Philippine Real Estate News and Economy - March 2018

hello everyone,

Here’s some select articles about Philippine Real Estate and our Economy from various newspaper correspondents that matters for your reference.  Take note that these articles when assessed actually guides us locally what direction the economy is going, what kind of issues our government is going through and generally, and how this affects our real estate market.  News directly affects investors / businessmen on their assessment of what business decision to make, this could be from the stock market ( which is a good barometer ) to daily activities ( hiring of workers, construction supply chain, and other economic variables.

here's an article from bworldonline.com correspondent, Arra B. Francia :

Prime Orion to Enter into Industrial Park Development through Share Swap :

AYALA Land, Inc. (ALI) will swap some of its shares in Laguna Technopark, Inc. (LTI) with Prime Orion Philippines, Inc. (POPI), allowing the Tutuban Center developer to venture into the development of industrial parks.

In a disclosure to the stock exchange on Friday, ALI said its executive committee has approved the exchange of shares with POPI valued at P3 billion.

Under the deal, POPI will issue 1.225 billion common shares to ALI in exchange for 30,186 LTI common shares, resulting in POPI acquiring a 75% equity interest in LTI.

“Combining LTI and POPI will create a bigger entity that will pursue real estate logistics and industrial development and reposition POPI to be a leading real estate logistics and industrial estate developer and operator in the Philippines,” ALI said.

Formed through a partnership between ALI and Mitsubishi Corp., LTI develops industrial parks in the country. Its portfolio includes the Laguna Technopark, a 460-hectare industrial estate that caters to light and medium, non-polluting locators from both local and global firms, according to its website.

LTI has further developed the Cavite Technopark, a 118-hectare estate similar to Laguna Technopark that aims to attract manufacturing investors that specialize in electronics, automotive, consumer products, food processing, and pharmaceuticals.

POPI returned to profitability in the first nine months of 2017, posting an attributable profit of P91.57 million against an attributable loss of P394.31 million in the same period in 2016.

This year, the listed firm said it will focus on the further development of Tutuban Center, which covers a gross leasable area of 60,000 square meters sitting on a 20-hectare property. POPI plans to double the leasable area of the shopping center and convert it into a mixed-use development in the future.

ALI’s net income climbed 21% to P25.3 billion in 2017 as revenues also grew 14% to P142.3 billion last year. The company is spending P110.8 billion this year in order to support the demand for more residential, office, and retail developments in the country.

Shares in ALI lost 3.81% or P1.60 to P40.35 each at the Philippine Stock Exchange on Friday, while shares in POPI gained 17 centavos or 5.43% to close at P3.30 each. 

here's an article from manilatimes.net correspondent, Atty. Peaches Aranas on Estate Tax :

The Bureau of Internal Revenue (BIR) recently issued Revenue Regulations (RR) No. 12-2018 or the Consolidated Revenue Regulations on estate tax and donor’s tax incorporating the amendment pursuant to RA 10963 (TRAIN Law), which introduced several amendments.

First, the said RR uniformly fixed the rate of estate tax, as well as donor’s tax, at six percent. This effectively amended the provisions of National Internal Revenue Code on the graduated tax schedules. Note that the taxes and procedures prescribed under the regulations shall govern the estate of the decedent who died on or after the effectivity of TRAIN Law.

To illustrate, Mr. A passed away leaving properties with a gross estate amounting to P5.5 million. If he died on January 15, 2017, the value of the estate tax due would be P540,000. On the other hand, if he died on January 15, 2018 the tax due would amount to P330,000.

Second, RR No. 12-2018 increased the allowable deductions from the deceased’s gross estate. The standard deduction for a resident is now P5 million and P500,000 for non-resident, plus claims against the unpaid debt and mortgages. The tax exemption for the estate of family home has also been increased from P1 million to P10 million.

Third, RR No. 12-2018 likewise changed the filing of the estate tax returns. Previously, the returns must be filed within six months from the decedent’s death. Under the new law, the heirs have one year from the decedent’s death to file a return. Also, a certification from a certified public accountant is now required for gross estate exceeding P5 million instead of P2 million.

