Property sector kicks off new year on upbeat note

Special Report: First of two parts

DESPITE a fragile economy, Philippine property firms have begun unveiling new projects in anticipation of a rebound this year.

The real estate sector was among those badly hit by the worst global economic slump in decades, with few local companies launching new projects last year.

Profits of listed property firms slid by 4.9 percent in the first nine months of 2009, with the gross revenues of the real estate sector falling 7.8 percent in the third quarter, a reversal of the 17.4-percent growth the year before.

On Tuesday night, the country’s largest property developer launched its second residential project for 2010, the Park Terraces.

This comes almost a week after Ayala Land Inc. (ALI) unveiled its first project for the year, the Santiera. Officials said the company chalked up P1.2 billion in sales for a single day for its first project under the Ayala Land Premier brand, which caters to the high-end market.

Alongside the Park Terraces, the property firm also announced a P20-billion redevelopment of its flagship Ayala Center Makati (see separate story on this page).

Bobby Dy, ALI senior vice president and head of the residential business group, told The Manila Times that the company “feel [s] quite optimistic.”

“We just launched one project last year. I think that’s reflective of our sentiment,” he said, referring to the two project launches so far this month.

Signs of rebound as early as mid-2009

Indeed, industry players have seen market activity pick up as early as last the middle of last year.

“We saw the [property] market pick up quite significantly starting July last year . . . and [showed] strength towards the end of the year,” Fernando Zobel de Ayala, ALI chairman, said.

Colliers International said developers have begun acquiring more land for future projects in anticipation of a rebound, adding that the land-banking activity started in the middle of 2009, when property values were low.

For this year, Zobel said ALI is seeing a “very strong” start for the property industry, with interest rates remaining low and overseas Filipino remittances growing.

He said Philippine banks are in a very healthy position, compared with peers in other parts of the world. Given this, ALI expects a dramatic increase in sales volume.

“We sold 2,500 units last year and we plan to sell 9,200 units this year,” Zobel said.

No dampener from elections

Even with the cautious mood prevailing in the run-up to the May elections, ALI expects no dampener from the upcoming polls. “We always see a significant sales [hike] after elections. We normally see positive growth for three quarters,” Zobel said.

Danilo Ignacio, Eton Properties president and chief operating officer, agreed that 2010 would be better for the industry provided the upcoming polls were credible and peaceful, adding that this would contribute to renewed business confidence.

“History has shown that economic growth immediately followed all post-martial law national elections. The global economy is on its way to recovery. Remittances will grow. Interest rates will be low. [The] foreign exchange will be stable. These factors will create an investment climate attractive to both local and foreign investors,” Ignacio told The Times.

He said real estate proved to be among the best investments in 2009, as prices went up while other investment instruments went down.

As proof of its confidence for 2010, Ignacio said Eton Properties plans to launch at least five new projects this year.

Jose Sio, SM Investments Corp. (SMIC) executive vice president, told The Times that the commercial and mid-income property segments will remain steady.

Sio said SMIC’s real estate unit, SM Development Corp. (SMDC), will go full blast on its residential condominium projects this year. SMDC caters to the low- to mid-income residential segments.

“They [SMDC] just launched five new condominium projects in addition to seven ongoing projects. The five new projects consist of 20,792 units,” he said.

Minimal growth of economy

However, “the high-end property sector will take time to recover,” Sio said.

Claire Quiray of Accord Capital Equities Corp. said the announcement of new property projects is in preparation for the anticipated recovery of the real estate industry.

Despite the industry’s upbeat outlook, Quiray said sales of property firms would not be higher this year. “We are not expecting a very high growth of sales, given the minimal growth of the economy this year,” she said.

From an estimated 1-percent uptick last year, Philippine gross domestic product (GDP) is forecast to grow between 2.6 percent and 3.6 percent this year, still below the domestic economy’s average expansion of 4 percent to 5 percent in the past.

As an indication of a slow recovery for the property sector, Jones Lang Lasalle Leechiu has advised developers to plan now and finish their projects between 2012 and 2014.

By then, demand is expected to start peaking. (To be continued) –DARWIN G. AMOJELAR Senior Reporter, Manila Times