Financial IQ: Real Estate Properties in Philippines

English: The St. Francis Shangri-La Place residential condominium skyscrapers in Ortigas Center, Mandaluyong City, Metro Manila, Philippines (Photo credit: Wikipedia)
Financial IQ Philippines Quick Hit(s):

Though real estate is on the uptrend, always perform proper due diligence when acquiring a property.  Try to get a sense of the location if the property is worth acquiring and can give you your desired investment returns.


The Philippines is now experiencing the best real estate market in the last 20 years, real estate and advisory firm CBRE Philippines said yesterday.


CBRE Philippines chairman and CEO Rick Santos said the local property market is turning green into gold, and that the country is experiencing democratization in the housing sector – from a nation of renters to owners – based on low interest rates and financing schemes.


He also pointed out that the country is no longer the sick man of Asia and is now the sweet spot for investors. “All eyes are now moving from the BRIC (Brazil, Russia, India, China) economies to TIP (Turkey, Indonesia, Philippines) economies. The Philippines is becoming the lifeboat for many US and European companies that need to outsource in order for their businesses to survive and actually preserve jobs back in the US and Europe. And as the outsourcing and offshoring sector gains strength in the country, we see more occupiers and developers prioritizing flight to quality, with green buildings becoming more the norm than the exception,” he said.


Santos likewise noted that pre-leasing is back while the office sector goes from strength to strength, with a surge of pre-leasing commitments in the central business districts. Green buildings, he added, are future-proof investments.


CBRE said in its mid-year briefing that the residential industry continues to feed on strong demand from a broader market in 2012 and onward.


It noted that bank lending rates are still on the downward trajectory, sustaining the liquidity in the financial system. Demand in the residential sector remains strong due to the increasing affordability of funds for housing acquisitions. The liquidity in the market, it said, enables developers to provide more affordable payment terms to buyers. Low cost of borrowing are likewise spurring development expansions in the residential/housing industry.


CBRE also explained that the single-digit mortgage rate has democratized the housing ownership in the Philippines, allowing Filipinos to buy rather than just being renters for life. In most cases, monthly rent for a typical household dwelling in Metro Manila are now at par with house and lot or residential condominium products now available to a broader market base.


It said that the modern Filipino household are becoming condominium dwellers attune to urban living within a live, play and work environment. “Thus, the demand for affordable condominium unit continues to grow year on year. The reason most property developers are shifting to the development of reasonably priced condo units around the Metro is to cater to the growing population who are empowered by the economy to own their dwelling place,” it explained.


CBRE in its report likewise said the Philippine office sector remains resilient despite the global economic slowdown.


It pointed out that in the major business districts, where office space requirements are on a steady uptake with no signs of a slowdown, demand is catching up with supply.


Average occupancy rates during the first quarter hovered at 96 percent. “The demand from the sustained expansion of the outsourcing and offshoring industry and the limited tenant turnover continue to put pressure on the already tight supply situation. Although new supply of traditional and BPO office space is scheduled to come online in the second half of the year, it is not expected to do much to alleviate the supply situation,” it said.


It added that already, about 293,000 square meters of the anticipated new supply, about 232,000 sqm have been precommitted.


“The limited supply continues to put an upward pressure on office lease rates. Despite the rental rate increase in the second quarter of 2012, Metro Manila is still the most cost-effective office destination in Asia, outperforming 18 other CBDs,” it said.


CBRE also said that the surge in green buildings will support the robust growth of the country’s property sector. “The benefits of going green are evident not only to the landlords but also for tenants/occupiers,” Santos said.


He added that Fortune 500 companies, multinational corporations, and even local firms now consider green initiatives as pre-requisites in their day-to-day maintenance and operations.

http://www.philstar.com/Article.aspx?articleId=819215&publicationSubCategoryId=

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Financial IQ: Brazil hit by Asia, Europe crisis

English: The President of Brazil, Dilma Rousseff, is awarded the Woodrow Wilson Award in New York City. September 21, 2011. (Photo credit: Wikipedia)
Financial IQ Philippines Quick Hit(s):

Other emerging countries such as Brazil are also experiencing some economic slowdown this past few years.  If you are a long-term investor, Brazil still has a strong outlook for the next 5 years.


For more than a decade, Brazil has been one of the developing world’s great hopes, outpacing the growth of Western Europe and the US Many even predicted it would soon become an economic superpower.


Now, as the world economy teeters, Brazil is looking less like a global golden child and more like a Latin American laggard.


Prices for exported commodities such as iron ore and soybeans are drooping due to concerns over Chinese growth. Economic turmoil in Europe is cutting into demand for manufactured goods such as aircraft. Meanwhile, Brazil’s still-strong currency makes its exports less competitive. Investors are pulling billions of dollars out of Brazil and other developing countries.


