//Oz Buzz #20 – Spotlight on Manila Real Estate – Foreign Buyer?

Oz Buzz #20 – Spotlight on Manila Real Estate – Foreign Buyer?

Oz Buzz

“Enthusiasm is the mother of effort, and without it nothing great was ever achieved.”

–Ralph Waldo Emerson

Today’s Issue:

  • VANCOUVER – THE NUMBERS, THE NUMBERS (EARLY)
  • INFLATION DEBATED
  • QUESTIONS, QUESTIONS
  • SPOTLIGHT ON MANILA REAL ESTATE – FOREIGN BUYER?
  • HOT PROPERTY – BUY A 2-LEVEL TOWNHOUSE FOR $95,000
  • PODCASTS: FOCUS ON PRE-SALES – PLUS – VANCOUVER’S BEGINNINGS
  • OZZIE’S OPINIONS ON EVERYTHING
  • BOOK RECOMMENDATION OF THE WEEK

PODCASTS

Oz Buzz Podcast #18: John Gilmour, Vice President of Magusta Development

Ozbuzz guest this week is John Gilmour, Vice President of Magusta Development www.magusta.com In a wide ranging interview John covers his area of expertise, his view of the construction of pre-sale condos. In fact, John has been working in the development industry since 1989 building affordably priced multi-family homes. Magusta has built over 1800 units of mostly low rise and high rise condominiums in Vancouver, Richmond, Pitt Meadows, Coquitlam and Calgary. His shares his thoughts on what’s involved in site acquisition, project feasibility, proformas, project design, municipal approvals, marketing, warranty, customer service, advertising and pricing etc. John works with land owners, realtors, architects, designers, lenders, insurers, consultants, lawyers, builders, trades, property managers, strata corporations, utilities and municipalities. On the personal side, John has been involved in the community for over 35 years. In 1985 he was involved in was the Vancouver Junior Board of Trade where he rose to the position of president. He also served with the Lynn Valley Community Association, North Vancouver Museum and Archives Society. He is president there doing fund-raising and awareness raising and is involved in building the new Museum of North Vancouver in lower Lonsdale. John lives in Lynn Valley, is married and has two adult children.

SPOTLIGHT: THE THRILLA IN MANILA?

That famous boxing match (Ali vs Frazer) took place here. Now the crazy traffic makes you feel in a boxing match – with cars. Everybody zooms in and out of traffic virtually in all directions, pedestrians weave in between … and … it works. My family – now on a journey of discovery (all 13 of us) swore never to complain about Vancouver traffic again.

Well, Philippine President Duterte’s ambitious US$180 billion “Build, Build, Build” program is designed to modernize the country’s infrastructure by rolling out 75 flagship projects, including 6 airports, 9 railways, 3 bus rapid transits, 32 roads and bridges, 4 seaports, 4 energy facilities, 10 water resource projects and irrigation systems, and 5 flood control facilities, among others.

That strong government spending and the focus on anti corruption maybe a reason for a very strong economy (6.7% in 2017). There is a reviving agriculture, increasing exports and booming tourism: The total number of foreign tourist arrivals surged 11% to 6.6 million.  Unemployment at 5.5%, (IMF), growing remittances from overseas Filipino workers (12 million).

The Philippines is now in its 7th year of a house price boomThere is a rapid shift from offline real estate purchase to online portals. A surging IT-BPO sector leading to a huge demand for office spaces and rapid employment generation is escalating the demand for all the sectors including residential, commercial, retail and hotel.

In Manila and Makati (like downtown Vancouver), property prices have risen by almost 60% from Q1 2011 to Q4 2017. In 2018 the supply of new condominiums to Metro Manila reached 27,200 units, up from a record 10,200 units in 2017. In 2017, the take-up of pre-sold condominium units throughout Metro Manila, including fringe locations, rose by 52,600 units up 24% from a year earlier and the highest level ever in the capital, according to Colliers International.

The nationwide residential real estate price index rose by 5.7% but metro Manila’s increases are far higher.

