Property still has some upside

By Elena Torrijos

The Asian financial crisis in 1997 acted as a rude awakening to Filipinos who thought that property investments were very safe. Certainly, many speculators saw the value of their land, residential condominiums, or even commercial space halved.
In the past few years, however, property values have firmed up again and experts say that there is still some significant upside to investing in property. But, of course, there are many factors to consider when buying a property, whether to live in it, rent it out, or develop it and sell it.

“If you bought a property 3 years ago, you’d probably have made better returns than you would if you bought now. But people then were wary about buying property because things were still shaky. If you buy it now, we’re nearly at the 1996 levels, so the upside would be 10% over a 12 month period,” says Richard Raymundo, research director of real estate services firm Colliers International Phils. Inc.
Looking at what stage the market is in at the property cycle, he says every segment is already up except for industrial and golf/country club shares. “I really wouldn’t advise going into golf or country club shares unless you have a passion for golf,” he adds.

In absolute peso terms, property prices are back to where they were in the 1996 and 1997 peak levels. “Like, for office, the peak price of office space was about P1,100 per sq. m. per month. We’re now already P850 per sq. m. It would only take about 12 months before you reach that P1,000 level per month again. On dollar terms you’re still 40-50% off from your 1996 peak, even if you’ve reached that on a peso level. A P1,000 per sq. m. price at P26 to the dollar versus P1,000 at P50 is still cheap in terms of dollars.

At present, residential condominiums are going for a low of P60,000 to P65,000 per sq. m. or even a high of P100,000 per sq. m, depending on the location, according to Raymundo. The developments in Rockwell are now back at near the P100,000 mark because the demand has been very strong, he notes.

If an individual is looking at a piece of property for investment, he says, he or she should have to be more careful in picking them for their potential yield based on a variety of factors. According to Raymundo, some questions to ask are: “Who’s the developer? Can it be turned over? What’s the track record? If you’re looking at it as an investment, you also look at ‘saleability’ or, if there is a term, ‘rentability.’ Can it be leased out easily? Is the location very good? Is it modern enough? Does it fit your budget?”Also, the investor also has to consider: “If I get stuck with this, can I live with it?” Raymundo says.

For investors looking specifically at investing in residential condominiums, a bigger unit may potentially offer higher returns in terms of rentals but will cost more and just may be harder to sell.

“You’d have a harder time leasing out a smaller unit right now because everyone is going into the studio or one-bedroom. With the bigger unit…it’s more expensive so the investment is bigger, but if you look at the last three-bedroom [development] which is the Shang Grand [in Makati], it’s doing very well in terms of rental. Everyone is surprised that it’s achieving a very high rental rate,” he says.

Anton Periquet, chief strategist of Deutsche Regis Partners, says: “If I were an investor outside the stock market, say a personal investor, I would still buy property… and you know the rule in property is always is to buy prime. Don’t waste your time on the periphery.”

If he had the money, he would buy specifically land in exclusive villages. “That is what is scarce. You cannot create new supply in Bel-Air, Dasmarinas Village, Forbes. You can always create condo units but you can’t create more of these villages.”