Finally, RR No. 12-2018 allows the heirs to withdraw the bank deposits of the deceased, but subject to six percent final withholding tax, whereas in the old law, a certification from the Commissioner is required before one may withdraw an amount exceeding P20,000.

With the new and fixed rate of 6 percent, it is easier for people to estimate the total tax due to settle the estate of the ones who went ahead.

here's an article from mb.com.ph on recent technology in the Contruction industry :

Imperial Homes first Developer in Philippines to use Connovate Building Technology 

Connovate Philippines Inc. and Imperial Homes Corp. are making history in the Philippine real estate scene as the first to adopt Connovate in the country.

Connovate, a construction breakthrough from Denmark, is a high-performance concrete building technology that offers less carbon footprint, 100-year material lifespan, fast construction and insulation abilities, among other innovative features.

Connovate Philippines Inc. acquired the exclusive production licensing agreement from Connovate Denmark. Imperial Homes Corp. is the first developer to use the technology in the Philippines and to produce it for low-cost mass housing projects.

The housing line is called Imperial Lifetime Homes, the first lifetime home in the country and the company’s second generation of solar-powered low-cost housing. It will make its debut at Via Verde in Sto. Tomas, Batangas.

The automated Danish factory for Connovate, located in Silang, Cavite, has a full capacity of two houses per day production. As a result, it now has a Philippine record of the fastest developer with the installation of six ground floor units a day.

Due to construction speed, Connovate Philippines Inc. addresses one of the biggest problems in the country’s housing backlog. Many low-cost housing developers could not meet the deadline to deliver quality homes to its buyers, resulting in poor quality homes that can last for 30 years only.

“The Connovate technology is a better investment for developers as it is the only panel system in the country that can meet three major goals: cost-efficiency with faster construction, green solutions for climate change, and health benefits,” said Engr. Ramir Padilla, president of Connovate Philippines.

The panels are produced with less cement since cement production accounts for five percent of global carbon dioxide (CO2) emissions. Add to that the fact that the panels can last a lifetime. Therefore, Connovate lessens the need for cement production to rebuild a structure after 30 years. As a result, it reduces the carbon footprint for developers.

“Each Connovate home can save up to 4.4 tons of CO2 emissions per 100 years. Connovate Philippines and Imperial Homes Corp. are the only companies in the country who are able to do this unprecedented move,” said Padilla.

Slim, compact and light-weight, the panels have the strength of 14,000 psi, can withstand up to 1,000-degree heat, and are resistant to molds, pests and deterioration. It is scalable to all building types and has insulation features, which make the panels perfect for different residential or commercial structures.

 

Connovate can also help prevent potential health problems caused by mold formation in ordinary homes. Unlike regular hollow blocks that have micro holes, each panel has a smooth surface and is made of non-porous materials to prevent the growth of molds and bacteria, which can cause health risks.

here's an article from philstar.com correspondent, Richmond Mercurio :

Department of Trade and Industry Allays Investors' Fears on Lost Perks under TRAIN 2

MANILA, Philippines — The Department of Trade and Industry (DTI) has allayed fears in the foreign business community that the government’s second tax reform package would harm the country’s investment climate, assuring them its implementation would entice even more investors. 

Trade Secretary Ramon Lopez, together with officials of the Department of Finance (DOF), in a recent dialogue addressed the issues and clarified the concerns raised by Japanese investors on the Tax Reform Acceleration and Inclusion (TRAIN) Package 2 which seeks to rationalize fiscal incentives and reduce corporate income tax rates.

Lopez said there are aspects of TRAIN Package 2 that would benefit both new and existing investors.  

“While Japan is our number one source of investments, there are still a large number of Japanese investors who have not located in the Philippines. The TRAIN Package 2 provides us with the mechanisms both to encourage existing investors to further expand their business, and to attract new investors into the country,” he said.

According to the DTI, Japanese investors have expressed their concerns on the new tax incentives for new and existing investors as well as the preferential corporate income tax.

Lopez, however, pointed out that the proposed legislation is not meant to remove incentives, but instead recognizes the important role of incentives and the need to make them more responsive, relevant, and effective which is why they should conform to the principles of being performance-based, time-bound, focused and transparent.  

