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By Likha C. Cuevas-Miel Reporter
WITH the Federal Reserve
conceding that the US is amid a recession, a growing number of local
property firms that had gambled their fortunes on the
Filipino-American market are rushing out the door.
Last week, the Philippines’
largest real estate developer made a bold admission: the pot of gold
in the US is no more.
In a briefing, Ayala Land Inc.
(ALI) said it is shifting its focus away from the world’s biggest
economy to other markets like Europe and the Middle East, the latter
playing host to a huge concentration of overseas Filipino workers (OFW).
ALI said residential sales of its
high-end development under Ayala Land Premiere have slowed down,
leading to flat growth in the first two months this year. Rex
Mendoza, ALI senior vice president, since this is marketed mainly to
US-based Filipinos.
At present, about 60 percent of
sales come from the US. But the company has yet to see any spike in
the percentage of cancellations, Mendoza said, adding this normally
stands at 10 percent.
Other property companies are not
as explicit in their confession about their US quandary, but the
number of those setting their sights elsewhere is rising.
Take the case of Eton Properties
Philippines Inc., a relative newcomer to the local real estate
scene. It was the first to announce its move away from the once-rich
grounds of buyers with high disposable incomes.
The real estate unit of airline
and tobacco tycoon Lucio Tan entered the low- to middle-income
segment and temporarily held off selling to Filipino-Americans due
to the weakening US market.
Danilo Ignacio, Eton Properties
president, said the company stopped its road shows in the US and
instead moved its marketing campaign to Singapore, Dubai, Europe and
Australia.
Ignacio said the absence of the
US market is unlikely to sorely affect the firm’s revenues since
only 20 percent of sales emanate from abroad.
He also said other firms that
have large exposures to the US market are hurting from the rising
cancellations of from 20 to 50 percent by Fil-Am buyers.
Not taking things
sitting down
J. Erwin Balita, SB Equities Inc.
research manager, told The Manila Times this shift would be good for
the firms and the whole industry. “At least they are responding to
the changes,” he said, adding ALI’s recent admission is a sign
the company is not taking things sitting down.
“However, based on [their]
sales for the first two months, property firms are still resilient
and apparently [the US slowdown] hasn’t affected the industry
yet,” he said.
Filinvest Land Inc. recently
announced that sales take up for the end-February period were up by
24 percent from a year ago even though half of its sales were made
to overseas Filipinos.
This positive turnout may be due
to its minimal exposure to the US at about 1.7 percent. Most of its
customers abroad come from Europe with 36 percent of total overseas
sales, followed by Asia ex-Philippines at 31 percent, and the Middle
East at 28 percent.
Kerwin Tan, Robinsons Land Corp.
(RLC) vice president for operations, said the company is “not yet
affected by the recession since our marketing to the US is not as
aggressive as those [of] other companies.”
He said RLC’s sales take up was
still “on track” during the first two months vis-à-vis its
full-year double-digit growth goal, with lower cancellations
year-on-year.
The Gokongwei-led company’s
exposure to the US market stands at 10 percent of total sales, Tan
said.
The executive said RLC is
maintaining its focus on Europe, especially the United Kingdom and
Italy, even as it explores other areas like Japan for sales growth.
The company’s recent
partnership with JP Morgan is proof of its aggressive plan to sell
to overseas Filipinos, Tan said, adding RLC is cooking up more
innovative ways to entice buyers.
Softening in high-end vertical
segment
Vista Land and Lifescapes Inc.
also reported higher sales take up during the first two months,
announcing that the sluggish US economy will have a “minimal”
impact on its books.
Ricardo Tan, the company’s
senior vice president for finance, said that even if overseas
Filipinos make up 60 percent of its market, its exposure to the US
stands at below 10 percent.
He however acknowledged a
“softening” in the high-end vertical segment of the business,
which is the preferred investment of the Fil-Am market since units
are located within the central business districts.
Given this, Vista Land will
“adjust” accordingly, Tan said, without saying how it intends to
position itself. For many years, the company’s strength had been
its “affordable” or housing segment.
ALI is also looking at the lower
end of the market. Mendoza said the company has shifted to selling
the lower-priced Avida and Community Innovations Inc. (CII)
developments to its overseas Filipino clients.
In addition, the company would
market its middle-income units to US-based buyers looking for
cheaper investments.
In contrast, Megaworld Corp. said
it has opted to stay put and concentrate its marketing efforts on
the local front where it finds its strength. “If you can sell it
here, why go there? We have to focus here,” Kingson Sian,
Megaworld executive director, said.
The executive said its exposure
to the US stands at 4 percent, with direct sales to overseas
Filipinos at 10 percent. Because of this long-standing sales
strategy, the company’s first quarter sales “had been better”
compared with last year. “In fact our US sales are higher year on
year (probably) due to our more saleable products,” he said.
Bigger worry: rising inflation
Even as they veer away from the
US market, companies however would have something else to worry
about: rising inflation.
Balita said this could spur
higher cost of borrowing due to the up tick in interest rates, which
in turn would dampen demand for new homes.
Back home, the 6.4 percent
inflation rate last month may spur tighter monetary policy from the
Bangko Sentral ng Pilipinas (See related story page B1). With the
March inflation doubling from last year, the BSP has broken away
from the loosening tack pursued by its US counterpart, the Federal
Reserve, as local monetary authorities cited inflationary pressures
coming from costlier oil, food and other commodities.
Balita said higher inflation
could still be offset by OFW remittances. This means the industry
would just have to wait and see.
To date, sales to the domestic
market have yet to show signs of letting up, as tax perks issued by
the government has propped up real estate development especially in
the low-income segment.
At end-December, the real estate
exposure of thrift banks, which usually lend to the low-income
market, reached P84.4 billion, three percent up from the
end-September level and 11.0 percent higher than in December 2006.
BSP data showed that incremental exposure came from real estate
loans, with housing loans rising for 19 consecutive quarters.
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