Index to monitor risk of property bubble on track

The creation of the standard price index that will serve as official guide for valuing residential properties in the country is on track and is set for completion before its formal launching likely within the year, a Bangko Sentral ng Pilipinas (BSP) official said.

At an economic forum held in Makati City on Tuesday, Assistant Governor for the Monetary Policy Subsector Ma. Almasara Cyd N. Tuaño-Amador said the so-called Residential Property Index (Repi) has already been presented for approval by the BSP Monetary Board only recently.

The index was earlier cited by BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo as a BSP initiative helping regulators and real-estate practitioners to further monitor prices in the sector and prevent price misalignments that led to property bubbles.

“We are doing it in stages. So what is keeping us from publicly disseminating is that we have [yet] to present it to the PSA [Philippine Statistics Authority]. Since they are still organizing themselves, they haven’t formed the board yet. Once they have the board already in place, then we present it. Whenever you come up with indices—that is the process,” Tuaño-Amador said.

The BSP official explained that the RePi is focused primarily on the residential sector but that the central bank hopes to expand the mechanism to the commercial sector in the future.

She also said the index only covers prices of residential property in the National Capital Region (NCR) as there were some “difficulties” in gathering data from places outside the country’s capital. This, too, was seen broadened in coverage after the initial index had been launched.

The index is said to be a function of several indicators, including both from the supply and demand curve of the industry. In terms of supply, Tuaño-Amador cited the cost of materials and business permits as some of the considerations, while in terms of demand, they measure it through the number of applications of permits, among others.

The PSA is expected to make a critical examination of the prepared index and will make suggestions or fine-tuning measures, if any, before releasing it to the public.

The BSP has imposed more stringent monitoring of the real-estate sector a few years back, especially the banks’ collective exposure to real-estate loans and instruments. said the real estate sector is an obvious sector where bubbles form.

She said that although there had been no property bubble the past several years, there was a period of hefty investments in property prior to the 1997 Asian financial crisis.

“Because it is the largest asset that any household can own so fundamentally, it can be an obvious candidate for possible misalignments. But my thinking is that…it could be a candidate but we are not seeing signs of that [bubble] yet,” she said.

According to Amador, the rise in property prices observed in the market today is due to the structural shift of a growing population in terms of its number and in terms of income. She also cited the rise in demand from overseas Filipino workers to own residential property in the Philippines.

“What we saw was some correction in the prices of residential property in 2009 to 2010, so there was a correction and now it is growing. But it is still manageable, the demand is being driven by an organic story,” Amador said.               

“There is an increase in property prices – in residential and office spaces – but I don’t think it is getting ahead of itself,” she added.

source:  Business Mirror

International luxury hotel operators gravitate to PH

Marco Polo Hotels, Ascott The Residence, Maxims Genting, City of Dreams, Solaire Resort and Casino, Hyatt, Marriot Manila, Shangrila Hotels and Resorts, Conrad Hotels and Resorts, The Westin Philippine Plaza Manila, Hilton, Sheraton Hotels and Resorts.

These are just some of the international luxury hotel operators that would either come into the country or experience boom times from 2014 to 2017, as forecast by CBRE Philippines during a Jan. 23 press briefing in Makati. It also reported that luxury hotel accommodations would play a major role in the hospitality sector, and that MICE (meetings, investments, conventions and exhibits) locations would pick up their businesses, and gaming establishments would draw in more foreign guests.

Property analyst Enrique M. Soriano III said, “Retail and hotels will likely post solid growth as employment and spending in the domestic front continue.”

The Colliers International market overview (for 4Q 2013) predicted that in the next three years, up to 4,300 rooms would be “delivered” annually, the highest number since 1988.

“Meanwhile, local real estate firms are entering the hotel and leisure sector, as SM Prime Holdings, Ayala Land and Robinsons Land introduce their new projects slated for completion in the next three years,” noted Colliers International Philippines Research. It added that last year, 1,372 new hotel rooms opened in Metro Manila, bringing the total room inventory to 17,517.

More branches expected
Jones Lang La Salle, in its JLL 2014 property market monitor, singled out Robinsons Land Corp. (RLC), which recently opened its seventh Go Hotel branch in Iloilo City. This one has 167 rooms
JLL forecasts more of such branches to be built over the next few years as RLC has offered the brand for franchise. In particular, Singapore-based Vanguard Hotels Pte. Ltd., in partnership with Roxaco Land Corp., is set to construct at least five new branches in the next two years.

