Buying A Condo In Manila - Advice Needed

[Peter G]

afathertobe - Thanks for the feedback, know what you mean with the condo market, endless choice out there, but think we will take the plunge and buy - fingers crossed what we stop paying to someone else in  rent will offset any loss if we buy, furnish and resell within a couple of years - you never know, we might have a fully furnished condo for sale at a bargain price in a year or two !

 

Cheers   

 

Hi Peter, no I haven't bought (yet). The more I research the condo market in Manila the less in a hurry I am. Lots of people over at Skyscrapercity and other property related forums think there's currently an oversupply in the studio, 1br market in those prime locations, so prices aren't going to appreciate much anymore or might even go down this year. 

 

So might as well wait a bit until the economic situation in East and South East Asia deteriorates a little bit and buy a unit I really like above the range I could currently afford. Unlike you I don't have an immediate need for it, but even then I'd probably rent for a year or two until I really understand what I need and then buy. Every tower in Makati and BGC have plenty of apartments for rent, I'd stay in a similar unit I am looking to buy for 6 months or so and then dedice if I'm still interested in buying.   

 

Chances are I won't buy this year at least. 

[afathertobe]

I think if you can afford the cash price it might be worth it still, just don't expect to make much money from the sale, the demand for so-called pre-owned apartments in Asia is much lower than elsewhere, everyone wants to buy new and there is a constant pipeline of new high-rises for them. 

[scott h]

endless choice out there

 

That should give you a clue Peter as to what the future "might" hold

 

furnish and resell within a couple of years

 

As Aft said, the market is flooded. I have been watching, over the past 5 years or so the asking price of new units really hasn't gone up. I know when we built our home 3 years ago, I asked recently what it would go for on the market, I was just given a square meter price which was that same as when built.

 

Unlike us (in the states) we used our home as an investment and retirement nest egg. Came out pretty good, but the same rules really don't apply here.

 

Hopefully we are wrong, but it never hurts to get as much feedback as possible :cheersty:

[Dave Hounddriver]

I don't recall seeing any Philippine condos built on spec.  They always seem to be built with OPM (other people's money).  This means the developer figures his costs and profits built on a certain number of "presold" units and starts construction when that target is met.

 

It does not make financial sense for the developer to sell the remaining empty units at a discount as he would rather sell you a "presold" unit in his next project.  Its what keeps his business rolling.  He doesn't care how many units are empty or how many units are on the market, only whether or not he can presell enough units to start a new project.

 

So the resale market is gonna suck if you ever want to get back what you paid.  There are always going to be a slew of brand new empty units and there are always going to be bargains for those that want to buy a presold unit.  Its one of the best scams going, in my opinion.

[afathertobe]

That's right. Personally I wouldn't buy if you have such a short time horizon in mind for selling it again - 3 years in your case. I think it's unlikely that many more people will be able to either buy or rent these apartments in the next few years. Just yesterday I read an article about how the average entry level BPO salary is just below the cheapest areas to rent a 1BR apartment in metro Manila (22k vs 23k). Only management-level employees can apparently afford to rent at a third of their salaries. This I think gives you a perspective of how disconnected real estate prices are from the economic reality and purchasing power of the average educated employee, and this won't change any time soon, even if salaries rise by 5-10% each year. So these prices are mostly supported by wealthy investors from abroad who park their money in Manila and are not dependent on rental income - Singapore, Japan, China, in that order according to a real estate Ayala manager I talked to recently. 

 

If there's a credit crunch in these markets they will pull out their money and prices might fall again. As scott said, for the towers I researched prices have hardly changed at all in recent years. In fact the pre-sale price in 2007 and 2008 at my family's current apartment are almost exactly where they are today for pre-owned apartments. Not a bad deal if you could avoid renting for these years after handover, but you still park your money for several years at 0% interest without really seeing a return on investment. 

 

I am certainly no expert on the matter, just started doing a bit of research, just my 2c. 

Edited February 1, 2016 by afathertobe

[Petey]

I would advise you to avoid anything to do with Filinvest. Notoriously slow in addressing issues and processing paperwork.  We have had a nightmare with them in changing from in house finance and going with BDO home owners loan. Our agent was not very helpful in guiding us in buying property. She said that because I'm foreign, they will only accept us with in house finance. We were paying IIRC 16% interest. 

