With the Philippine economy still registering strong growth, the real estate industry, which consistently posted as one of the fastest growing in the past years, is definitely in investors’ focus. The upward stroke in the industry, needless to say, has broad effects. The boom in the Business Process Outsourcing (BPO) and the expansion of multinational corporations is fuelling high demand for office spaces. Growth in manufacturing is pushing the demand up for industrial spaces such as warehouses and manufacturing plants. And the growing high and middle-class income earners, together with the increase of remittances from Overseas Filipino Workers (OFWs) are bringing up residential property values. The southern greater Manila has a great potential for growth. Various infrastructure projects and real estate developments make provinces south of Manila a viable alternative to Makati, Mandaluyong and Ortigas. Currently, developments in Muntinlupa and Santa Rosa City are at the forefront of this expansion in ‘the South’. To have a better picture of the real estate industry’s situation today, and where it might be in the coming years, we interviewed Mr. Josemari Cuervo, Vice Chairman and CEO of Cuervo Appraisers and President of Cuervo Far East, who, apparently, seemed quite optimistic about industry prospects down south.
VOTS: There’s a trend of thought that says moving to the South is not only a good way to decongest overpopulated Metro Manila, but also lays down a perfect platform for real estate values to appreciate here. Is this just some hype?
Cuervo: We definitely have been seeing land values continue to rise in the peripheries of the major business districts...in fact what we are seeing is pocket business districts forming which create its own self-contained ‘live-work-play’ convenience. Traffic has led developers to create a new model - convenience developments. You need not travel too far to get what is available in your own backyard. This is clearly seen by the rapid increase in commercial development in cities that usually were ‘pass-thru’ areas like Sta Rosa, Laguna. Santa Rosa has changed from an Industrial and low-end residential pocket to a thriving , full-service city. Sta Rosa now offers high-end residential products, commercial establishments for low-mid to high-end market. The thriving BPO phenomena has also brought more money in the area for spending.
VOTS: What’s your take on this emerging trend among developers wherein they design and build whole ‘townships’?
Cuervo: I personally believe that township development is a natural direction when demographic growth have become too aggressive and real estate values have reached levels only for the affluent few. We have seen many Agricultural land converted for Industrial use during the 80s to 90s but when China opened its doors, our manufacturing sector has had to take a back-seat whci led to a stagnation in Industrial land valuation for many years. As our population continued to grow, one sector which is constantly playing catch-up is our Residential sector...especially for the low-mid income wage-earners. We continue to see low-cost condos being developed within the CBDs and housing developments in peripheral cities of the Metro. This is definitely not a trend… this is our reality.
VOTS: So you think townships are going to be the new way developers are going to design their projects, since they encompass the residential, commercial, industrial and, increasingly, the agricultural?
Cuervo: We have no choice...Land values for residential property in Makati have breached 200,000 per sqm.. Ayala Alabang is at 60-75,000 and rising....places where water services were unavailable have now doubled in value since the water companies have provided their service. Areas like Better Living and BF Homes have enjoyed this. Values that used to be 3,000 to 6,000 per sqm are now at over 12,000 per sqm.
VOTS: The gridlocked traffic in Manila is already demonstrating how the Metro could fail drastically as it reaches the category of Megalopolis. Do you think Metro Manila will collapse as the prime growth center in 5 years or so, given its grossly unsustainable set-up at present?
Cuervo: Correct...sadly people can no longer ‘commute’ to work as efficiently as before....population grows, car sales over 20% year-on-year and yet no Infrastructure Government spending to provide new roads and highways is causing what the city is now experiencing. So given a choice to ‘Live-Work-Play’ in an area where travelling is no longer required...is becoming a norm.
VOTS: So bad as it is for the metropolis, it could be good for regions like CALABARZON and MIMAROPA, with the land values there poised for a big rush. Do you agree?
Cuervo: Developers have created new companies to address needs in differentiating their products. Ayala for one has Ayala Premiere and also has Avida to segment the products that cater to different market segment. In Retail you will also see this where PureGold for example have also created their Jr stores...Ayala and the Nuvali development is another example. You are right, the CALABARZON is about to witness a demand like it has never felt since the agri ‘land conversion’ days of the 90s.
VOTS: How powerful a force is this reverse-migration from the capital? Would it push far down the coasts of Batangas, for example? Do you see a lot of coastal towns included in this supposed coming boom?
Cuervo: The coastal towns will take some time. Look-out for areas that are affected by the MCX, CAVITEX, STAR, CALAX. Those are the main arteries that will affect short - term development.
VOTS: And the Laguna Lake Dam/Circumferential Highway...which sadly was deferred.
Cuervo: One move that will decongest traffic in Metro Manila is the relocation of the Port from Manila to Batangas. The Trucks plying SLEX C5 are all causing most of the traffic all because of their ingress and egress Manila Ports. Yes that Laguna highway was a welcome but sadly shelved.
VOTS: Of course, unbridled conversion of our agricultural lands to residential cannot be good. Surely it would take an intelligent-enough leader to correct and balance all ill consequences that will be brought about by these tremendous shifts (including the onset of the ASEAN Integration). Do you think there’s enough political will out there, and enough brains to understand these events, so that it could be dealt with in the best possible way?
Cuervo: Thats a tough one...haven’t really heard much from any government programs on Urban Planning, Urban Renewal and Rural Development. It seems that the more pressing issues like corruption and poverty alleviation are the main issues most of the populace is looking to address at this time. What the leadership must take note of in any program that would affect the real estate industry are these points: -High-end Residential Land values are seen to increase from 10% to 15% annually, provided all infrastructure projects and other developments are completed on time. -Smaller lot cuts will have a higher price per square meter compared to larger lot cuts. -The profile of the market has matured. Buyers take into consideration factors such as geohazards, accessibility, and availability of support services when making an investment decision. -An expected increase in Zonal Values in the near term will affect the cost of sales for land which will result in higher asking prices. -Due to the lack of available supply in this sector, demand forces in the market will greatly affect capital values in the next five years.
VOTS: Well, thanks so much for the inputs.