Similar pressures are starting to hurt most of the so-called BRICS countries - including Russia, India, China and South Africa - whose fast growth has been turning them into this century’s top players. Now Brazil is instead looking more like neighboring Argentina, which is frantically trying to protect its economy from runaway inflation and dollar flight.


For Brazilians, government measures to halt the slowdown are bringing momentary perks such as cheaper credit and lower taxes, but analysts generally believe the big boom is past.


Projections by the International Monetary Fund indicate that every major Latin American economy, save Paraguay, is likely to outpace Brazil this year.


“The model that served so well in the last few years has started to unravel,” said Neil Shearing, chief emerging markets economist with Capital Economics LTD, a London-based consultancy. “The days when the economy could grow five to six percent a year forever more ... that was a bit of a stretch, and might be behind us.”


Shearing said Brazil’s economy is growing slower than its neighbors for a number of reasons, but that in general the country historically has been “more sensitive to global economic gyrations” due to structural factors such as a stronger dependence on money flowing in from foreign investors to finance spending, flows that quickly reverse in times of uncertainty.


Brazil’s economy, Shearing added, also is more broadly linked to China’s than other Latin American nations, so the slowdown in Chinese growth and that nation’s demand for commodities hits Brazil harder than its neighbors.


Analysts do believe the country will continue to grow, albeit at lower levels.


“This is a cyclical response,” said William R. Cline, senior fellow at the Peterson Institute for International Economics in Washington. “The general expectation is that growth will begin to revive and will be at reasonable levels for the next few years.”


Brazilian President Dilma Rousseff is ramping up bullish rhetoric. The straight-talking technocrat recently stepped out of character to do a little cheerleading about Brazil’s ability to weather the global crisis.


“I can assure you, Brazil is 100 percent, 200 percent, 300 percent ready,” Rousseff said.


In 2010, Brazil’s economy expanded by 7.5 percent, but it only managed 2.7 percent growth in 2011, out of league with fellow BRICS nations, which managed to grow by 4.3 percent to 9 percent that year.


Brazil’s target of 4.5 percent growth this year looks unlikely to analysts, who are betting expansion will end up closer to 3 percent. On top of that, the outflow of $2.59 billion in foreign investment in May was the biggest since the outbreak of the 2008 global crisis, reversing an inflow of $5.99 billion just the month before.


Brazil’s success before the current crisis had inspired imitation by Latin American countries such as Peru and Mexico, which adopted a more conservative fiscal approach and amassed enough foreign reserves and flexibility to likely ride out the storm, Shearing said. Brazil’s international reserves ballooned from $38 billion in 2002 to $240 billion by the end of the 2009, helping the country survive the 2008 global credit crunch without much damage. Now, Brazil is even better prepared than it was in 2008, Rousseff said, with some $370 billion in international reserves.


Oil reserves have helped some countries resist global headwinds, as crude prices remain high despite financial woes. But most of Brazil’s vast, recently discovered oil reserves are still years from production.


Countries that have built much of their economies around exporting commodities to China are vulnerable, and several of them have prepared themselves for the eventual commodities downturn.


Strong sales of metals and private investment helped Peru grow at China-like rates in past years, and foreign companies have pledged another $15 billion in investment since President Ollanta Humala took office almost a year ago. In spite of lower commodity prices, Humala said this week that Peru’s relatively low debt levels and high international reserves would help the country ride out the crisis. Economists project growth of 5.5 percent this year, down from 6.9 percent last year.


So far, Brazil has responded to the slowdown with measures such as reducing its benchmark interest rate and taking measures to weaken the Brazilian real, which helps exporters.


Finance Minister Guido Mantega has also announced measures to boost domestic consumption: targeted tax cuts on Brazil-made products, interest rate reductions and an extension in the time allowed to pay back loans. The measures will make local cars about 10 percent cheaper, and reduce taxes on financial transactions. These measures have had some immediate impact.


Car dealerships such as Euro Barra in Rio de Janeiro


Their enthusiasm didn’t last long, said Euro Barra general manager Antonio Carlos Maciel Junior.


Within two weeks, movement in the dealership was back to normal. That’s because it’s still hard to qualify for a car loan in Brazil, he said. Buyers have to put down half a new car’s total cost to benefit from the lower rates. Others still pay 10 percent to 12 percent interest a year, he said.


“The government is going in the right direction, stimulating sales,” said Maciel Junior. “But the banks are still hesitant. The government took steps on this that the banks haven’t followed. They need to relax rules around lending as well, make it easier for people to borrow.”


Taking advantage of her high approval ratings, Rousseff is also pushing through public pension reforms that had been unpalatable to her predecessors, said Joao Augusto Castro Neves, an analyst with the Eurasia Group consultancy


Even as the world warily watches Brazil and the rest of Latin America, Rousseff says her country has indeed turned a corner and is not about to go back to the bad old days of hyperinflation and economic meltdowns.

http://www.philstar.com/Article.aspx?articleId=817234&publicationSubCategoryId=66

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