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I do NOT invest into Real Estate in Cebu because . . .


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#1 Balay

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Posted 09 September 2010 - 12:25 AM

In the past few years I have been investing a lot into Real Estate, mostly in Cebu. I feel that Cebu has just begun to grow with the amount of IT businesses opening, Schools and ASIAN foreigner investments. For some reason I think the Real Estate wave in Cebu is just starting to pick up speed. I want to catch the wave as soon as I can and be in it for the long ride.

A few members have commented in other threads that investing into Real Estate in Cebu is not a good decision. Maybe they are right and I am more than willing to listen so I don't wind up loosing out on my life savings.

Retired: I understand a lot of the members on this forum are retired, they worked their whole life and now just want to enjoy their "golden" years. Investing into real estate is too much of a long term investment so it isn't for them.

Other Investments: I am sure there are faster and easier ways to make money. I have never been good at investing into the stock market or investments of that type.

Capital: Investing in the Philippines requires a lot of initial capital, since it is very hard to get a loan and mortgage rates very high compared to other countries. Banks have shorter terms with an average of 10 years compared to other countries that allow up to 35 year terms.

Bubble: I know there are a lot of projects in the works right now that will not be finished for a few years. By the time they are done there maybe a saturation of condos. I could have a hard time renting them or reselling with out a loss.

Other: What ever the reason not already listed.

If you vote please comment on the reason why you do NOT invest into Real Estate in Cebu.
It could help me prepare my thesis for when I apply to be a Licensed Real Estate Consultant.



#2 Balay

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Posted 09 September 2010 - 12:48 AM

In 1986 after the first People Power revolution removed Marcos from power, property rates in the town north of Cebu ranged from P50 to P150 per square meter. I am talking about the towns of Consolacion, Lilo-on, Compostella with in 25 kilometers north of the city center. Now, the prices range from P1000 to P3000 depending on location. Beach lots are a little more expensive and the price varies more. There are not that many undeveloped beach lots compared to inland lots. I am sure other areas prices are different, but since I live and interested in investing in the northern towns I have been able to do the most research.

North of the Cebu properties has an appreciation of twenty fold in 24 years. Can you compare an average property in another country ? From what I understand a property in a good area of the US bought in 1986 for around $60,000 is now its valued at around $400,000. Around a sevenfold appreciation.

20 times compared to 7 times appreciation.

Yes I understand the exchange rate could play a big part of comparing different places to invest in Real Estate. The bulk of the appreciation of Real Estate prices in the Philippines was in 1995 to 1997 when the Philippines had an economic boom. It crashed with the 1997 "Economic Asian Flu" and got even worse around 2000 with the removal of President Joseph Estrada.

Is Cebu's Real Estate bubble about to burst or is it just starting to blow up ?

Edited by Balay, 09 September 2010 - 9:14 AM .


#3 spritsail

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Posted 09 September 2010 - 1:43 AM

i think you have made the right choice and stick with it. My mate in Boracay bought 11000 sq metres at 90peso sqmt in 1992 and just been offered 45000 peso a sq mt. Prices in Camiguin have risen tenfold in 10 years. Some resorts have changed hands for 40 Million peso for less than 5000 sq mts. With an incoming wave of korean, japanese and chinese investors, real estate is still very cheap.

#4 David_LivinginTalisay

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Posted 09 September 2010 - 1:07 PM

I used to live in Hong Kong, before moving to Cebu, Philippines in May 2001.

Those who think 23.5 sq. m + 4 sq.m for Balcony is small, clearly has not lived in Hong Kong.

Hong Kong is one of the most densely populated areas in the world with an overall density of some 6,300 people per square kilometre.

Land is at a premium in Hong Kong meaning that residential housing is very expensive. An American Telcom Company, 'Netrix' was not covering my rental, property prices camet come as something of a shock at first. I did not want to spend huge sums of money on rental, so spent some time investigating the older buildings in Hong Kong.


When I first arrive, my initial instinct was to gravitate toward the newer, glitzy residential complexes that offered swimming pools, shopping and health and fitness facilities. These, however, are very expensive and I was able to find accomodation of equivalent size, for a far lower price, by being prepared to sacrifice the facilities and compromise on area. I rented a small 2 bedroom apartment at the top end of Kennedy Town for US$1,200 a month on a 12 month Contract.

After the handover of Kong Kong, by the British to the Chinese in 1997, prices started dropping - the first time ever! I was able to move closer to the City, find a bigger apartment, for less money US$800 a month



Analysts are also dissecting whether history is repeating itself.

Prices might suggest so, with Hong Kong property rising 45% since the beginning of 2009, and in many cases back to 1997 highs. Yet according to Nomura analysts in a recent research report, the market is missing two bubble ingredients: leverage and speculative demand. They forecast another 20% gain in prices by the end of 2012.


