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Property 'bubble' In Cebu - Your Views Please!


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smokey

As I have stated before, the developers have the job of convincing investors to invest in the buildings and don't give a damn that the places will never be lived in.

Tons of rentals in Cebu City now for P10,000-P20,000 that were P25,000-P60,000 just 5-6 short years ago.

 

 

 

 

do show us some before adds and present adds..... for rent 25,000p now only 10,000p?????

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It's not that the market is immune to forces. It's that filipinos are immune to logic.

You are communicating in the wrong place. You should be going into pubs all over the island with a shirt that details your proud investments, then you will are talk to folks that live or visit there a

what i invested was found money ,,, i made a lot of money in a short time with little effort so i spent it sure i could of cut here and downsized there but i did not i am of the mind that life is a hu

smokey

And what is the point of your bet? There probably would be fatalistic buyers lining up but there is not a financial institution anywhere in the world that is going to finance this dream during the time your's and my ass points to the ground.

You are a big boy, you know in your heart what you invested could have been done better but you have the grace not to need to sell the property...i hope it stays that way.

 

You have taken many a shot at members posting dodgy investments, please tell me how your property advise (in the Philippines - not Arizona- you are doing well there) is anything better than what you have taken David to task over. It might be a good time to stop pretending you are in the Cebu market

 

 

 

 

 

 

what i invested was found money ,,, i made a lot of money in a short time with little effort so i spent it sure i could of cut here and downsized there but i did not i am of the mind that life is a huge roller coaster you are up and you are down sure i did not make money from my house there but i am making money from some land there and i am making money here in arizona so it all evens out..... win some loose some..... tit for tat.... I may never sell my house in cebu and that is ok no use worrying about things i can not change my biggest mistake was thinking cebu was my rest of my life stoping point... But as i live here in arizona now i see a mix for me maybe 6 months there and 6 months here so in the end it always works out .... to the new guys i say rent for the first 2 years.... by then the honey moon called the philippines is over and reality set in

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smokey

Here's my two centavos....

 

The only residential real estate sector which I don't think is at risk of eventually crashing is the low-end, low cost housing (say, p1.5M and below). There is a great demand for this kind of housing and it is still "affordable" to a sizable segment of the population (typically, OFW, call-center, or foreign-relative based.)

 

The other residential real estate sectors are much more susceptible to a bubble since property prices have/are increasing exponentially while family incomes are only increasing incrementally. The growing gap between affordability and property values undermines the sustainability of the the current market boom.

 

Despite this fundamental problem, the market values may not crash in a fashion similar to the US. Instead, as it has been pointed out, the properties may remain vacant for years before they are sold. Eventually, wage inflation will make them marketable again at today's pricing some time in the distant future.

 

Another point that has been made by others that I agree with is that many homeowners purchase property at prices that they can barely afford to cover during their present "good times". It doesn't take much of a cash flow hit to cause them to default on their loans and lose their property. In this regard, they are like many Americans that are over-extended.

 

 

 

 

 

how do you compare a place where 3% down is common in realestate to a place where cash is used ? The bubble is banks and there are very few properties unless your talking condo that banks are involved in? the only sector that can crash in cebu is the low end because everything over 3 million is a cash ONLY sale

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miles-high
I may never sell my house in cebu and that is ok no use worrying about things i can not change my biggest mistake was thinking cebu was my rest of my life stoping point... But as i live here in arizona now i see a mix for me maybe 6 months there and 6 months here so in the end it always works out...

I spent a couple of months researching the condo/townhouse market in NCR and Cebu and just bought a condo for my GF as her B-day gift but I would NEVER buy myself a property either in NCR or Cebu… I am a happy renter, can move anytime I want to within the city, within the country or out of the country… From my rented condo in NCR I can see 20 or 30 new condos being built, probably many more if you include those condos for Filipinos…

 

The formula I came up with during my research is: subtract your age from the life expectancy of your group then divide it by 2… then multiply it by your annual rent. If it is higher than the price of the condo you like to buy, buy IF you like to spend the rest of your life there or if you can afford to buy a few condos…

 

But here in NCR the average rent is PHP50K/m for a PHP10 to 11 million condo (40 to 60 m²) so it's hard to justify unless you are very young...

 

:twocents:

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senseless

For those of you who purchased condo units; would feel safe during the next 6.0-8.0 quake?

 

I don't know why anyone would buy one of those units at any price for any reason.

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smokey

For those of you who purchased condo units; would feel safe during the next 6.0-8.0 quake?

 

I don't know why anyone would buy one of those units at any price for any reason.

 

 

 

how about people who ride bikes in cebu ... or take jeeps in cebu every day above ground is a good day,,

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rainymike

I believe that the market here is spotty. Different experiences based on location and point in time. My partner and I have had good success negotiating rents when we've taken our time. Not sure if that will translate to purchasing.