JLL also cited residential property developer Vista Land & Lifescapes Inc., which plans to venture into hotel and resort development. According to the firm, the planned venture is mainly supported by the strong performance of the tourism industry. The firm has formed a new unit that would focus on the development of hotels and resorts, likely starting in 2015.

40% at Entertainment City

Colliers International Philippines’ comprehensive report indicated that of the 4,120 rooms to be completed in 2014, more than 40 percent would be concentrated within the Pagcor Entertainment City, such as Belle Grand City of Dreams (920 rooms) and the surrounding Mall of Asia Complex, such as Radisson Hotel (500 rooms) and Tune Hotel (204 rooms). 

It also revealed a new player in the hotel and leisure market—Shanghai Jin Jiang International Hotels—one of the leading hotel groups in China, with two projects slated for turnover in 2014, the Jin Jiang Inn Ortigas (95 rooms) located beside Richmonde Hotel and the Jin Jiang Inn Greenbelt (70 rooms) located opposite New World Hotel Makati.

“As the government strives to reach its foreign tourist arrivals target of 10 million in 2016, local real estate firms are joining the hotel and leisure sector to augment the accommodation needs of foreign travelers,” reported Colliers.

It added that the Carlson Rezidor Group had partnered with the SM Hotels and Conventions Corp. (SMHCC) to launch the 150-room Park Inn by Radisson in Clark, Pampanga. This project is set for completion in 2016.

Colliers also observed that Ayala Land, through its hotel and resort corporation, had launched two new Seda hotels in its emerging mixed-use developments in Vertis North and Circuit Makati, both of which would be operational in the next three years.

RLC, for its part, aims to complete 1,200 rooms in its portfolio by 2014 by launching three Go Hotels—one in Ortigas Center, another in Butuan and one in Iloilo.

Decreased layovers
CBRE reported an 11-percent growth rate of tourist arrivals as of October 2013 (year-on-year) and possibly exceeding 4.5 million for the whole year.

Despite the increase, it estimates that the average hotel occupancy rate dipped from 67 percent in 2012 to 64 percent in 2013.

CBRE said: “This may be attributed to the increasing number of international flights to airports outside of Manila, thereby reducing the need to layover in Manila and easing the access to other major tourist destinations in the country like Boracay Island. The Mactan Cebu International Airport Authority, manager of the second largest airport in the country, reported a 15-percent increase year-on-year in the number of international flights at the airport from January to October this year from 3,972 to 4,581 flights.”

Hotel rates
Colliers also reported that growing interest in the Philippines as a tourist destination and a business investment option has been driving hotel room rates to consistently increase in Metro Manila.
It pointed to the trend that average five-star room rates had grown by 3.7 percent to $333 per night in the second half of 2013, versus the 1.1-percent increase in the first half of that year. Four-star room rates increased slightly by 1.1 percent in the second half to $273 per night.

On the other hand, three-star room rates continued to improve significantly at 9.5 percent half-on-half, 250 basis points higher than the 7-percent growth posted in the last period. This can be attributed to the increasing number of local and foreign tourists seeking quality accommodation at affordable prices. Meanwhile, corporate rates grew considerably across all classifications at an annual average of 15 percent.

source:  Philippine Daily Inquirer

Popular BPO sites driving PH property up

A robust business process outsourcing (BPO) sector—which is expected to remain strong in 2014—will drive the real estate industry further up this year.

The country’s outsourcing industry will still be one of the best in Asia. CBRE Philippines said that as more occupiers relocate to the country, expansionary growth in Metro Manila’s fringes and provinces will be seen.

Metro Cebu, Mactan and Clark were cited as becoming the preferred lifestyle and BPO sites.
For property analyst Enrique M. Soriano III, the office market would continue to grow, and demand will be dispersed out of the traditional central business districts in favor of new CBDs.

“Cebu, Davao and Iloilo will continue to book solid growth for as long as the local government leadership provides regulatory and marketing support,” said Soriano, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business Advisory.

CBRE Philippines added that BPO expansion would be among the several factors (the others being the influx of tourist arrivals and the demand for expat housing) that would speed up luxury residential property takeups.

These properties, including luxury and high-end hotels, are scarce and mostly located in Bonifacio Global City, Makati, Cebu and Boracay.

“There is potential for developers to look into investing into this market,” said CBRE.

More office buildings

Colliers International’s real estate market report in the fourth quarter of 2013 indicated the BPO industry to continue to influence the commercial office sector in the next few years.