Board of Investments managing head and Trade Undersecretary Ceferino Rodolfo, for his part, said the second tax reform package would provide better incentives.

“First, investors will no longer be limited to just the income tax holiday and the five percent tax on gross income earned (GIE) – but will now be able to choose other incentives that may be more relevant, including long enough net operating loss carry-over, accelerated depreciation, and double-deduction of certain expenses critical to upgrading competitiveness such as research and development, training, and others,” Rodolfo said.

Rodolfo added that equally important is that the TRAIN Package 2 will remove the nationality bias as well as the export bias of incentives.

‘This means that as long as an activity is listed under the Strategic Investments Priorities Plan, this will be eligible for incentives regardless of citizenship of owners or the markets they will serve. For Japanese companies, they can receive incentives even if they will sell to the domestic market,” Rodolfo said.

Meanwhile, DOF director Juvy Danofrata addressed the concerns of investors on the sunset provisions for existing tax incentives.

“While transition mechanisms will be provided including replacing the five percent GIE with a reduced 15 percent corporate net income tax, we are open to suggestions on how we can design better transitions, as long as these will comply with the basic principles of being time-bound, performance-based, focused, and transparent,” Danofrata said.

According to the DTI, the discussion on TRAIN Package 2 with the Japanese investors was part of the agenda of the 10th Philippine-Japan Economic Partnership Agreement sub-committee on the improvement of business environment meeting last March 22 co-chaired by Lopez and Japanese Ambassador Koji Haneda.

here's an article from businessmirror.com.ph correspondent, VG Cabuag :

"BBB" Fast Becoming a Threat to Property Developers 

The Duterte administration’s “Build, Build, Build” (BBB) program promises to usher in a “golden age” in infrastructure buildup in the country to boost the economy and subsequently improve the lives of Filipinos as the Chief Executive promised in his campaign sorties in 2016.

However, almost two years after President Duterte assumed power, the construction industry sector is yet to experience the fulfillment of that promise, or even just half of it.

A company executive has noted that the Duterte administration only has a handful of big-ticket projects to boast, while real-estate prices continue to soar by the day.

Waiting game

“The TRAIN has been completed, hopefully the ‘wait’ is finally over and the ‘build’ will start,” a company executive said, referring to the first phase of the Tax Reform for Acceleration and Inclusion, or TRAIN, law that took effect early this year.

Thus, as companies wait for the machines to actually dig the ground, many investors are instead putting their money into real estate.

“They have so much liquidity, and they don’t know where to put it. We all thought that once we signed the documents [for the infrastructure deal], that’s it, the project will be started. But until now we’re still waiting,” the executive said.

Land sellers’ market

In the Philippines, only a few companies can carry out these big-ticket projects, with the likes of the Ayalas, the Sys of the SM group and Aboitiz, along with the companies headed by businessman Manuel V. Pangilinan.

Ayala Land Inc. and the SM group, for instance, are rushing to acquire parcels of land for development in the reclaimed area of Entertainment City in Parañaque, as both ride on the tourism windfall of the huge integrated resort-casinos in the area.

A new Ayala mall will rise at the Aseana City complex adjacent to Pagcor Entertainment City, while the SM group is reportedly shopping for available land in the area, possibly the Ashmore property that sits right across Solaire Resort and Casino. The Wenceslao group, a construction firm, is also rushing to complete its Aseana City.

According to Isidro A. Consunji, chairman of construction firm DMCI Holdings Inc., land prices will be skyrocketing over the next five or six years, and that prices already went up some five times in about six years in places like Pasig, Mandaluyong, Mall of Asia (MOA) in Pasay and Bonifacio Global City (BGC).

“That’s good if you are selling land. But if it’s your raw material, then you will have  problems because I think the price increase is too high,” Consunji said.

DMCI is not as big compared with Ayala Land and SM Prime Holdings Inc., but it is in the business of property development since the 1980s, focusing on the residential part of the sector and not much into township.

Consunji said in some areas in BGC, prices are now selling at P1.3 million per square meter and, in the MOA area, the price is at P300,000 per square meter.