 

After a long slog we managed to move to BDO ( Filinvest were dragging their feet ) and we secured a loan with 6.9%. This is payable over 10 years and a lot more manageable.

 

Took us about 18 months to actually get to where we needed with our payment structure.

 

If i were to give an honest opinion and had my time again, i would rent. There was for us nothing but issues in the transition. Contracts would be made out by the bank and signed by us, sent to Filinvest and there not happy with wording - so all has to start all over again.  But if your adamant to buy, then read everything and double read. Seek a property lawyer, don't pay 100% of the down payment or 100% purchase price in one go, as soon as you do pay up, they may start to slow up on the build.

 

I know for us we have a realty tax and a land tax that has to be paid in December. I'm pretty sure you will have the same. Also check if the amenities are included in the monthly payment - Our clubhouse charges. Also the guards/ security. Remember nothing is free. Question it. Always follow up queries.

 

I know this message is a little scattered but I'm tired. Hope something in this mess you will find of some use.

[ManilaBae]

Hello

I experienced both buying pre-selling condominiums and building my own 3 door townhouses in Manila (delivered in October 2015 and February 2016), and both experiences were replete with learnings, unique challenges and risks. That said, such undertakings helped me understand important considerations when delving in a property play in the Philippines. If I can distil my learnings into 2 key concepts they are:

1. Pursue a project if you'll have a price advantage at the completion of your property project (Economise and profit)

2. ALWAYS have your wits about you and be 10 steps ahead of the people you deal with (Apply sound Risk Management strategies)

 

For number 1, I was fortunate to purchase 2 pre-selling apartments at Resorts World Manila in 2008 and 2009 respectively. At the time, BGC was heavily marketed as the "next big thing". I reduced my options to 3 areas: BGC, Rockwell and Resorts World (RW). In the end I opted for Resorts World for 3 reasons:

a) Location - I wanted a place close to the airports as I cant stand the traffic of Manila. In addition, it sits nicely in the intersection of Makati, the Fort, Mall of Asia and the South Super Highway. In essence Im in the middle and within easy reach of all these places.

b) Price advantage - among the three, RW was the most price competitive. I forecasted that, all things being equal, the price ascension of RW on a % basis was likely to be higher than both.

c) Very easy payment scheme - I took advantage of a 0% DP and a monthly payment of $US200 a month over 5 years + balloon payment upon turnover.

 

I knew the property purchase at RW was a good deal and comfortable that the capital gains was very likely as the economic landscape of the Philippines was likely to persist over the years.  So, I bit the bullet and then rode the price surge.

However, dealing with Megaworld Corporation post sales especially when finalising the paperwork for settlement showed the unprofessionalism of the Megaworld staff and the lack of logical processes involved in making the transactions seamless. For instance, I had already informed a Megaworld representative of the likely delay in transmitting the funds from Australia to the Philippines as real time gross settlement (RTGS) does not happen instantly. I was shocked and angry when I received a letter stating the automatic cessation of my contract + all payments made if I did not comply with their settlement date. It took a lot of effort in coordinating and chasing people in various departments to have my case heard. There was no proper escalation channel and senior managers didn't seem to care much about the buyer's position. For them, the rules must be followed even if they have options to exercise flexibility.

Second issue with Megaworld is the delay in attending to the fixes in the punchlist. I bought in the most premium end of RW, thinking that it would have an architectural finesse similar to a 1st world country. Overall, its decent enough, however, when I inspected the internal space, there were defects that had to be attended to (eg. hollow tile flooring, water leaks, substandard metal railings in the balcony). The process to fix these defects was painful, as the Engr facilitating the punchlist forced me to accept their half-arsed fixes. I stood my ground until I was satisfied with the work, which was a needless waste of my effort and time (see build issue on a BGC condo for another example of quality issue  

Third issue, Megaworld is mum when the project delivery is late. One of my condo's delivery was late by 1 year, and I hadn't received any official word from the company on its delay or even an apology. They, however, compensated me with a brand new air-conditioner.