According to the report, with the recent announcement of Tholons, a global outsourcing research and advisory firm, Manila has overtaken Mumbai as the second leading outsourcing location in the world. Colliers expects that more BPO companies will enter the country and establish operations. As a result, there would be a need for office buildings that cater to the specific needs of their prospective tenants.
Colliers added that this would be well within the forecast of the IT and Business Process Association of the Philippines  that the industry will hire 1.3 million full-time workers and earn export revenues of $27 billion by 2016. Complementary to this, Colliers forecasts that through 2014 and 2015, an average of 570,000 square meters of net usable space would be delivered to sustain the office space requirement of the O&O (offshore and outsourcing) industry.

Meanwhile: Jones Lang LaSalle’s January 2014 property market monitor revealed the following:

• Ohio-based O&O company Convergys Corp. is set to acquire Stream Global Services Inc., partly owned by Ayala-led LiveIt Investments Ltd., for around P36 billion. The acquisition is set to be finalized by first quarter of 2014.

• SilkRoad, a US-based, cloud-based human resource solutions provider, recently opened its new office in the Philippines. Its office demonstrates the Philippines’ importance as a growth source for the firm in the Asia-Pacific region, mainly due to the robust performance of the O&O and IT sector in the country, which continues to attract numerous investors.

• Alphaland Corp. is in talks with prospective buyers, particularly foreign firms, for the sale of its recently completed 34-story office building, Alphaland Tower. According to the firm, while there are numerous companies interested in leasing a portion of the building, Alphaland aims to sell the entire development. The Philippine Long Distance Telephone Co. previously expressed its interest to acquire Alphaland Tower, but has decided not to continue with the acquisition.

• The Philippine O&O sector is expected to lead the industry among the members of the Association of Southeast Asian Nations, according to a corporate executive of Teleperformance Asia Pacific. The robust performance of the local sector may be attributed to its cost efficiency, the English language proficiency of the workforce and the quality of services. The rising demand for nonvoice activity is also seen as one of the growth drivers for the O&O sector.

source:  Philippine Daily Inquirer

Laws vs erring developers gain ground in Congress

DELINQUENT subdivision and condominium developers will soon be meted heavy fines aside from a minimum 10-year jail time for failing to complete their projects and for using sub-standard materials. 

Rep. Susan A. Yap, principal
author

The proposed amendment to the current rules and regulations—particularly on the protection of buyers of property development—has been approved on second reading in the House of Representatives.

House Bill 395 that seeks to amend Presidential Decree 957 or the Subdivision and Condominium Buyers’ Protective Decree of 1976 has recently gained ground in the Lower Chamber of Congress as lawmakers press for its early passage.

Lawmakers have found the existing laws (PD 957) to be weak in deterring bad behavior among property developers and builders.

The bill dubbed “The Subdivision and Condominium Buyers’ Protective Decree Amendment of 2013” requires developers to register at their own expense all deeds of sale of subdivision lots and condominium units that have been fully paid.

In case of units sold through installment scheme, the developer and buyer would share the registration expenses proportionately.

Rep. Alfredo Benitez,
Housing Committee
chairman

The bill  empowers the Register of Deeds to cancel a property’s registration papers without the need of a court order if the buyer defaulted on his or her payment. It likewise requires developers to donate open spaces reserved for schools, places of worship, hospitals, health centers, and barangay centers to the local government in their project sites,

“Due to obsolete penalties for violations of PD957, many land and condominium developers contravene the decree knowing fully well that payment for the defiance of the law is so small,” Said Tarlac Rep. Susan A. Yap, principal author of the bill.

Negros Occidental Rep. Alfredo Benitez, chair of the House committee on housing and urban development, said that the bill would provide protection to real estate buyers who end up holding the empty bag when developers do not deliver on their promises made during the pre-selling of their projects.

“A certificate of registration does not vest the owner or dealer of a project the authority to sell without the necessary license to sell,” Benitez said.

The bill would raise to P50,000 the administrative fine for each violation of any of the provisions of the decree or of any rule or Lawmakers has found the existing laws (PD 957) to be weak in deterring bad behavior among property developers and builders.

These includes failure to complete the  project and or titles to the property sold to buyers, inability to refund the purchase price, and failure to follow construction specifications or poor workmanship resulting to sub-standard units or to construction defects.

For multiple violations,  offenders would be slapped with a P500,000 penalty and jail term of four years for the first offense; P750,000 penalty and 7 years imprisonment for the second offense; and P1 million penalty and 10 year imprisonment and revocation of business permit and licenses for the third offense.

Violators would be levied an additional fine of  P500,000 for every house and lot or condominium unit sold from illegal advertising.