Vol. XXI, No. 183 [ Business World Online ]
Friday, April 18, 2008 | MANILA, PHILIPPINES
THERE ARE opportunities to buy house and lots and big tracts of land with property prices consolidating, as banks scramble to dispose of idle assets ahead of the expiration of a law granting tax perks to buyers and sellers of distressed assets.
In a briefing yesterday, CB Richard Ellis Philippines General Manager Trent M. Frankum said special purpose vehicles (SPV) and local banks would be "competing" to unload small-ticket assets and develop or sell big-ticket assets.
The Special Purpose Vehicle (SPV) Act of 2002 expires next month.
"It affects the value of the properties in a big way There are a lot of properties that have come on to the market through the SPVs and banks that are affecting the valuation and market value of these properties. We are seeing a shift in the market from a seller’s market to a buyer’s market," he added.
Citing Bangko Sentral ng Pilipinas estimates, Mr. Frankum said there are about P520 billion in nonperforming assets (NPA) for disposal with only about P170 billion sold to SPVs. Upon expiration of the law, which was extended to May 14 this year through Republic Act No. 9343, banks will have dispose of the remaining P350 billion worth of NPAs without incentives, and this is urgent as they have to comply with stricter Basel 2 capital rules.
Banks have to beef up their capital under the Basel 2 standard which emphasizes risk-based supervision, an approach that allows banks to take risks as long as they demonstrate the ability to manage them.
CB Richard Ellis Philippines sees lower property values due to competition between banks and SPVs.
"It is a good time to buy because of competition. If they sell it to the market, they will be competing against the domestic banks, which also cherry-picked the prime assets from the portfolios before they sold to SPVs," Mr. Frankum said.
Asked whether it would be wise to extend anew the SPV law, Mr. Frankum does not see any harm in giving sellers and buyers another chance.
"But you don’t want to keep sending the message to the market that we will keep on accommodating you time and time again," he said.
With rents in the Makati central business district (CBD) rising to P1,200 per square meter, CB Richard Ellis Philippines Vice-Chairman Joey M. Radovan said rents would stabilize at the range of P800 to P1,000 per square meter by yearend as some business process outsourcing (BPO) companies will move out of Grade A high-rise building to IT buildings in new business districts.
Feeling the pressure of high rental costs, some BPO firms will move out to new low-cost and growth areas.
CB Richard Ellis Philippines Chairman Rick Santos noted that building sales transactions have resumed in the Makati CBD over the last six months.
He cited the sale by listed holding firm South China Resources, Inc. and the Puyat family of two parcels of land with an aggregate area of 9,497 square meters beside Dasmariñas Village for P1.2 billion; San Miguel Properties, Inc. of its equity share in Enterprise Center to Shang Properties, Inc.; and Rizal Commercial Banking Corp. of a 2,400-square meter lot to Valparaiso I Land Holdings, Inc. for P975 million. Businessman William Gatchalian has also bought the 2,400-square meter Ayala Life Assurance building on Ayala Avenue corner V. Rufino Avenue for P696 million.
Mr. Santos also said there is pent-up demand for new hotel developments in Makati, Ortigas and emerging business districts since there is already a critical mass of office buildings and business travel. — Ruby Anne M Rubio
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