Sometimes it is better to be wrong…

Following the recent headlines for the past two weeks about the mother of all bailouts, some prophets (of doom) have started to take advantage of the opportunity again to ride on the issue. Then what? Hoping that people will believe them, stay on the sidelines, observe, stop investing, keep their money and wait and see. Then what? Money stops circulating in the system then they go out and proudly say to the world…See! I told you so! These self-fulfilling prophecies feed the vicious cycle that often leads to the people’s negative reaction if not outright panic. I am talking about real estate.

Yes, after the property crash in the US and the closure of some of the biggest financial institutions in the US, some “experts” have started to predict that we should prepare for possible gloomy days ahead. Well, being ready for the rainy days is something that we should really practice, but expecting bad times to come is another story. Come to think of it, the subprime issue started already middle of last year and if you will just look around, the Philippine real estate is not just surviving; it is very much alive and active. Even when the prices of construction materials started soaring since the second quarter of this year, several huge projects of different developers have been launched. And how is the take-up? New phases are scheduled to be launched again. Those in the know are aware that even the most ridiculously expensive projects are being sold (take note, pre-sold!) in record time. By the way, did I mention that the payment terms for these pre-sold projects were on either cash or deferred cash basis and not high-financing just like in the US? Actually, the difficulty of access to financing in the Philippines is one of the main reasons why it is very unlikely that a crash similar to the US could happen here. I have been telling this to my clients since one of my first mentors, a Singaporean investor, told me these 19 years ago.

So, is there still a market? Why? Have the people stopped dreaming? Have the population stopped growing? Ask our developers about their buyers’ profile and you will be happy to find out that most are either end-users or first-time investors who intend to just rent it out for the meantime but use it themselves in the future. We still have very few people who can afford to just speculate. While it may be true that some areas may already seem to have an oversupply of condominium units, but then real estate does not only refer to condominiums.

Most developers now know not only what projects to build, where to build, what concepts will sell and what price can be absorbed but also and most importantly where they can sell it. The market now is no longer limited to the Philippines. The world is our market and we now have the ability and the capacity to reach out to these markets either by sending our sales ambassadors to the different countries and doing roadshows, advertising in international media or doing transactions online. We can simply follow the money trail and sell there. Incidentally, you might be interested to know that the biggest OFW market around the world came from the Central Luzon area.

A very big market now and will always be there is in affordable housing. For first-time home buyers, they are not only buying a house, they are fulfilling a dream. There are a lot of incentives now from the government for developers catering to this particular market as there are also several special programs prepared for the buyers. These were actually discussed during the national real-estate convention of NREA (National Real Estate Association) and HUDCC ( Housing and Urban Development Coordinating Council) held on September 24 and 25, 2008.

So, are we seeing a sustained boom? Or are we expecting the bubble to burst soon? I say good times ahead for developers who know how to position well and market their projects properly. I may be wrong. But I’d rather be wrong than be right to predict that it will be a bust.