The year 2014 only has 18 days to live. But there’ll be no mourning from now until then. On the contrary, practically everyone involved in the real estate industry is poised to celebrate and anticipate an even better 2015.
And so, before people start popping the bubbly and singing “Auld Lang Syne,” Inquirer Property asked analysts two questions: What should property buyers expect in 2015? Is a property bubble a-forming next year?
Enrique M. Soriano III, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business, denies that any real estate bubble would likely form.
“Absolutely, there is no real bubble across all assets, but the market will continue to be nervous if the structural and regulatory elements are not aligned and land prices continue to move up,” says Soriano.
He explains that a real estate bubble is a deviation of the market price from the fundamental value of an investment driven by speculative demand. He adds that usually, growth is fueled by lending, spending and employment, plus the oftentimes unchecked prohibitive land prices.
Soriano says: “Should there be an imbalance in any of these elements, and an external event intervenes, e.g., crisis in the Middle East means massive layoffs, then you will see the makings of a bubble. Perhaps what we should caution the end-users, investors and developers is the wrong notion of assuming that recent price performance will continue into the future without first considering the long-term rates of price appreciation and the potential for mean reversion.”
Look for good buys
Claro dG. Cordero Jr., head of Jones Lang LaSalle Philippines Inc.’s research, consulting and valuation, says that “in 2015, property buyers may expect a sustained, yet moderate, increase in capital values as buyers/investors look for good buys as property yields growth remain relatively flat across all other mature markets in the Southeast Asian region.”
Cordero also observes that a property bubble is not imminent.
He stresses: “While supply pressures are likely to curve excessive growth of capital values, a bursting of a property bubbles is not imminent. Developers of residential condominium developments are still likely to expect strong competition in the mid-end sector.”
He adds: “The developers, on the other hand, are likely to launch more projects compared to 2014, as excess supply gets absorbed and buyer/investor demand remains consistently high. Developers may also face limited access to loans (both for development and retail buyers) and capital from financial institutions as monetary authorities (primarily the Bangko Sentral ng Pilipinas) inject stricter regulations against banks’ exposure to the property sector.”
Soriano’s advice to home buyers: “Buying a property is probably a once-in-a-lifetime investment, so the key is to be an educated buyer. Gather all the information you need before signing a contract.”
Guidelines
Soriano shares the following guidelines for buyers’ reference:
- Buyers should consider their short-term needs and long-term goals, e.g., as an overseas Filipino investment or a first home.
- Buyers should learn about the prices of properties in different locations before deciding on a place.
- Buyers should choose the type of unit that best suits their needs, e.g, house and lot, studio, one-bedroom or two-bedroom unit.
- Buyers should consider the developer of the project e.g., their track record, customer service.
- Buyers should be aware of their payment/financing options—cash, in-house, or bank financing.
Tips
To developers with substantial inventories and are experiencing slow take ups, Soriano shares the following tips:
- Focus on a great concept.
- Avoid the commodity trap.
- Maintain relentless branding initiatives.
- Leverage your brand in other growth cities.
- Defocus your efforts in Metro Manila.
- Explore other asset classes and possible recurring income streams.
- Be service centric in the postsales process.