 

However, after several years of renting and seeing the quality of construction (or lack thereof), I'm in no rush to buy. Will probably take my time and build my own. Not sure if I can do that affordably, but the point of building a home will be to have a home and not an investment. Whether a bubble bursts or not will probably not be relevant to me in my lifetime. And I will do it with cash in hand rather than financing.

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A_Simple_Man
Tons of rentals in Cebu City now for P10,000-P20,000 that were P25,000-P60,000 just 5-6 short years ago.

 

And yet Forefall could not find one

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WONINTWO
I don't know why anyone would buy one of those units at any price for any reason.

 

 

I don't either.

 

I find the prices,for the quality/interest rates u get and the location it is in(Cebu,city),laughable!BUT,whatever floats ones boat,u kno?

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Jim in Cebu
Jim in Cebu, on 18 July 2012 - 05:18 PM, said: Here's my two centavos....

 

The only residential real estate sector which I don't think is at risk of eventually crashing is the low-end, low cost housing (say, p1.5M and below). There is a great demand for this kind of housing and it is still "affordable" to a sizable segment of the population (typically, OFW, call-center, or foreign-relative based.)

 

The other residential real estate sectors are much more susceptible to a bubble since property prices have/are increasing exponentially while family incomes are only increasing incrementally.

 

The growing gap between affordability and property values undermines the sustainability of the the current market boom.

 

Despite this fundamental problem, the market values may not crash in a fashion similar to the US. Instead, as it has been pointed out, the properties may remain vacant for years before they are sold. Eventually, wage inflation will make them marketable again at today's pricing some time in the distant future.

 

Another point that has been made by others that I agree with is that many homeowners purchase property at prices that they can barely afford to cover during their present "good times". It doesn't take much of a cash flow hit to cause them to default on their loans and lose their property. In this regard, they are like many Americans that are over-extended.

 

how do you compare a place where 3% down is common in realestate to a place where cash is used ? The bubble is banks and there are very few properties unless your talking condo that banks are involved in? the only sector that can crash in cebu is the low end because everything over 3 million is a cash ONLY sale

 

If you look at the "property owned" section of various banks (such as http://www.bdo.com.p.../RealEstate.asp), you will see foreclosed house and lots with values up to over p10M. While the number of foreclosed properties is relatively small (just as it was in pre-bubble-burst America), it doesn't mean that there isn't a bubble forming.

 

Regarding the "everything over 3 million is a cash ONLY" myth, Pag-Ibig (the government's housing lending program) lending limits historically were 3M or 4M, if I remember right. (I understand that those limits have been raised recently, but I have not verified that.) What that meant in the marketplace was that more expensive properties were either "cash only" OR had to obtain financing from non-government sources (-- that is, banks, developers, or other third-party lenders.)

 

While Cebu housing typically requires a much larger downpayment/owner's equity than is required in the States, that doesn't mean that owners don't end up with homes that are worth less in the market than they owe. However, it does mean that in a falling market, Filipino owners would absorb a larger part of the loss before a foreclosure would occur than their American market counterparts. This high owner equity serves as a buffer to soften the fall in real estate prices from a bank/government/economy reporting perspective. For example, I believe BDO requires a 25% downpayment, and for the sake of argument, let's say that all lenders require and buyer's have a 25% equity in their properties today. The result of this would be that the market could fall 25% or more before there there would be a spike in the reported mortgage foreclosures caused by desperate sellers who could not find buyers.

--

 

Regarding the low-cost housing sector, there is a huge demand for low-cost housing.

 

According to a close acquaintance, who was a housing loan officer at one of the major banks in Cebu and who now is involved in low-cost housing development, Cebu has an immediate need for a large number [-- I don't remember the number, but it was several 100,000 --] of low-cost units plus an additional 50,000 low-cost housing units built per year to keep up with current growth. He said that the existing building of low-cost units doesn't come close to filling the current needs, to say nothing of the backlog. [Hence, as another poster on the forum pointed out, the price on low-cost "rat holes" is rapidly climbing.]

 

Because of the huge demand for low-cost housing, I believe that the low-cost housing sector will be the least likely sector to crash.

--

 

I agree that "The bubble is banks" [loose lending practices] IN COMBINATION WITH investor speculation. The riskier the investment and the higher the leverage that the banks and investor's take on, the more the market will boom (and the more likely it is to form a bubble) and the harder it will fall when the bubble bursts.

--

 

For those that are interested in real estate bubbles and how large owner equities may defer, but not eliminate, bubble bursts, you may want to research China's urban real estate market. A few years ago, despite rapidly increasing prices, the real estate market was frequently described as bubble-proof because of it was close to a "cash only" market which, in theory, prevented speculation. However, during the last couple of years, prices of fallen significantly and owners, not banks, have taken the hit.

--

 

Ultimately, the market is controlled by supply and demand, affordability (which can be manipulated by lenders and the government via loan terms, etc.), and owner/investor psychology (fear or greed.)

