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Ayala Land taps young buyers to lift profit in next decade

By Bloomberg | Sep. 10, 2014 at 10:01pm [ ]
By Cecilia Yap and Ian Sayson

Ayala Land Inc., the Philippines’ biggest builder, said annual profit may increase by as much as 20 percent in the next decade as faster economic growth and rising incomes boost office, shop and housing demand.

“More people are really buying earlier in their life,” Ayala Land president Bobby Dy, 51, said in an interview in Makati City Tuesday.

“People are now able to buy a condominium for the same price as amortizing a car,” he said.

Rising remittances from the nation’s 10.5 million citizens living abroad, an outsourcing industry that’s expected to employ 1.3 million by 2016 and interest rates that have been kept at record low for almost two years until July have driven demand for home purchases.

Ayala Land’s second-quarter profit rose 25 percent to P3.59 billion ($82 million), the highest ever for a three-month period.

The Philippine economy grew 6.4 percent in the second quarter, among the fastest in Asia, and is poised to be among the world’s five-fastest expanding until 2016, according to economists surveyed by Bloomberg News.

The Southeast Asian nation is set to enter a “demographic sweet spot” starting 2015 when a large portion of the population becomes employed, President Benigno Aquino III said in February.

Dy’s 20-percent profit
is slower than the average annual 31-percent increase in the past four years. Net income increased 30 percent to a record P11.74 billion in 2013, beating a P10-billion target a year ahead of a five-year plan. Profit may rise to P14.3 billion this year, according to the median estimate of 14 analysts.

“Ayala Land has a good lock on the market for middle to higher-income residential market,” Rommel Rodrigo, a Manila- based analyst at Maybank ATR Kim Eng, said by phone.

The company has “the biggest share and is the preferred developer by home buyers in this segment because of its track record of quality and price appreciation.”

A decade ago, people 25 to 34 years old, who were buying Ayala-built houses selling for at least P2 million accounted for only 5 percent of the brand. This age bracket now accounts for as much as 30 percent of buyers, Dy said.

The Philippines may reap a “demographic dividend” as more of its people join the labor force, according to brokerages including Maybank ATR Kim Eng.

The demographic dividend happens when most of a country’s population is in the 15-to-64 working-age range. This increases productivity if supported by policies that promote health, family, labor and financial, and human capital.

Developers including Ayala Land will be vulnerable to economic growth and interest rate moves, said James Lago, head of research at PCCI Securities Brokers Corp.

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