[ Malaya.com.ph ] March 12, 2009
BY AMADO MACASAET
There are no new plans. Those who have started constructing apartment buildings will complete them because the units were pre-sold.
Property developers who are ready to deliver the apartments are having a hard time getting the buyers to complete payment.
In fact, a property developer told Malaya Business Insight that there are 40 apartments in Rockwell of the Lopezes which are up for sale. Some want to convert the asset into cash.
Some do not want to part with their money by paying the balance or have better uses for it.
On the other side of the coin is a reasonably large group of high middle income earners who want their money placed in tangible assets. What could be more tangible than an apartment in a posh building?
These and other observations were culled from numerous conversations with property developers and apartment dwellers. None of them want their names mentioned.
The story is the property sector is not spared from the crippling effects of the world-wide recession.
The business has become a battle of wits and capital. The likes of Andrew Tan of Megaworld and Ayala Land are not suffering from the problems crippling others. "They have carved their niche in the market," a developer said.
He explained that the problem of the developers is made a little easier to bear by the lower interest cost of borrowing. "That saves them a lot of money," he said.
None of the developers have reduced prices. The Ayalas, for example, sell their apartments, particularly those in the newly developed and extremely popular Serendra in Fort Bonifacio, for a minimum of P100,000 per square meter, unfurnished.
A 100-square meter apartment of two or three bedroom will not go for less than P10 million.
The high-end market is sluggish but the Ayalas and Megaworld are hardly affected as yet.
There is a very thin market at the top of the income pole. Indika Aboitiz, for example, bought two penthouses in a new apartment building in Makati and joined them, reportedly paying P80 million.
The market that hardly moves and sideways, if it all, is rental. Expats stay. So do junior officers of foreign embassies and legations. The occupants change periodically but the apartments remain rented.
On the other hand, demand for lower priced apartment units, as in the eight apartment buildings being built by Eton Properties, is just unaffected. An official said there is a growing segment in the market which believes that now is the best time to buy tangible assets.
Prices are at the basement but could dip even more. "They just want to be there when the recovery begins," he said.
This segment of the market is composed of smart people, he said. They can see that the peso will continue to deteriorate although slowly. When that happens, the prices of tangible assets like apartments they bought earlier will produce a profit, he said.
He explained that there are "quirks" in the property development business. He explained that the price of steel bars and other iron products used in construction has gone down from P67 a kilo to the present P23 per kilo.
However, he said, in spite of low demand, cement prices remain high. "The cement industry is a cartel," he said. Iron and steel made from scrap is a very competitive business.
"There are too many players fighting it out in a small field," he said. He explained that steel bars and cement account for only 20 percent of total costs of an apartment building.
The big ticket items are electrical and air conditioning. Their prices have not moved down substantially, he said, because the industry has a smaller inventory of these products.
One developer explained that apartment buildings under construction will not keep their present work force.
"After the buildings are completed," he said, "they will lose their jobs." Unless new buildings come up.
