10 minute read
WHY CEBU?
THE FUTURE OF PROPERTY INVESTMENT
Having returned to Cebu after years of living abroad, writer Allain Fonte takes a look at Cebu’s real estate landscape and asks, is now a good time to invest? Discussions with industry insiders and a hard look at the facts show why Cebu might really be the next big economic hub of Asia. Or is it?
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The Cebu I.T. Park is home to majority of the city’s information technology services
History, beaches, adventure trails, nature trips, economic zones, business centers, IT parks, the metropolitan lifestyle—name it all, Cebu has it. The hailed “Queen City of the South” has developed robustly over the past decade that it became the newest destination for property investors. But will Cebu be the next economic hub of Asia? Can Cebu really make it?
After over seven years of residing overseas, I was surprised to see the rising skyscrapers here and there when I came home. The view of the mainland Cebu, at night, is reminiscent of Hong Kong. It used to be easy to point out Marco Polo Hotel, as one of Cebu’s landmarks, standing so regal on Nivel Hills. Yet now, it can barely be seen. There used to be more green than concrete at the IT Park. From across Mactan Island, the Cebu International Convention Center once appeared as a vision of success; yet now, the dilapidated edifice is nowhere to be found, hidden behind new towering pieces of modern architecture. Which begs the question—who will fill up these buildings? With all the new structures springing up everywhere, how is investing like in Cebu? Are we going to be the next Hong Kong, or the next China?
Economist and business analyst Gillem Tulloch, of the Global Research Center for Comparative Policy Studies, claims that China has about 64 million condominium apartments that are uninhabited. Tulloch explains that this is the effort of the Chinese government to keep its economy booming, and with the estimated number of people, these apartment units will surely sell. However, “even though there are plenty of people who would love to move in, the properties are priced out of the market,” Tulloch further explained. This is probably one of the greatest fears of a balikbayan. Are the prices in Cebu real estate out of the market? Are they putting their money in the right investment?
Cebu Landmasters Inc.’s showroom of their upscale project, 38 Park Avenue.
“Cebu has always been very enterprising, and continues to establish itself as the center of trade and commerce in the South. On top of this, there is a very strong tourism market that further fuels the economic expansion,” Jose Franco Soberano, Cebu Landmaster’s Chief Operating Officer, says. “We see Mandaue urbanizing further and there are still opportunities to develop townships or mixed-use projects as Mandaue offers the best accessibility. It would also be good to position in Mactan, Talisay and Minglanilla.” The Cebu-based real estate company had a successful IPO offering last year and is currently developing several projects nationwide including the 22-hectare Davao City Golf Club in the heart of Matina transforming it into a business district.
“It is inspired by the highly successful Bonifacio Global City project in Taguig, and it will feature offices, residential condos, malls, hotels, civic uses, a hospital, and very generous parks and open spaces. This is a dream project for us because it has the greatest potential to contribute to the growth of the city, generate significant employment opportunities, and create improved infrastructure access and connectivity. This will be the first of many townships in the pipeline.”
Lucky Atari, property investment specialist
Lucky Atari, a property investment specialist for over ten years, assures that Cebu’s property investments are nowhere close to China’s issues of property investments. Lucky explained that, if there are property investment issues in Cebu, that would be the lack of space, and not on too much spaces. He has worked with clients from local to foreign investors, and has also assisted them when they want to lease their properties. He continues that, whether leasing their properties for long-term stay or turning them into an AirBnB, the investors in Cebu are more than satisfied.
“In fact, most of them wanted to acquire more properties, because they can see that the demand for spaces is rising,” he adds.
As a young entrepreneur, Mikhaela Caram has invested in and is managing four condominium properties, having turned them all into AirBnB units. According to her, business is doing better than expected. With the influx of tourists and English language students from overseas, she hardly gets an empty unit in a month. The AirBnB business is not only covering her mortgage for the four apartment units, it has also given her additional income.