The average price of a luxury 3-bedroom condominium unit in Makati central business district (CBD) (like Vancouver downtown) soared by 10.46% during 2018 to PHP199,050 (Can $5,140 per sq. meter). A sq. meter has 10.77 sq. ft., approx. $500 a sq. ft. However, that is metro Manila (12.9 million people). As close as an hour’s drive you can buy an up and down townhouse for as low as $97,000 (See Hot Property). Can FOREIGNERS buy real estate? If so, how?

  1. Foreigners cannot own land but can own condominium units or apartments in high-rise buildings as long as the foreign proportion does not exceed 40%.
  1. They can also buy a house but not the land on which it is built. Leases on land up to 50 years, renewable for another 25 years, are available.

Taxes are moderate for foreigners engaged in trade or business. Two kinds of taxes: For taxation purposes, properties are treated as Capital assets a) if it is not used in trade or business, and properties are treated as b) ordinary assets if used in trade or business, such as rental property.

The 6% Capital Gains Tax applies only on properties treated as capital assets and not on properties treated as ordinary assets.

Rental Income: Non-resident foreigners who are engaged in trade or business are taxed at progressive rates (5% to 32%) on their net income.

Rents above PHP12,800 (US$26) per month are also liable to VAT at 12% of gross rent.

Inheritance: Non-resident foreigners pay estate tax only on property located in the Philippines at rates from 5% to 20%.

It takes about 32 days to go through the nine procedures to register a property in the Philippines. Pre-selling, or the selling of units during construction, is the fashion nowadays.

Major Point 1: I met some German investors who claim that their average rental income net return after taxes is 9%. But remember, the Philippines are still two countries in one … rich and poor. But is a fabulous island nation. All English speaking, very religious (mostly catholic). All road signs, newspapers etc. etc. are in English. Making a living and owning here is easy. Fabulous beaches, incredible vistas and a wonderful upbeat population. Having been 400 years under the Spaniards, there is still a lot of Spanish influence and being 50 years under the Americans – a lot of the institutions are similar.

Major Point 2: In the last 4 years we travelled all over Europe, Australia, etc. We found and reported to you that real estate assets in ALL the major cities, Europe, North America and Asia, in the world were rising. The Philippines is no different.

WHAT IS INFLATION?

Soo much confusion. If inflation is good for real-estate and governments tell us that there is only 1.8 % inflation … what does that mean to my house price? Well, yes … there is headline inflation, core inflation, stagflation, hyperinflation, cost-push inflation, demand-pull inflation … argh.

We at Jurock’s Real Estate Insider and Oz Buzz have always argued (taking the monetarist position) that inflation is a consequence of an expanding money supply. We have quoted Milton Friedman countless times. He said: “inflation is always and everywhere a monetary phenomenon.” (According to this view, the principal factor underlying inflation has little to do with things like labor, materials costs or consumer demand. Instead, it is all about the supply of money.)

Major Point: We have agreed with him for 25 years. That’s why we believe that increases in hard assets are directly related to the money supply (we are in the ‘mother of all money creation’ -out of thin air- of all time) and that means it eventually is always good for real estate. Note hard assets! We also have noted that ‘whatever the inflation rate name is quoted; it is cost inflation that you feel the most!  Things you buy go much higher and need to live go up much higher than the CPI. This chart says it all:

Unfortunately, I cannot trace the creator of this chart. If you know who it is, please let me know to give due credit.

Major Point: As long as we keep creating money (now $9 trillion in the US), it will eventually settle in hard assets – i.e., real estate.

HOT PROPERTY

1. Vancouver: The cheapest 2 bedroom, 2 bathroom, and 2 parking stalls in UBC. Also comes with a storage locker. 974 sf. Price: $780,000– some sold for much higher.

2. One hour from ManilaSan Carlos, (Tolentino), Binangonan, Rizal, Philipines. Close to 900 sq. foot 2 level townhouse, 3 brms 2 toilet bath. Brand-new. Solar Powered Smart Homes are the ‘most talented and hardworking houses’ in the country today. They generate electricity, collect water, deflect heat, maximize air circulation, protect its occupants from the elements and disasters, and produce food crops and herbs. Furthermore, they are also elegantly designed, finely crafted, extremely durable and are ready for occupancy. Could be a great B&B. Furnished. Price: Php 3,727,500 (Cdn $95,435.00).

