Emerging real estate trends in Cebu

First of 2 parts

If you are thinking of buying property in Cebu, either as a first-time buyer or as a repeat investor, knowing current trends is invaluable in making a sound decision.

Traditionally, buyers of properties have been Overseas Filipino Workers (OFW), Filipinos with foreign spouses, local businessmen and a small percentage of foreigners. Lately, there’s been a spike in sales due to foreign retirees as the population in developed countries age and their pensions shrink following several world financial crises.

Mactan Newtown of Megaworld announced that it has sold-out four condominium buildings. About 90 percent of the buyers are Japanese retirees and investors. Other developers have started to show a similar increase in sales from Japanese and retirees of other nationalities.

The boost can be attributed to favorable reports in various websites and publications that describe the Philippines an an ideal place to retire or invest.

Yahoo Finance and Huffington Post, to name a few, cite Cebu in particular as one of the top retirement destinations in the world. A national daily quoted Japanese officials as naming the Philippines as an investment haven.

Taking advantage of the surge in foreign interest, some developers have capitalized on this by marketing Cebu properties in Japan and other countries which have prospective retirees. Some developers plan to do sales promotions in Europe. They either send sales agents abroad or partner with sellers in those countries. Cebu real estate is truly going global.

LOCAL MARKET

In the local market, competition for sales is also heating up. Based on the 2010 census (the latest approved by the government) , there are 4.16 million people living in Cebu province.

The most populous areas are Cebu City, Mandaue City and Lapu-Lapu City. Talisay City has the fastest growing population. With a growth rate of 1.77 percent in the previous decade, Cebu certainly has a big domestic market based on population alone.

Developers and sellers have also reached out to the Visayas and Mindanao— provinces like Southern Leyte, Samar, Bohol, and even cities of Pagadian, Davao, and Zamboanga—for new markets. They hold activities to target local businessmen, families of OFWs and those whose children plan to study in Cebu.

Whole buildings are getting sold out years before the projected delivery dates such as Grand Residences, Avida, Baseline, and Midori Residences. Ready for Occupancy (RFO) units are still rare even as several projects have already been delivered.

However, only a few developers are building for the affordable or economical housing market even if these units sell quickly, which was the case a few years ago. As expected, cheaper houses result in lower projected returns.

Projects, big players

The past few years saw a surge of real estate projects in Cebu. There are about 150 ongoing real estate projects in Metro Cebu, including condominiums and house and lots. Some are large developments of several hectares or clusters of high-rise buildings. Some are pocket developments with a handful of units. Based on data from the Housing and Land Use Regulatory Board (HLURB), there are around 200 HLURB-accredited developers from Cebu alone.

Big players from Metro Manila have set up shop in Cebu with early entrants coming in more than a decade ago. Ultra-high end property developers like Megaworld, Ayala Properties, SM Properties, and Rockwell have started development or have closed deals to start projects soon. Filinvest Land is also positioning itself to capture this market with an ultra-high-end cluster to be added in Citta di Mare in the South Road Properties (SRP) in addition to existing projects there.

With competition getting tighter, real estate giants have also been designing grander concepts trying to outdo each other in size or sheer attractiveness of their lifestyle offerings. Ultra-high end units that cost P14 million to P30 million are incorporated in their projects.

STUDIOS SELL QUICKLY

Studio condominium units in Cebu City are still available below P2 million or as low as P1.3 million, but these are quickly soldout and are usually located in less than ideal neighborhoods. In one exception, a developer with affordable units in a good location, was able to sell around 250 units in July. The demand for units in that price range is high.

Studio units of 22 square meters in prime locations usually sell for P1.7 million to P2.2 million. A house and lot below P2 million would be extremely difficult to find in Cebu City. These are more readily available in Mactan, Talisay City or towns of Consolacion, Liloan, Cordova, and Minglanilla.

Decent townhouses in Cebu City would be in the P3 million to P3.5 million price range, and even these are hard to find.

Perhaps in a move to increase dominance, a few well-established developers are moving from the midrange and high-end market to the lower market where demand is still high and expected to remain so for several years even if other markets start to taper off. Despite lower profits per unit in the lower market, this should keep developers in the game for a long time.

WHAT BUYERS SHOULD WATCH FOR

As more developers deliver their projects, their track record and reputation in the Cebuano market is being established.

Customers should consider the most important aspects of delivery.

These are delivery dates versus what developers promise; quality of the units delivered; undisclosed or poorly-explained charges upon turnover; documentation, which includes delivery of the title; purported returns versus actual returns on their investments; and quality of support services (water and sewage, after sales, property management), and many more.

Some developers have fared well, while others have been given a failing grade by many of their buyers. Those who fell short of their promises are feeling the consequence in a slowdown of sales in 2013.

In some cases, it was easier for sellers to sell unfinished projects and tickle the imagination of buyers than to sell units which could actually be inspected. Ten years ago, incompetence would not have made a dent in the sales of big players. But with the entry of more companies, the smallest problems already create a big headache for developers.

Most moneyed families in Cebu have real estate projects in one form or the other. Many had no prior experience in conceptualizing, constructing, selling, or even pricing these projects, but learned quite a lot from their experiences in the past few years.

Some are doing quite well and have started to make a name for themselves. The project concepts and size of the developments surprisingly rival that of traditional big players from Manila.

The year 2016 will be very interesting. Many of the projects pre-selling today have a promised delivery date on 2016 and beyond. The question is whether the developers, especially the new ones, will live up to their promise.

Another question is how the property management and rental market in Cebu will look by then.