo champions in their areas, and rightly so, because they can make a difference in improving the lives of their constituents. We aim to replicate the Go Negosyo model for mindset change and entrepreneurship empowerment to all provinces and localities in the country, as the way to propagate on a sustainable basis the huge advocacy to change the Filipino culture and mindset. The goal is to get all government agencies and private associations in their areas to support the enterprising leaders and the people in each province.

While India and Thailand have huge problems, this presents us with more opportunities to build the grassroots for a more meaningful growth and development. More call centers and BPOs would locate in the Philippines, and not just in Metro Manila. In fact it is already happening in other cities outside Manila. With everything else that is happening, especially in the promotion and development of hundreds of tourist destinations, more tourists are expected to come to the Philippines. This presents a lot of negosyo opportunities. The next President of this country must take the entrepreneurial success of the Arroyo administration to another level. This is our chance, and Yes, The Filipino Can!

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Firm proceeds with Lapu project

A REAL estate company showed its optimism in the market amid the global financial crisis by pursuing the groundbreaking of the first of six towers of its five-hectare leisure residential property development project in Punta Engaño, Lapu-Lapu City yesterday.

Robinsons Land Corp. (RLC), the real estate arm of JG Summit Holdings Inc., will start construction of the first tower of AmiSa this month.

AmiSa is a multi-million peso five-star condominium-resort. It is RLC’s first project into high-end mixed-use property development, which include condominiums, a hotel and other resort amenities.

The first tower, which has 14 levels, will house 136 condominium units and is scheduled to be completed by 2010. The building design is inspired by infrastructure in Gold Coast, Australia.

“The take-up is very good. This (groundbreaking) manifests our intent to deliver our promise to our clients,” said Trina Cipriano, RLC assistant vice-president for leisure and retirement.

She told reporters that there is a possibility that RLC will build one tower every year until the six towers are completed, especially if market response continues to be strong. The towers collectively offer more than 800 condominium units.

Units at the first tower, or Tower A, are “almost sold out” since it was introduced to the market in November last year. RLC already started selling the 155 condominium units for the second tower, or Tower B, last August.

The buyers, Cipriano noted, are comprised of a “good mix” of foreign investors, overseas Filipino workers, and locals, including Cebuanos. The resort community’s location also poses an advantage for the company to market it to the rest of the Visayas and Mindanao.

“They could use their units at AmiSa as their second home and enjoy the amenities here while enjoying Cebu,” she said.

The units are classified into two-studio type with a price tag of about P3.1 million to P3.3 million and two-bedroom, which is priced at about P5.2 million.

Looking ahead, RLC remains bullish for 2009 because the company is “riding on its good reputation and track record.” Cipriano pointed out that demand for homes continues to rise.

Meanwhile, the company is still on the lookout for an international hotel chain operator that will manage and operate the hotel within AmiSa. (NRC)

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