REAL ESTATE

Our Government wanted prices down.

They won. Vancouver and suburb prices are down between 13% and 27%.

What they did not want was fewer sales (less tax rev).

They lost! Sales are down between 33% and 38%. Listings are up between 38% and 101%

THE NUMBERS, THE NUMBERS – VANCOUVER (EARLY)

SUMMARY PRICES 2019 2018 %
Vancouver SF 1,472,600 1,736,300 -15%
West Side SF 2,922,800 4,014,400 -27% (Oct/17- 4,466,700)
West Van SF 2,409,100 3,201,700 -25% (Dec/17- 4,009,000)
Vancouver East SF 1,375,200 1,705,000 -20%
Burnaby SF 1,557,000 1,791,000 -13%
Victoria SF 867,400 868,000 +01%
SUMMARY SALES
Vancouver All 1,493 2,211 -33%
Vancouver SF 453 626 -28%
Vancouver Condo 760 1,184 -36%
Victoria Sales 421 545 -23%
SUMMARY LISTINGS
Vancouver 11,951 8,651 +38%
Vancouver Det 5,610 5,376 +06%
Vancouver Condo 4,469 2,215 +101%
Victoria 2,131 1,545 +38%
VANCOUVER FEB 2019 FEB 2018 %
All Sales 1,493 2,211 -33%
Avg Price 956,000 1,061,000 -10%
Active Listings 11,951 8,651 +38%
ALL DETACHED
Sales 453 626 -28%
Avg Price SF 1,472,600 1,736,300 -15%
Active Listings SF 5,610 5,276 +06%
ALL CONDO
Sales 760 1,184 -36%
Avg Price Condo 678,000 746,200 -09%
Active Listings Condo 4,469 2,215 +101%
VICTORIA 2019 2018 %
Sales 421 545 -23%
Price SF 876,400 868,000 +01%
Price Condo 458,600 434,300 +05%
Active Listings 2,131 1,545 +38%

Major Point 1: Sales are still way down across the board. Active listings are way up! Vancouver condo listings are up 101%. Victoria countertrends in prices – actually up. Again … make offers, lots of them. Only buy the absolute deal of a lifetime. And yes – again: Cash is not trash. NOTE: From April on our numbers will look better… But only because we measure ourselves against the already falling market … so this year will look better … yet be down more.

Major Point 2: Again, this downturn will continue… Markets become the stories people tell about them … and they are all negative now. As a buyer: Rejoice … realtors have time, multiple offers are dead, and owners look at offers! As the owner: Forget the downturn! 67% of all houses are selling! Act to get your sale into the 67%! How? ‘Look at 21 ways to make your home sell faster’Free at www.jurock.com

QUESTIONS, QUESTIONS

Q: Looks like your interest rate forecast is going to be wrong. Governments around the world are likely not raising rates. Things are better than you thought?
A: 
You are possibly right, although we believe that rate increases remain the goal of ALL central banks. Not rising rates at this time is surprising. Actually, quite worrisome. The ‘about face’ of the Fed in the US, Britain and now Europe is much more scary than higher rates would be. Higher rates bring us back to normalcy. Currently, the economy in the US is spectacular. Unemployment stands at record low, employment high, US dollar high, etc. All signs are that rates should be raised to get that cushion governments want and need for the time of a downturn. This sharp reversal after much fanfare means only one thing: Governments know something that you and I do not. They fear something. That scares me also. (Revisit last issue of Oz Buzz.)

Q: Your discussion on programmed electronic trading blew my mind. I have done a little research and it seems to be far more prevalent than even you reported. For now, I am staying in the stick market, but I will watch it closely.
A: Watching your stocks closely is always good advice. But … pleeeaaase … remember, I am not a stock market analyst. I care about economy, stocks and bonds only in as much that action there could have an impact on real estate values.

