Betting on real estate

Despite warnings about a real estate bubble issued by an economist, the Philippines is considered a very good market as underscored by the recent PricewaterhouseCoopers report that ranked Metro Manila as the fourth most attractive real estate market in the Asia Pacific region  up from its previous eighth place ranking. Aside from the business process outsourcing sector that has driven demand for office space, continued strong inflows from OFWs has contributed to the upbeat sentiment in the residential market, with property investors looking at Metro Manila as a preferred investment destination.

For sure, the country can take advantage of the current slowdown in Singapore and Hong Kong where tighter restrictions are being imposed by government in an attempt to curb runaway property prices. In Singapore for instance, higher stamp duties, debt ceilings at 60 percent on borrowers’ incomes and increased real estate taxes were implemented in 2013. Hong Kong on the other hand has raised the minimum mortgage down payments six times since 2010 and also slapped an additional 15 percent tax on non-resident buyers.

Not surprisingly, developers in Singapore – ranked as the most expensive city when it comes to buying luxury homes – ended 2013 on a low note with lower home sales and minimal rise in property prices, posting the worst performance after seeing the biggest gains in 2012. Investors are now looking at China, the UK and the US where home prices are showing impressive jumps, rising over 13 percent in October last year. In fact, a Singapore developer bought the Los Angeles Tower late last year to signal expansion plans in the United States. 

While a rebound is seen in the next couple of years, a market analyst has commented that the restrictive property measures in Singapore and Hong Kong have certainly stifled sentiment, prompting property developers with the financial wherewithal to look for investments elsewhere – which can only be beneficial to the Philippines. It certainly looks like real estate is still the best bet.

Asian businessmen worried of China moves

More than a decade ago when China was just beginning to emerge as an economic powerhouse, it adopted a policy of “non-interference” in external political issues that appeased the anxiety of its neighbors – but not for long. Pretty soon, the Chinese dragon started to show more and more aggression particularly over disputed territories in the west Philippine (South China Sea), ruffling the feathers not only of Asian neighbors such as India, Japan, South Korea, Vietnam, and the Philippines but also the United States and other countries that are concerned at the implications on their political, security and economic interests.

While China professes a foreign policy of “harmonious worldview” and “good neighbor” diplomacy, it’s quite ironic that it seems bent on fomenting “controversy” (to put it mildly). A few months after imposing an air defense identification zone over major portions of the East China Sea including islands claimed by Japan as its territory, Beijing again announced new fishing restrictions in the west Philippine (South China Sea), requiring all foreign shipping vessels to seek Chinese approval before they are allowed to enter disputed maritime territory. 

This has stoked increased tension in the international business community, with businessmen wary of potentially unpleasant consequences including the use of force. Japanese Defense Minister Itsunori Onodera has promised to “firmly defend our country’s territorial sea and land with the self-defence forces cooperating with the coast guard” – increasing concerns over the prospect of armed conflict in the disputed territories.

Both the Philippines and the US have denounced the restriction, warning that this could escalate tension and unnecessarily complicate the situation in the west Philippine Sea (South China Sea). Vietnam, for its part, said it would file a protest, noting that China’s new “rule” would negatively impact the lives of Vietnamese fishermen who fish in the disputed areas that are considered by Vietnam as part of its territory.

Former Senator Edgardo Angara called the restriction utterly selfish and self-serving, adding that fish are migratory and therefore no country can claim exclusive domain over these creatures. Ed is proposing joint fishery agreements with China, saying it is a window of opportunity towards resolving the territorial dispute in a peaceful manner.

The stakes are definitely high considering that regional stability hangs in the balance. According to experts, some $5.3 trillion worth of trade passes through the west Philippine (South China Sea), and any disruption in the route of cargo ships and vessels would be detrimental to the economy because it could entail increased costs in almost everything – from fuel down to insurance rates, not to mention the longer time it would take to deliver goods from one transit point to another. 

Red vs. yellow

The prolonged and escalating protests in Bangkok are causing a lot of turmoil in the market, with stocks plunging to more than 12 percent last month and the Thai baht on a consistent record-losing streak since November last year. One of the biggest hit is the tourism industry in Thailand, with travel warnings now being issued by more countries and flights to Bangkok being canceled due to lessened demand. The unrest is driven by a classic clash of classes between Thaksin-Yingluck Shinawatra supporters and the “royalist” protesters who have built barricades and occupied roads to force a shutdown. Battle lines are being drawn with the war of colors defining pro- and anti-government supporters. The anti-government are known as the “yellow “shirts while Thaksin sympathizers are known as the “red shirts.”

In the Philippines, political parties are also identified with their colors of choice. Diehard political loyalists were recently warned by the government about wearing their favorite political colors – especially if it’s yellow or red – when visiting Thailand.

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