I had stayed in Hotels when I first arrived in Cebu. Renting here in Cebu, was a lot lower than Hong Kong. Finding places to rent for less than 1 year, were difficult, to find, if indeed you managed to find any, however?

Sha-Sha, whom I'd met in Hong Kong, lived in Cebu. She wanted to buy a house/lot, in Cebu City, so her daughter, who was to be attending San Carlos University, did not have to pay for accommodation. We quickly determined that prices in Cebu City itself, were out of the range she could afford with her life savings, as a Deposit, and the repayments on a Home Loan, from earnings as a Domestic Helper in Hong Kong. Since her Family lived in Barili, she wanted somewhere South of Cebu City to make the journey easier.

We found a 120 sq m lot in Tierra Grande, a Camila Homes/Crown Asia Development in Lawa-an 1, Talisay City. Sha- Sha used her life saving to make a 30% Deposit (with 8% Discount for cash), and the 70% Balance was over 24 months, interest free. These amortization payments, came to about Php18K per month, so I agreed to pay these, as an alternative to rent. At least after 24 months, nothing more to pay!

In May 2001. we left Hong Kong, to move to Cebu and live in the 5m x 6m, 2 bedroom bungalow, sitting on a 10m x 12m Lot (ie the building occupied 25% of the lot area only). After getting my divorce finalized in July 2001, I was then able to marry Salome (Sha-Sha) in June 2002. We have since extended the house - outwards to fill the width of the lot, and upwards, to 3 storey. We have gone from 30 sq m floor area to 105 sq m. There is potential for extending the original 30 sq m building upwards, to make bigger rooms on the 2nd floor, if required.

Foreigners can't own land in the Philippines.


When Salome (Sha-Sha), finished paying for this house/lot off Crown Asia, and getting the Title Deeds handed over, on sign off of the Mortgage, they wanted me to sign a declaration that none of my money had been used. I refused to do this since I was the one paying that 70% Balance.

I am not sure of the legal situation, with regard any claim I might have on owning the building on half the Land? Effectively I paid 70% of the original House/Lot and 100% of the building extension. I don't have any problem with this, as I consider it belongs to my wife, and her daughter (and our granddaughter, now).


House/Lot v Condominium
  • Condominium, can be owned by Foreigners (as long as not exceeding 40% ownership total of that Condo Development).
    Town Houses on suitable Registered HLURB Titled Development with common areas of shared ownership, can also be owned (40%) by Foreigners

  • Ammenities such as Gym, Swimming Pool, may be provided with a Condo (although some Subdivisions also provide Swimming Pools Tennis Courts, and Gyms/Games rooms in some cases)
  • Security - much less of a problem leaving Condo unattended, than a house/lot. Gated Subdivisions with a 24 x 7 Guard, is better than non-walled/gated, individual Lots.

  • Value for money - Cost per sq m. Considerably higher for a Condominium, so higher buy in cost for given size. In house Financing these days make Condo purchases more affordable.
    Studio Apartment
    of just 28 sq m in a 30 Storey high rise Tower in Cebu City, might cost Php1.5-2.5M
    200 sq m Lot in a Subdivision outside of Cebu City, might be Php7,000/sq m these days, so Php1.4M. The average cost per sqm, to construct a cement house is P18,000 per sqm. This will give you smooth, painted walls, basic ceramic floor tiles and all fixtures. So a 100 sq m Floor area House will cost about Php1.8M to build (Could be less P10K/sq m with lower Specification, or as much as P25k/sq m for 'elegant' house).

  • Re-Sale is dependant on DEMAND. No buyers, wrong location, wrong outlook, too high a price, will make selling difficult? Could take a long time, and might cause you to lower asking price, to even find someone willing to buy it.
    Condominiums, are often sold at early stage of construction. Whilst Foreigners can own Condominiums, they may find they have to use the developers in-house Financing to purchase said Condo unit as Banks in the Philippines may well not offer Home Loans except for completed units. Some Developers might offer to buy it back at he original purchase price, if unable to secure higher prices, 5 years from purchase. Some Developers may accept such Condo at current pricing as Deposit on a larger more upmarket Condo.
    I have not seen this happening with Hose/Lot on Subdivision developments.