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smokey

jim i have never see a home over 10 m forecloused maybe a condo ...... for real estate to become distressed in the philippines either the owner is hurting or the bank is knocking at the door and that is very rare in cebu sure i look at the forecloused stuff at union bank all the time and most of it is empty land someone tricked the bank on loaning a bunch of money on or condo some person picked up thinking it would be worth more when built.... In the us the problem is low down payments.... dirvorce ,,, job loss .... only one is a common one in cebu... take phoenix az... of the 26,000 plus homes for sale about 12,000 are short sale or forecloused almost 50% now in cebu i bet its of the 100% of the homes for sale maybe 2% are forecloused at most... Of the 65 homes in our subdivision that are build i know of NONE that have a bank loan so why would any of them homes be sold under distress due to a bubble...

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smokey

i wonder if there was a way to have a firm number of foreingers in the last 10 years that have retired to the philippines and with them their pensions how it affected prices in the philippines.... say americans average penision 2,000 us a month and say 300,000 in the last 10 years now that is a lot of money being spent and then add europeans etc etc... the flow into the philippines from outsiders bringing their pensions must be huge...600,000,000 A MONTH maybe close to what the OFW are sending home...when you add all the foreigner on pensions..

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Brucewayne

do show us some before adds and present adds..... for rent 25,000p now only 10,000p?????

 

 

Now I am sure you know I can't show you 'before" ads as they are non existent at this time, but I can certainly show you a lot of empty condos at P10k-P12K all day long.

First of all, prices and terms are getting easier to afford at some places because they are tired of the buildings being empty and falling down without being rented, so the new ones can be had fairly reasonably now http://www.cebuclassifieds.com/detail.php?id=872950

Here's one for rent at 16K http://www.cebuclassifieds.com/detail.php?id=872654

10k http://www.cebuclassifieds.com/detail.php?id=871071

12k http://www.cebuclassifieds.com/detail.php?id=866059

 

There are better deals out there (larger units) that are not advertised online.

I have a friend who bought a 2 bedroom condo in a building with 10 units total.

He has lived there for 6 years and 2 other units have been sold, the other 7 are now being offered at P10,000 per month because nobody has bought them and they are going into disrepair due to sitting empty for so many years with no maintenance done on them.

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The problem with most new Condos in Cebu is the rental price, they want 50,000 pesos for a 70m² condo with gym and pool facilities and overcharged electricity rates.

 

I know people who would be ready to rent a place like that any time for 35,000 pesos + monthly fees. Now what most Condo owners are seeing is empty units, theres just not many people willing to rent at this price.

 

If they would be renting out their condos at 35,000 pesos instead of trying to go for 50,000 pesos they would be getting their investment back in 10 years, which is a good deal but that's not what they are trying to do, they are trying to get it back 7 years which results in empty units and no return on investment at all

 

This is what is truly baffling about filipino logic. Many owners stubbornly stick to asking rent even if it means keeping the unit empty and receiving zero rent. This happens not only for a month or two but for years sometimes. So instead of getting 80% or 90% of desired rent, the owner keeps the unit empty and receives no rent. Most filipino owners seem to stick to this type of behavior and this seems to be the main reason why rental rate in Philippines is totally out of whack compared to other neighboring countries.

 

seaman

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Headshot

There is not...and probably never will be...a big "bubble" that will burst and destroy the entire real estate market here. Instead of thinking of the market here as a giant bubble, picture a bubble bath where are hundreds of thousands of tiny bubbles...each of which could eventually burst. When they burst, there is no noise, and very little effect on their neighbors. Why? It is because of what I talked about before with the two types of sellers. Whenever an owner moves from "wanting" to sell to "needing" to sell, then you can expect one of the tiny bubbles to burst. At that point, the seller will take less for the property...because they need money NOW. However, most owners, and certainly the bankers, see real estate as a long-term asset...not a short-term liability. You will never see them just wanting to get a property off their books at any price. It is the oriental viewpoint that was already discussed here. Because of it, you will never see a shift in investor psychology...and therefore you will never see a collapse of the entire market...POP!

 

Anybody who holds off buying property because they think the whole real estate market will eventually burst and prices will collapse just doesn't understand the psychology of the people here. Don't buy stupid (from the first group that "wants" to sell and can afford to wait), but certainly buy smart (from the second group that "needs" to sell and can't wait). BTW, I would guess that most Westerners who buy here will eventually end up in group two, so if you bought your property from group one, you will take it in the shorts when you "need" to sell. If you bought from group two, you may break even when you sell. Only if you sell while you are still in group one do you stand any chance of making a profit, and there is a much higher chance of making a profit if you bought the property from a group two seller and sold the property as a group one seller. THAT is how the real estate market works here. If you refuse to believe that, it will be at your own peril. You need to remember, too, that all major developers are in group one. If you buy into a large development, it is extremely unlikely that you will ever get your money back out again. Developers, banks and rich people (those with large reserves) are all in group one. Never forget that.

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