‘Amid global economic slowdown, investors are well-advised to train their sights on real estate’
This is the resounding counsel of former Cabinet members and esteemed academics, along with active real-estate industry practitioners who are one in saying that it is always smart to invest in real estate, more so in uncertain times.
“When you invest in real estate at a time of a financial crisis, you hit the ground running when the situation gets better. Real-estate investments are better than jewelries or shares of stocks, as they are stable and enjoy more security,” former agrarian reform secretary and recently retired De La Salle University-College of Business Administration dean Philip Ella Juico insists.
Juico, now the point person of a group of experts orchestrating a Southeast Asian management forum seeking to formulate a regional response to the present financial turmoil, does not see a protracted upheaval based on the global reaction to the crisis.
“The Asian crisis of 1997 saw countries approaching the problem individually. Some survived it with great difficulty; still others even benefited from it like Myanmar and China. If you look closely as to how other countries weathered the storm, you will see that real estate and manufacturing played a big role,” he pointed out.
University of the Philippines economics professor Solita Monsod recently shared the view that panic should not set in, although she issued a warning that financial assets must be invested wisely, or the purchasing power is further diminished.
“With economic fundamentals firmly in place, there is no reason not to invest in the country, particularly in real estate. Interest rates remain relatively low and banks are still generally willing to lend.”
Industry players who witnessed the real-estate boom from 1990 to 1996 and the lull from 1997 to 2001 are digging deeper into their creative bag of ideas but remain optimistic as “time corrects the situation in real estate.”
“We have to provide for long-term arrangements, make the cost more affordable and even develop discount packages. We do everything to arrest an unwelcome decline in market movement,” said Excelsis Land Inc. president Ma. Charina Garcia, noting that their Madison South subdivision in Calamba, Laguna, is an ideal proposition to the middle-income market, particularly overseas Filipino workers.
Around one-third of the foreign remittances sent home by expatriate Filipino workers, estimated to have reached nearly $11 billion after eight months in 2008, are injected into real-estate acquisition or housing-and-property development.
At Madison South, Garcia said, a house and lot would cost from a low of P1.2 million and a high of P2.6 million, with interest rates depending on the source of financing, but generally averaging 12 percent.
At last glance, noted Garcia, the backlog of the housing industry is pegged at 4 million and the government housing program is only able to meet 2.5 percent a year, giving the private sector a pronounced role.
“This financial crisis opens doors for middle-level investors, as they can scout for bargains. There are some distressed sellers who want to liquidate. Now would be a good time to make some moves,” she said.
To illustrate, Garcia recounted how an investor in the 1970s acquired a 2,000-hectare property for P20 million and sold half of it for P1.5 billion 20 years later. The other half is now better known as the posh Canyon Woods community.
“Time is the best friend of real estate.”
No one argues the change of pace in demand which reached more than decent levels in 2004, but industry stalwarts note that investors can still generate quick cash through rentals until things get better.
Sen. Edgardo Angara perhaps delivered the most logical and powerful point for real-estate investment when he made a pitch for the Real Estate Investment Trust Act (REIT) last year.
“The REIT aims to create a level playing field to both small- and large- scale investors. It will give them equal opportunity to participate directly in the ownership and financing of large-scale real-estate projects at affordable rates of investments without the disadvantage of illiquidity, high transaction and management costs.”
“This will create the real investment trust, a stock corporation formed for the sole purpose of investing in income-producing real-estate assets. Under the Act, the stock of the trust will be listed on the Philippine Stocks Exchange and small investors are able to buy and sell securities of said companies through REIT. REIT will provide steady income to the investor and the national government and allow cross-boarder investments that will encourage strategic foreign investment in the capital market.”