    For example Filinvest suggest that Lots in Phase 1 of Corona del Mar, are now valued @ Php9,000/sq m.
    There has not been any Lots available in Phase 1 of Corona del Mar, since 2004, when a remaining 216 sq Lot sold for Php4,300/sq m.
    That on paper is Doubling of Value in 6 years -
    not as good as Hong Kong property rising 45% since the beginning of 2009, (20 months)
    In practice however, I have seen Lots being resold in Corona del Mar, Phase 1, where they had lowered to Php7,200/sq m to attract buyers. Clearly Filinvest are not buying them off these Owners @ their claimed market prices

    CoronaDelMar_GoogleMap.gif
    Corona Del Mar Subdivision Clubhouse

    Lots in Amara Phase 1/2/3 are sold out, and those still available in Amara North are fetching > Php16K Nett per sq m (ie Php6.18-9.35M plus taxes)
    Amara North 2 price list - Price range from Php12,000.00/sqm to Php20,000.00/sqm

    Amara_GoogleMap.gif
    Amara Subdivision

I am sure Amara is nice place to live/retire, and by Western standards, paying Php6-9M for Land and Php20K per sq m to build a house on it, might not seem unreasonable. It has, or will have Clubhouse, Sports & Recreation Club , Serenity Park, Playground, Gazebos, Esplanade and seaside decks.

I am also sure some bought Lots in Amara, hoping to make profit from re-sale?

Same with those buying in Filinvest Citta di Mare
Posted Image
This Thread is about INVESTING - making a profit from Real Estate


How long, after putting up the Capital/making the repayments, before one can start getting a ROI and how much?


What is the APR they are achieving?


To start with my Investments were NOT really in Real Estate - as the Hosue /Lot were to live in not make profits from

I did invest Php7.5M Gross (Php6.4M Nett) into Rural Banks and was earning Php142K pm in interest from such.


I could not own land, to put investment money into that. Even if I put Php6.4M into Condominiums, I doubt if it would generate Php142K per month nett of Tax, from Rentals, and no doubt one would also need to offset for redecoration, repiars and refurbishment also?

Some will tell you they would not risk putting funds into Rural Banks in the Philippines. Well t may have taken the PDIC a long time to process 134,000 Claims in those 12 x Legacy group Banks, that got closed in December 2008, and some have still not received their Claim payments (like my Step-daughter for her Php250K claim in RB of Bais), and others been paid less than the Insured Deposit amount (like some 8 Claims, totalling about Php190K shortfall). Some have had claims denied, and having to get PDIC to reconsider (under penalty of legal action in Court, if they don't).

Well I am not putting much funds into Rural Banks any more as few offering even 12%pa now, and although Php500,000 in the Insured Deposit limit, Claims >Php250K require payment by the Government for that portion, to 1st June 2011.

At least I was earning good ROI on those Rural Bank Deposits up to December 2008. Personally I think this was better for producing good monthly income, that was guaranteed and Tax Free, than Renting out Condominiums to generate enough to live off.

No guarantee that you will rent it out, or how long it takes to find someone to sign up to such rental agreement. No guarantee that they wont cut short on the Rental Term, and walk off with the TV, Microwave or whatever (except for the 2 months rental Deposit to compensate)?

My attempts to find other Investment than Rural Banks - like the Pre-Need buy Back failed from October 2008. Had I not been re-investing, in an attempt to increase my Capital (10 x over 6 years), then it would only have been 17.5% loss. Had the SEC done their job properly to Control and Regulate such Pre-Need Companies, then no one will have invested and lost any money, since they should never have been any 'Permit to Sell' issued, we discovered after those Senate Investigations.


My attempts to make money from Chinese Motorcycle imports failed, because our money was not handed over to Zongshen, to pay for the 1st batch of 900 x v8 Motorcycles (OEM Zongshen), by Catherine L. Soronio. It is now 16 months since we filed Court Cases against her and others, in May 2009, and still waiting to see Justice.

What I have had more success with, over last 12 months, is on Importing Rice and Sugar (+ Herbs & Spices) legally via local Php50M SEC Capitalised Family Business.

Now I am using that ROI to pay for a a Studio Unit (1502) of just 28sq m in Ultima Residences - Ramos Tower, costing Php2M, payable interest free (OK 10% Discount for cash, so really 10
% Finance over 18 months = 6.67%pa APR?). Because I turned down Units costing Php3.5M, and more in other developments, my investments still generate enough to live off also.


Some are going to say, but what if this investment fails also?

If it goes wrong, the repayments might not get paid, and that could lead to contractual issues. I could end up losing the apartment, is the bottom line, and not sure how much of what was paid can be recovered?

That is the worst case scenario, since this Family Business would not want MEDIA coverage that they failed to honour Contracts and make due payments. This Family rely on their living from the profits of supplying Herbs, Spices, Rice and Sugar to leading Hotel chains, Resorts, and Restaurants, not just in Cebu, but through out the Philippines. Also Contracts with the likes of Nestle Corp.
The Contracts signed with us, state that Property will be assigned if they fail to honour the contract with cash payments. I have seen these Land Titles and they recently applied to HLURB for a 10 unit subdivision of a Lot, near Amara. So we may be given one of these Lots, as alternative to Capital.

