I THOUGHT of sharing this information about my trip to the Philippines recently. I primarily stayed in the Metro Manila and the Makati Area for about a week. I did meet with several potential investors for the US market and inquired about the Real Estate Market in those areas.
I have to say that the Real Estate in those areas are booming and maybe over heating a bit. There are high-rise buildings everywhere. It’s amazing to see developments; I went when there were back-to-back holidays therefore the traffic to me was really not that bad. The weather was ok due to typhoon and rains coming and leaving the Philippines. So, it was very pleasant for me but what is really interesting is the information I gathered about what has been going on with the Real Estate Market there from whom I had spoken with.
Let’s talk about the high-end areas, Rockwell and Fort Bonifacio areas for example. High Rise condos and commercial areas are really skyrocketing in prices and they keep building them. My main question is who are buying all these high end condos to the tune of $300K all the way to $500K US dollars. About average 12 million Pesos and up. From what I gathered and it’s the small percentage of very rich business families and new rich that are buying up all these condos. I see most of them vacant because I believe they are all buying to speculate to re-sell when the prices even go higher. I also heard that most of them not only buy 1 or 2 they actually buy multiple properties in one building to wait for a good flip. The Money that is going around there is incredible, the wealth is really staying up and not trickling down to the middle and lower end citizens. I suspect it’s like a musical chair for these rich investors, whom ever are holding on to the properties when the music stops will be hit hard.
Now, there are also a ton of buildings that are being built by all the tycoons such like Lucio Tan, Henry Sy and the Zobels for lower end families. Those are going to about 3 Million Pesos but not in the Rockwell or the Fort and they offer financing for them. These condos are smaller in size but much more affordable for the above average families.
I believe the outer areas also have been booming and those properties come with land because most of them are in rural areas and are in subdivisions.
What has been doing very well in the Philippines are “call centers,” where a normal employee would make about $300-400 a month working for these businesses. The amount of dollar that went to the Philippines from calls centers have doubled since two years ago and has a 3 to 1 ratio compared to OFW dollar transmittals. Which is awesome for something that just really became bullish the last 5 years.
New money is also very abundant in the Philippines, meaning money from investors all over Asia. Real estate in the Philippines is fairly cheap compared to Hong Kong, japan, Singapore to name a few. Therefore a lot of investors from the Asian Region are also considering buying in the Philippines.
But remember all these investors are speculating and wanting to turn a profit, that means if the bubble burst, a lot of people will get hurt.
This is how I see investing in the Philippines, if you are speculating short terms you have to know when to time to sell fast. If you are buying to live in or retire please try to buy with cash and not finance to avail of your holding power just in case the bubble burst.
Between 1997 and 2004, luxury condominium prices dropped 30.4% (53.7% in real terms), as the Philippines experienced the biggest property crash of all economies affected by the 1997 Asian Financial Crisis. As with the present housing crisis in the US and Europe, a speculative bubble had formed in the 1990s after financial liberalization and economic reforms, pushing luxury condominium prices up 63% (35.3% in real terms) between 1995 and 1997.
But in recent years, employees of new IT-related firms such as call centers and other business process outsourcing (BPO) firms have boosted demand for rental housing, with a ripple effect on the construction, retail, and telecommunications sectors, resulting in property price increases of 59.3% (16.2% in real terms) from 2005 to 2008.
In 2009, luxury condo price growth slowed to 0.2% y-o-y, hit by the global financial meltdown. But the significant economic recovery of the Philippines that started in 2010 is now propelling prices up again, with 5.5% price rises in 2011.
I met some investors who are looking for properties here in the US market and I ask them and said that I was curious about their decision to invest in the US market. They replied to me that it’s great to Invest in the Philippines but a turn of even in politics or other unavoidable factors could quickly turn investments into dust. This person is a very seasoned investor commenting, they also state that since the dollar is weak and the US market has been depressed for close to 5 years, they believe it will turn around and the dollar strengthening is almost guaranteed.
It is really great to see the Philippines improving a lot and I hope that the growth and advancement stays long term.
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