[ manilastandardtoday.com ] November 1-2, 2008
LUXURY flats are still fetching record prices in Makati, but the country’s property barons are getting nervous as the financial crisis takes hold.
Builders have already started reviewing their plans amid fears the huge Filipino expatriate work force that last year sent home more than $14 billion could shrink as jobs are lost in the recession-hit West.
“We haven’t experienced changes in default rates,” said Alfonso Reyes, chief investor relations officer for Ayala Land, the property firm that built Makati.
“But given the uncertainty of the environment, it is understandable that there’s a bit of a wait-and-see attitude that is prevailing in some of the hard-hit markets in the US,” he said.
A third of Ayala Land’s residential sales last year were to Filipino expatriates, half of them based in the US. The figure excludes sales to their relatives here who may be receiving remittance money.
That figure had now dropped to 23 percent, Reyes said.
The SM Group, the country’s top shopping mall operator, still expects its net profit to rise 13 percent to P14 billion this year as consumer spending remains firm in the retail sector. But it has since announced it will trim its P4-billion budget for the middle-income condominium market for 2009.
“Management feels that due to the global financial crisis, demand for housing may be dampened,” company spokesman Sarah Kae Llovido said.
But experts say that some high-end developments may be recession-proof thanks simply to their scarcity.
Luxury 300-square-meter high-rise condo units in Makati, such as Discovery Primea with its private lifts, bedrooms the size of a helipad and Italian marble floors, and the nearby Raffles Residences project are among those residences that developers hope will hold their value no matter how tough the going gets.
Discovery units were still being snapped up at $1.1 million each, and Raffles units were going for a record $1.2 million each three years before they were even built, Asuncion said.
Seen from Ayala Land’s Tower One headquarters, building activity in the Makati district has slowed, even though construction material costs have fallen substantially since the summer.
Ayala Land’s retail occupancy rates remained high and demand for the lower-priced segment of its residential market remained strong, said Reyes, adding: “We have not canceled any project.”
But, he said, “We are aware of the changing conditions and the risks in the market, so our posture is to be a little bit more flexible to be able to manage our risk exposure properly.”
Real estate companies that survived the 1997 Asian crisis found new growth in outsourcing, where Western companies cut costs by farming out accounting and other segments of their operations to lower-cost, English-speaking corners of the Third World.
The huge and increasingly affluent market of 8.5 million expatriate Filipino workers also came into play, bringing a boon to the housing as well as retail segments of the property sector.
“The property sector may slow down, but there will still be year-on-year growth,” said CB Richard Ellis research director Victor Asuncion.
Asuncion said Filipino builders had learned their lesson, and debt exposure was limited as developers signed office leases even before building them and sold homes off the plans—helped by a housing shortage estimated by the government at 3.7 million units.
Construction does not start until 40 percent have been sold or leased. AFP
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