Q: I would like to display some recreational real estate products at Landrush on May 4th.  
A: Anything to do with real estate in any form is welcome. Attendees come because they are interested in ‘all things real estate’ and the future. At Landrush they have been getting both since 1993. (We expect over 600 attendees.) For details on sponsorship and booth space write to max@jurock.com.

Q: Why do you need my email? I can just go to your Ozbuzz.ca site and read issues there.
A: You can yes … but not the latest issues. We offer our Ozbuzz free, but like to know how many people like it. We only know that from having subscribers give us their email.

THIS WEEK’S BOOK

‘Contagious’. What makes things popular? By Jonah Berger. Word of mouth is 10 times as effective as traditional advertising, but why do people talk about and share certain things rather than others? Why do some products catch on, some ideas diffuse, and some online content go viral? Berger talks about the secret science behind word-of-mouth and social transmission. I like his six basic principles to become contagious.

AUDIOBOOK

Too busy to read? Want to listen to Ozzie’s book for free? Sign-up for a free trial at Audible by clicking HERE and get Real Estate Action 2.0 FREE!

WANT TO PARTICIPATE?

Go to www.realestatetalks.com – Some 2,500 members (47,009 posts) talk real estate. Ozzie created this bulletin board in 1998!
If you are in a real estate related industry of any sort (realtor, appraiser, lawyer, home inspector, etc.) list yourself in Ozzie’s free British Columbia real estate directory at www.bcred.ca.

OZZIE’S YOUTUBE CHANNEL

You can watch all my videos and most of my podcasts on my YouTube channel at https://www.youtube.com/jurockvideo

RADIO

On air with Michael Campbell on fabulous MONEYTALKS every Saturdaysometime between 8:30AM – 10 AM. The Hot Property that we discuss there, is available by subscribing to the Oz Buzz Dispatch at Jurock.com

HAVE A QUESTION OR COMMENT?

You can reach me at info@ozbuzz.ca with all of your questions, comments and concerns regarding the Oz Buzz publication.

LIVE LIFE LARGE

Success is internal
The real difference is inside you
You, you, you
In fact, the difference IS you
The price of success is belief

The magic that makes things better is inside me
The magic is in my believing
The magic is in my daring
The magic is in my trying
The magic is in persisting
The magic is in my thinking
The magic is in my caring
The magic is in me

I will grow into my future best!

Look up all the “Grow into your future best” cards at: www.commitperformmeasure.com

Go to LandrushCanada.com … Check it out…!
Write to Max@jurock.comm for a sponsorship package…

Oz Buzz Podcast

Disclaimer

Please note that any response to any email or any invitation to any meeting is accepted on the understanding that “Jurock Real Estate Insider (JREI)” or the “Jurock Case Real Estate Action Group (JCREAG)” as the case may be, are not responsible for any result or results of any action or actions taken in reliance upon any information contained in this posting or meeting, nor for any errors contained therein or presented thereat or omissions in relation thereto. It is further understood that the said JREI and JCREAG, as the case may be, do not, pursuant to this posting, purport to render legal, accounting, tax, financial, planning or other professional advice. The said JREI and JCREAG may or may not own properties discussed at meetings or receive or not receive referral fees at any meeting you may attend as a result of this posting or invitation. The said JREI and JCREAG, as the case may be, hereby disclaim all and any, liability to any person, whether a purchaser of any offering, a reader of any offering, or, otherwise, arising in respect of this postings and of the consequences of anything done or purported to be done by any such person in reliance, whether whole or partial, upon the whole or any part of the contents of this postings. If you respond to any posting JREI and JCREAG fully expect that you get independent legal/tax/investment/mortgage advice as the case may be.

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Product Special

  • Recording of the Land Rush Real Estate 2019 conference, May 4, 2019 in Vancouver, BC. Complete audio on CD or NEW THIS YEAR we offer it on a USB stick. Pre-order now! Ships two weeks after the conference. For more info see LandRushCanada.com
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By |2019-03-21T20:27:11-07:00March 21st, 2019|Oz Buzz|0 Comments

About the Author:

Ozzie helps members build an action plan toward real estate success with his Real Estate Action Group, arming investors with the best information and insights possible with his Jurock Real Estate Insider. More info OzzieJurock.com

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