How Philippine Real Estate Developers will Survive Today
It is quite obvious that Philippine Real Estate Developers are not as robust now compared to the previous 3 years due to the global economic slowdown, and therefore need new fresh tactics to survive.The Inquirer Property section started a series of articles that stated “Asia is no longer insulated” from the financial crisis originating from the West (source: http://www.inquirer.net/propertyguide/aroundtown/view.php?db=1&article=20090314-194072). Global Property Guide’s survey of publicly-available house-price time-series for 2008 showed that Philippine Property prices were declining steadily. Even until now, the slope is still going down as we brokers ourselves experience difficulty in selling. Most people we talked to our holding on to their money, or simply have hard times themselves in making it.According to the article, here is what Prince Christian Cruz, a Global Property Guide senior economist, suggests to Philippine Real Estate Developers to cope with the crisis:
• Provide cheaper properties by cutting back on certain amenities such as gyms, function halls and swimming pools. Location is more important to the working class Filipinos.
• Focus on accessibility to public transport as this is crucial to them
• Price properties according to the buying capacity of working and middle-class families. The international standard for affordable housing is three to five times the annual income. In other words, a Filipino worker who earns P10,000 a month can buy a Philippine Property between P360,000 and P600,000.
• Offer rent-to-own schemes for better affordability
In other words, Mr. Cruz is suggesting developers should shift their focus from Overseas Filipinos an enormous local demand from the locally employed middle-class and working-class sector.
The second part of the Inquirer article quotes Alejandro Mañalac, president of the National Real Estate Association, saying that the Economic Slowdown is a blessing in disguise since there will be a smaller glut or oversupply of Philippine condominiums due to developers slowing down in new projects.
Mañalac also said the Ifric 15 issue (see my previous blog entry about it on http://www.realestatephilippinesblog.com/breaking-news-new-rule-to-hamper-philippine-real-estate-developers/) also made developers rethink their plans to build high-rise buildings (which takes three to five years to complete) in favor of end-user projects which they could finish within a year, and thus recognize their income in their books. “It’s a good thing that the implementation of this new accounting reporting standard was deferred until 2012,” he said, or else all of them would look bad to investors of their stocks.
Mr. Manalac also agrees with Mr. Cruz in terms of adjusting the payment schemes of properties for sale so that end users and the Filipino workers can afford it more. He reiterates that even though most of the Philippine Pre-selling projects are 60% sold, which gives them enough money to complete construction, developers should adjust their investment terms accordingly and not necessarily bring down prices, so that the remaining inventories of pre-sellers can be taken.
If you ask me, this suggestion should also apply to secondary sellers of Philippine property. They should try selling rent-to-own style, where in they can earn from the interest they charge to their tenants as well. In that way, they can help more Filipinos in owning their dream home while doing business also – a Win-Win situation for both buyer and seller
All pointers in building a subdivision or development are agreeable except that cutting amenity especially swimming pool? in my own point of view, for developer in order for them to survive in economic situation like this, they should make there product more affordable.. but how?
1. Thought payment scheme for projects like condominium to be completed in 3 to 5 years how about increase the down payment scheme to 30 to 40 percent but payable in 2 to 3 or 4 years? its affordable and the remaining equity shall be payable thought loan in backs or pag ibig, which is lesser amount and that therefore smaller interest rate. Since the condominium is to be completed in 5 years. The only thing to do is to let the HLURB issue the licence to sell early or before construction begin, to let Developers conduct pre-selling with out violation. and in order to generate liquid funds while the construction is in progress.
2. And adopt new construction materials and construction techniques for housing development which sum of the lasgest developer are applying now. Like Ayala land Corp. But this construction techniques and new construction products should not be keep secrec to some smaller developers. in order to create a better competitive market and a better economic atmosphere, smaller developers, investors and entrepreneurs should be help survive.
3. Sorry if I protect this amenity ” Swimming Pool ” you ask 10 home owners in a subdivision or a condominium, what amenity would you like to take out? I think no one will agreed that swimming pool” because here in our province when we talk subdivision there is always a swimming pool. and thats the main attraction of a subdivision project. May be its better to get the guard house, but maintain the gate and the swimming pool.
By the way i like these article..
Thank you very much for your input