So that is my suggestion - Find an Investment paying a good ROI (60%pa), then use that to pay the in-house Financing on a Condominium Subdivision, licensed with the HLURB.


Once that Condominium Subdivision is paid in full, apply for a Home Loan, so you can afford to build a house on it, or finance another Condominium?

Edited by David_LivinginTalisay, 09 September 2010 - 1:18 PM .

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#5 A_Simple_Man

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Posted 09 September 2010 - 2:00 PM

I have done my share of real estate investing in another country. As the opening post suggests, some of us are retired and need more liquidity and less risk, regardless of potential return. Perhaps the opener could start a 'Mutual Fund' that manages the real estate. Then he could sell shares which pay a return and are reasonably easy to liquidate. (The fund would have to maintain a certain amount of liquid assets to pay off anyone who wants out immediately)

But I digress. My reason for posting is to relate my experiences of buying property in two different cities, 81 miles apart (the actual city names are unimportant and I have no wish to divulge details). Both cities showed the same potential in 1981. By 2001 my property in city A had quadrupled in value but property in city B had stayed exactly the same. At that point I was forced to sell but, interestingly enough, that property in city B did double in value in the following 2 years.

The point. I agree with the opener that real estate is a great long term investment. A great idea for young people.

#6 fredanna

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Posted 11 September 2010 - 3:29 AM

I have always read here that "investing" or building in the Phils for any profit was wasteful dreaming and, that if a dream house was built, be ready to vacate and leave the country and take the loss, if the government fails, or falls.

Fred

#7 blaze pontaine

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Posted 11 September 2010 - 3:38 AM

In 1986 after the first People Power revolution removed Marcos from power, property rates in the town north of Cebu ranged from P50 to P150 per square meter.



source?

#8 D_D

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Posted 12 September 2010 - 4:35 PM

[quote name='David_LivinginTalisay' date='09 September 2010 - 01:07 PM' timestamp='1284008870' post='215676'
  • Value for money - Cost per sq m. Considerably higher for a Condominium, so higher buy in cost for given size.
[/quote]

yeah a few people said they didn't like the cost per square meter of a condo unit.

In the last few years I have been buying condos and hope to continue. There seems to be a lot of existing condos with many more projects in development. Yes it is possible there maybe be over stock of condos when all those projects are completed but more people continue to move to the city.

One thing you may notice is there is not many condos being offered for rent in the Cebu Sun Star Classifieds.

[quote name='fredanna' date='11 September 2010 - 03:29 AM' timestamp='1284146946' post='216131']
I have always read here that "investing" or building in the Phils for any profit was wasteful dreaming and, that if a dream house was built, be ready to vacate and leave the country and take the loss, if the government fails, or falls.

Fred
[/quote]

I guess I am screwed then.

But where am I going to vacate to ?

[quote name='blaze pontaine' date='11 September 2010 - 03:38 AM' timestamp='1284147535' post='216135']
[quote name='Balay' date='09 September 2010 - 01:48 AM' timestamp='1283964518' post='215541']
In 1986 after the first People Power revolution removed Marcos from power, property rates in the town north of Cebu ranged from P50 to P150 per square meter. [/quote]


source?
[/quote]

The Bamboo Telegraph.

Ask anyone here and they will tell you the same.
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#9 Paul

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Posted 12 September 2010 - 6:47 PM

I do NOT invest into Real Estate in Cebu because . . .


... I cannot own the land.

However, I learned some years ago that it is possible for me to buy property in my daughter's name, with me being the trustee of said property. At the time she is 18, I can turn it over to her, or continue living on the property and putting money in an account for her that would serve as "rent" for me living on the property. As I stated, I would be buying it for her, so it still wouldn't be mine.

I believe that to be the truth anyway. If anyone knows my information is inaccurate or out right just wrong, please feel free to clarify the ability to serve as a trustee on property purchased in the name of your minor Fil-foreigner child(ren).

#10 D_D

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Posted 15 September 2010 - 1:37 PM

I do NOT invest into Real Estate in Cebu because . . .


... I cannot own the land.

However, I learned some years ago that it is possible for me to buy property in my daughter's name, with me being the trustee of said property. At the time she is 18, I can turn it over to her, or continue living on the property and putting money in an account for her that would serve as "rent" for me living on the property. As I stated, I would be buying it for her, so it still wouldn't be mine.

I believe that to be the truth anyway. If anyone knows my information is inaccurate or out right just wrong, please feel free to clarify the ability to serve as a trustee on property purchased in the name of your minor Fil-foreigner child(ren).


Yes it is possible to buy property in the form of a trust for an -18 year old child and do what you mentioned.

What about condos ? Foreigners can buy condos as long as the the entire condo project is 60 percent owned.

Do you think condos are a good investment in Cebu ?




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