The Philippine Department of Tourism records show that there is an average of 800,000 tourists that enter Cebu every year. 53% of these tourists prefer an AirBnB accommodation because they find it more convenient and more economical.
“AirBnB’s are more convenient because the locations are accessible, and they have the amenities of a hotel at a much lower price,” Kohei Sudo, a Japanese student studying English in Cebu, says. Kohei further explains that in their school, about 73 students are renting AirBnB units for the duration of their three-month study.
The universities and schools in Cebu are also getting competitive with the standards of international education. In fact, Times Higher Education Review (2017) mentioned Cebu Institute of Medicine as one of the best medical schools in Asia. Moreover, three of the big medical schools in Cebu are accredited in the United States Medical Board and in the Association of Healthcare Professionals in Commonwealth Countries.
Good quality and reasonably priced education in Cebu has attracted a number of international students. Pradeep Khan is a junior medical student at SWU-PHINMA medical school, and is from India. He has been leasing a condominium unit in uptown Cebu with three of his friends for P18,500 per month, exclusive of electricity bills, water bills, and the building amenity dues. They have been renting the unit for three years. And when he graduates, according to Pradeep, the unit is already reserved for his cousins who are also coming to Cebu to pursue medical studies.
The Bureau of Immigration in Cebu has already listed an estimate of 3,870 foreign nationals on student visas. In the testimony of Lucky Atari, 80% to 90% of these foreign students are leasing condominium units for long-term stays.
Yet, the international students and tourists are believed to be only the tip of the iceberg for the real estate market. In a coffee conversation with property investment experts, my questions are better answered and my interest in real estate deepens. David O’Neil is the President of the t1 from the KMC group, a company that focuses on project management and construction management for properties. He assured me that Cebu is going to grow more when it comes to property investments.
David has been handling projects in Cebu because many land owners are consulting with his firm for the development of their properties. Most of these properties are ideal for building structures that are for corporate leasing because of their perfect locations and accessibility.
“Even with the numerous projects that their firm handles, the supply for corporate spaces is still not enough,” he says. The demand for service spaces grows higher every year. Compared to last year’s projection, the demand has increased by 4% from last year’s; thus Cebu needs an estimate of more than 3,500 office spaces for 2019.
Svetlana Osmeña, general manager of KMC Solutions
Along with the increasing demands for corporate spaces, there is an increase in demand for apartment units. Corporate spaces draw in international and local businesses and create work employment. The employees prefer to live in areas closer to their workplaces to avoid the hassles of commuting and traffic jams. Expats also prefer to live in Cebu, within the proximity of their offices, to be able to personally manage their businesses, instead of remotely managing them.
The growth in Cebu is not spur of the moment. A careful projection has been made that Cebu will surely be the nest economic hub of Asia.
“In my years of property consulting and assisting investors, this is the perfect time to invest in Cebu because in the coming years, Cebu will definitely be more aggressive with its developments,” Lana iterates.
But why Cebu? Both Lana and David explain that Cebu is not only strategically located in the center of the Philippines, but also in Asia.
Lana specifically addresses the question with nine points. First, with its international seaports and airport, Cebu is more accessible globally compared to other cities in the Philippines. It is easier to start a business in Cebu because of its location. Second, Cebu is as developed as Metro Manila, but with lesser traffic and is less populated. Third, the literacy rate in Cebu is 92%; therefore the pool of talents to hire in Cebu is so wide and available. Fourth, when it comes to cheaper labor, Cebu offers a better deal compared to Singapore and Kuala Lumpur. Fifth, the language barrier is almost never an issue in Cebu because the Cebuanos are very versatile in language. Sixth, Cebu does not only offer economic progress to investors, but the city also provides leisure and resort experiences to the investors, and with adventure activities from the hills to the shores. Seventh, Cebu is geographically located in the region that is least visited by typhoons and earthquakes. Eighth, Cebu is already a home to many economic zones; thus the availability and accessibility of materials is a significant factor for considering Cebu for investment property. Lastly, the markets in Cebu are meticulous when it comes to investment, and they are very much willing to invest if they know that they get their money’s worth.