“It’s just unbelievable pricing. That [MOA area land prices] is expensive since you have to spend a lot on your foundation and then there’s a maximum height ceiling [of between 45 meters and 65 meters],” he said.

Double-whammy effect

According to Frederick Rara, research and consultancy manager of property broker KMC-Savills, there may be a double-whammy effect of the depreciating peso and rising oil prices on the prospects of the real-estate industry in the country.

Add to that the effect of the TRAIN and the possibility of a rate increase by the Central Bank as inflation rate rises.

“In theory, all of that are dampers [of real-estate industry growth]. But we don’t know what will happen on the ground, it’s still a matter of price,” he said in an interview.

Rara explained rents are increasing at an average of 10 percent to 15 percent, and if construction costs rise by about 10 percent, developers still have the incentive to build even more.

“In the real estate, we’re all derivatives here. We’re still following what the market is doing. Let’s say, for now, they’re willing to buy even at higher rates,” he said.

With the government’s BBB program, the real-estate industry may face another challenge, this time on the possible manpower shortages.

Manpower factor

Public Works Secretary Mark A. Villar said the government is embarking on a massive hiring program—especially for technical people—that will be called “Jobs, Jobs, Jobs,” or JJJ.

“We’re still working with the DOF [Department of Finance], we’re working with other agencies, the BBB team, in order to undertake matching with jobs. We are already looking for people. We are recruiting and we are aggressive in recruitment. We will have the Jobs, Jobs, Jobs program for matching,” Villar said. The program will be launched in May.

Villar revealed that the JJJ will cover Filipino professionals in the country and abroad, and recognized that the government would be competing with private employers, including salary rates, to get the required number of skilled people to improve the implementing agencies’ absorptive capacity.

“The cost of labor will go up…but many will be coming back from overseas. Before, I was in [the] housing [sector], and our engineers were going abroad. Most of them are still abroad. But, if the salary here would be competitive, even if not as high, they will come back. That will become the dynamic,” he said.

At the moment, protecting its pool of manpower is one of the trade secrets of many property developers.

Semirara Mining and Power Corp., for instance, has to peg the salary of some of their skilled workers—or those who operate huge trucks to haul coal from its site on Semirara Island in Antique—on overseas rates, and in dollars, to prevent their workers from leaving the Philippines.

These workers are being poached by other mine sites mainly in Australia and other parts of the world.

The same is true for the likes of Wilcon Depot Inc. for its container truck drivers, whose pay starts at $1,000 at the minimum.

8990 Holdings Inc., a developer of mass-housing projects all over the country, also felt the shortage of workers even before President Duterte came into power.

“And with Digong’s [Duterte’s] Build, Build, Build program, the scarcity of labor will be even more felt,” former 8990 president Januario Jesus Gregorio B. Atencio said.

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Thank you.

robert

Robert G. Sarmiento Properties

Professional Affiliation :

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Member, City of Taguig Real Estate Board 2016 - 2018

Real Estate Broker’s Association of the Philippines 2000 - 2015

President, Greenhills Chapter 2008, 2009

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San Juan Mandaluyong Chapter 1998 -1999

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robert
Robert G. Sarmiento Properties

Professional Affiliation :

Philippine Association of Real Estate Boards

Member, City of Taguig Real Estate Board 2016, 2017

Real Estate Broker’s Association of the Philippines

President, Greenhills Chapter 2008, 2009

Philippine Association of Real Estate Boards 2000-2015

San Juan Mandaluyong Chapter 1998, 1999

PRC # 6569

Lecturer’s License # 0294

02 5148481 ( direct line )

+ 632 5536051 ( trunkline )

+ 632 4781316 ( telefax )

+ 632 8561365 ( line 3 )

+ 632 8041701 ( line 4 )

+ 63 917 5364829 ( globe )

Email : roberts@surfshop.net.ph

Website : 
www.robertgsarmiento.com

Website: http://condosphil.wordpress.com

Website: www.philippinecommercialproperties.com

Website: http://philippinewarehouses.wordpress.com

Website: http://philippineoffices.wordpress.com

Website: http://philippinetownhouse.wordpress.com
 

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