BY AMADO P. MACASAET
[ Malaya.com.ph ] July 26, 2011
THE competition in the housing or property development industry has become so intense it is beginning to appear as a buyer’s market.
The Philippine National Bank is cutting down its equity requirement for housing borrowers by 50 percent, from 20 percent to 10 percent.
Before the Aquino administration took over the reins of government, equity requirement, not only for housing but for nearly all types of borrowers, averaged 40 percent.
The requirement came down slowly and stayed for almost a year at 20 percent. That means anybody who wants to buy a home and have it financed by a bank has to have at least 20 percent of the total cost.
If the home costs P1 million in the low-end market, the 20 percent is equivalent to P200,000.
PNB is cutting the equity down to 10 per cent. Interest rates on the balance do not entirely depend on the maturity of the home loan.
Three other banks surveyed by Malaya Business Insight require equity of between 20 percent and 10 percent.
PNB, for example, lends at 5.55 percent per year for the first year. The rate goes up to 7.5 percent for a fixed three-year accommodation. In the fifth year, the rate goes up to 8.88 per cent. Loans from six to 10 years go up to 10 per cent. If the term is 11 to 15 years, the rate goes up slightly to 11.5 percent.
From the 16th to the 25th year, the rate is fixed at 11.75 per cent.
However, sources in the banking industry told Malaya Business Insight that Metrobank has imposed the condition that it will re-price the rate from the 11th to the 20th year.
Metrobank has the longest repayment period of up to 25 years. The average among the rest of the banks is 20 years.
Danilo Ignacio, president of Eton Properties, told Malaya Business Insight that the market now has a wider and cheaper source of money.
Ignacio conceded that Ayala Land is tops in the property development business but he added that Eaton "probably has the largest land bank" of a few thousand hectares scattered in the hundreds of hectares in many places.
In Sta. Rosa, Laguna, alone Eaton has 970 hectares that it is beginning to develop for the middle and low middle market.
The more expensive apartments it builds are in Metro Manila.
According to Ignacio, the property development market will never be overbuilt for as long as the players are building homes and apartments for the low and low middle market, without necessarily ignoring the A-1 market which is small in number but has all the money to buy expensive apartments.
According to Ignacio, the demand for homes from the low and low middle market will continue to expand. Therefore, overbuilding is a remote possibility. He explained that the market for the property development industry is generally made up of all end-users.
There is very little trading in the property market. He explained that many of the buyers of expensive apartments do not sell their units while they may have expensive homes in other places in Metro Manila.
He said other rich but almost retired businessmen sell their expensive homes in exclusive villages to keep to themselves in high-priced apartments. Others, he said, are renting their residences for large sums of money every month. Expatriates are most preferred.
Another executive of a property development company said the worsening traffic situation is another factor that makes for brisk sales of expensive apartments.
Many of them want to stay in Makati, the country’s premiere business and financial district, to avoid having frayed nerves going to their offices.
According to Ignacio, the biggest market for most commodities, including homes, is the mass market.
However, he said the property developers may not as yet go into socialized housing which is practically subsidized by government. He explained this mass market does not have adequate incomes to buy homes.
He said the property developers have learned lessons from the collapse of the home mortgage market in the United States. Before the collapse, even people who do not have jobs can acquire homes.
An official of a reasonably big property development company said the declining unemployment rate and what appears to be an improving business climate should contribute to higher demand for low and low-middle homes.
The market, however, could move much faster if a secondary mortgage market can be developed, he said.
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