David O'Neil, President of the KMC Group
“What is good about the condo market is that there are 3 major segments: high-end, mid-market and economic. There is actually a good option and affordability level per segment. At present in Cebu, high-end condos are priced at P120,000/sqm to as high as P200,000/ sqm or more. Mid-market condos will range from P80,000/sqm to P120,000/ sqm while economic condos will range from P60,000 to P80,000/sqm,” Franco Soberano adds. “Based on recent market research, Cebu produces an average of 4,000 condo units per year while Metro Manila produces almost 30,000 units/year. This really means that the Cebu market is not saturated, and Cebu generates better rental yields versus equivalent condos in Manila. Our rental yields in Cebu range from 8 to 12% (or P800 to P1,000/sqm in rental rate on the average). This means that a 20sqm unit can fetch rental rates of P16,000 to P20,000 pesos. Of course, these rates will also vary depending on the location and market segment if high-end, mid-market or economic.”
Crystal Chloe Ong-Chua, Innoland internal Vice President for sales and marketing
Land values have also seen a sharp rise in recent months. Commercial properties in highly coveted areas near IT Park, Cebu Business Park and reclamation areas in Cebu and Mandaue, are scant. Prices of up to P140,000/sqm are the norm, while residential lots near the central business areas can go up to P40,000/sqm if you can find one that’s just a lot. The biggest landowner are still the cities of Cebu and Mandaue, and since they are in the business of governing, not real estate, properties owned by the local government units are sold in chunks of 10 hectares, making them prohibitive except for deep pocket developers.
Subdivisions around the periphery like Maria Luisa Estate Park and Northtown Homes can fetch P20,000/sqm. Finished homes, however, are very subjective. Some houses in these gated communities have sold at P150 million, while smaller homes can be had for P20million. This is very market dictated, and the taste and requirements of buyers are the driving force of prices.
“Purchasing a property is a longterm investment,” Crystal Chloe Ong- Chua, internal Vice President for sales and marketing of Innoland, states. She echoes Lana’s sentiments on the Cebu market’s meticulous attitude towards investment. “Don’t commit to something that is beyond your financial capacity. Figure out your fund sources first before jumping into a real estate purchase.”
An illustrated map of Cebu's prime areas for property investment
There’s a conscious move among real estate developers towards going green. In ten to fifteen years’ time, building concepts and technology will incorporate nature into its designs such as natural lighting, air flow, and open spaces. Overall, the real estate industry will continue to grow tremendously within the next few years for as long as government policies, tax reform programs, and infrastructure development remain favorable.
With all the assurances, and with the bigger and better picture, this cements the idea that this once-quiet island is actually an economic dragon, and has now fully awakened to greater feats. No time to waste—the time to invest is now!
A Greener, Cleaner Cebu
The unstoppable growth of Cebu’s economy caused the over pouring of properties for investments. With skyscrapers shooting out here and there, Cebu’s clean and healthy environment are at risk—hence why many properties are opting to go green. Here’s how:
1. Creating rooftop gardens, which not only help in contributing to cleaner air, but also helps improve the insulation of the buildings
2. Using premium construction materials to build environmental-friendly structure
3. Maximizing the front yards of their buildings to create a greener façade.
Why Do Young Investors Prefer Living in Condos?
1. Many Cebuanos need to live close to their workplaces, and condominium buildings are situated in the heart of the city’s economic hubs.
2. Condos offer breathtaking city views, and some are even designed to offer resort living.
3. Many of the condominium buildings offer excellent management services like back up power supply in case of electrical shortage, or full water supply.
4. The floor areas and designs of these apartments are so varied that it can cater to the requirements of any investor; from studio units to three-bedroom units.
5. The prices of the apartments are either similar or even cheaper than the house-andlot properties in the gated subdivisions; with condominium units priced from 4,000 pesos per square meter to 220,000 pesos per square meter.
6. It’s asier and economically practical to manage or maintain a condominium apartment building.