 

For point 2, I committed to a 3 townhouse development in the northern part of Manila last year. Initially, I was to put up an 18 unit complex, but changed tack because managing these properties could be onerous given my distance. So, of all the contractor that I chose, I opted for a fella who'se a "Baranggay Captain", As such, he has a reputation to protect in the eyes of his constituents. I made sure that I did my due diligence: interviewing his old clients, inspecting past and current development projects, understanding the costing of materials, analysing our contract etc... I also got some input from legal and construction experts who are in my contact list to ensure that everything was above board. Once I was comfortable with the project plan, we signed the contract in front of a local judge and a senior police official in Manila- this ensures that he'd commit to the project and would be unlikely to abscond with my initial 40% down payment. The project came to its conclusion a few days ago, and Im very likely to be selling the townhouses in 1 row, as I can foresee a Filipino clan wanting to live together or an OFW with a few kids wanting to purchase all 3 to be used as a primary home + 2 income yielding investments.

 

Admittedly, my situation is different to yours as you have a child and wife to maintain. Like what others have said, it will be important for you to get a solid legal advice before jumping in and committing to a purchase. Assuming that you can put in legal protections in your contract which will protect your interests, my likely position is to purchase an old home for a bargain price then renovate. That way, by the time its complete, you're likely to have some equity in your home.

 

Regards

 

Mark

Edited February 29, 2016 by Jollygoodfellow
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[afathertobe]

Thanks Mark, that was an excellent write-up. I would be curious to hear a little bit more of things to watch out for when buying condos in Manila. What would you do differently with your MW properties? Did you anticipate costs and your own efforts correctly? Did you get billed for costs at short notice, unable to send money on time? How was the communication with them when overseas? And... many other questions.   

[ManilaBae]

Hi afathertobe,

Glad to be of help. Ill answer your questions in turn:

What would you do differently with your MW properties? I would have purchased a bigger 3 bd apartment as my primary Manila base because a lot of the space in my apartment is eaten by the structural, reinforcing coloumns. So when buying a pre-selling property, make sure you check where these columns are likely to be placed. Second, I wouldve reached out to RW condo purchasers to understand what their lessons learned were. I wouldve trawled the internet for real client feedback and understand what pain points clients experienced/experiencing. That way I have all important information to consider and pull out of an investment if the developer's credibility is not stacking right for me. Third, I would have sat down with someone in operations, preferably in the highest seat possible, so I understand what the procedural steps are when turning over a condo. Furthermore, developing a relationship with someone in command could help at crisis situation especially if you need your case escalated to a key decision maker. Giving small tokens like imported chocolates or shouting them lunch or dinner would help cement the "friendship"

Did you anticipate costs and your own efforts correctly? No I did not anticipate the costs and efforts correctly because I planned some key trips around the time of the turn over of my condo. Much to my dismay with their delays, it cost me money to accommodate myself in Manila in the times that I flew there. Also theres the rental loss of 1 year that I took into account. Luckily, though, the capital gains of the properties more than compensated for the cost overruns, but the annoyance and inconvenienced left a sour taste in my palette.

Did you get billed for costs at short notice, unable to send money on time? No, the payment plan was structured well enough that there was no reason for me to miss a payment. The issue came at the turn over of the condo because of the challenges sending funds abroad from Australia (lots of AML procedures by banks etc... which is monitored by the govt).

How was the communication with them when overseas? Terrible. They were non-responsive or quite difficult to reach. I suspect that they get pounded by a lot of problem emails daily, which explains their non-communicative ways. More disappointingly, their phone lines are seldom answered.

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[afathertobe]

Cheers Mark / ManilaBae, again much appreciated. I am dealing with different authorities, private services firms over email from overseas, and it's just such a hassle dealing with them... makes me weary buying a condo when I'm not always able to travel to the Philippines within a reasonable time frame.

 

If I knew a developer that has a professional PM, is responsive and responsible over email communication, dependable and knowledgeable that would give me a lot more confidence to go ahead. But as you said, I've done some research on different developers online, but many Filipino buyers have such low expectations regarding professional communication and services that it all boils down to "oh yeah they're great, didn't cheat me too much, I actually got my apartment a few months later... " which just isn't enough for me.