Cebu, as the second largest city in the country, has a home shortage forecast in the next five years or so. With an estimated population of 2.3 million, which is basically 41.7 percent of the total population in the Central Visayas region, it is understandable that the demand for homes in the Queen City of the South is increasing every year.
Moreover, the employment rate in Cebu as of 2019 is a whopping 94.6 percent, with 63.4 percent coming from those who are employed in the private sectors and are receiving compensation packages that are above the standard minimum wage, according to the Labor Force Survey and Philippine Statistics Authority. Hence, it is safe to assume that half of the workforce in Cebu can afford the average rent or mortgage of a low-cost-housing property. And with the series of social and natural challenges that the Filipinos from the south are facing, migration and displacement have also impacted the speedy increase of Cebu’s population, adding to the housing demand. Moreover, the younger generation has slowly joined the workforce, and their aggressive consumer behavior patterns are also adding up to the demand.
With the increasing housing demand, is Cebu becoming the next Singapore wherein real estate prices are shooting up the roofs and will be unaffordable by the local wage-and-salary workforce? Or is it going to be the next Bangkok wherein real estate developments are spread to the outlying suburbs to offer a variety of properties with accessible prices? Or the next Jing Jin New City in China that has developed a lot of over-priced properties but turned into a ghost city when more affordable developments become available in the other regions of the country?
Because in property investments, we just do not consider the now, but we also have to carefully assess the future and answer questions that may convince or discourage property investors.
We have identified Cebu’s hotspots as the Cebu Business Park, the IT Park in Lahug, the North Reclamation area in Mandaue City, and the South Reclamation properties.
Franco Soberano of Cebu Landmasters Inc. always exclaims, “Location! Location! Location! It should suit the end user’s needs or the investor’s criteria. It’s always best to invest in properties with the best location for potential appreciation in value.” These hotspots are close to shopping malls, medical centers, access to freeways to the airports and ports, offices, hotels, churches, and schools.
Looking back 10 years earlier, these lands were bare, but now driving around these areas will make you feel like you were on Orchard Road in Singapore, or in Lan Kwai Fong in Hong Kong. Both commercial and residential buildings are springing up like mushrooms. With the rate of development in Cebu, are we not at the point of over-supplying the demand? Is the demand just a momentary phase, or will we still be experiencing this in the next 10 to 20 years?
Soberano says, “While land and real estate valuations all over the country are reaching all time-highs, Cebu will still offer great investment upside. Property values in Cebu Business Park or Cebu IT Park are reaching P300,000 to P400,000 per sqm. versus the P1,000,000 per sqm. valuations in Makati or BGC. In Cebu, there is still great value for both developers and investors. Developers can still enjoy good margins with the right development mix, while investors can still enjoy strong return on investment with healthy rental yields and consistent demand. Cebu is both a regional economic/institutional hub and a tourism hub so real estate investment is able to benefit from both drivers. Both drivers continue to grow.”
As of 2018, the Philippine Department of Tourism records show that there is an average of 800,000 tourists that enter Cebu every year. About 53 percent prefer airbnb accommodation because they find it more convenient and economically reasonable.
According to Mika Caram-Castañeda, an airbnb super host who is managing 47 condominium units in Cebu, “Airbnbs are more convenient because the locations are accessible and they have the amenities of a hotel at a much lower price.” She adds that all of the units she’s managing are booked every day during the peak season, and that she’s even expanded with three branches of her backpacker’s hostel just to accommodate the demand from tourists. “Tourists are traveling for the experience and want to spend more on their activities during their trips and spend less on their accommodations without compromising comfort.”
As for the demand for office spaces, Rey Manigsaca, chief executive officer and president of Apple One Properties, Inc. (API), explains that because Hong Kong remains to be one of the most expensive property investments in the world, businessmen are searching for other options in Asia and are now eyeing Cebu as the next destination for international offices. International companies like Google, Bombardier and Amazon already have offices in Cebu.
API also recognizes the growing demand for flexible workspaces and mixed-used developments in the premier business districts in the Visayas, so it has partnered with the International Workplace Group (IWG). Lars Wittig, country manager for IWG Philippines, discusses that the reason the Visayas has the greatest potential in the country is because of its ever-advancing economy, and as the capital region gets too congested, businesses are moving to central Philippines. Plus, the access to central Philippines is much easier with its state-of-the-art international ports and airports, making logistics much easier in the area. Wittig also expresses appreciation for the policies and the government administration in the locality because they are very supportive of businesses.
Grand Benedicto, chief executive officer of BE Residences, affirms, “The rapid economic growth that Cebu City has experienced in the past five years can be seen and felt in numbers and on the streets. Our GDP and GRP remain steady and are higher than the national average. BPOs and the tourism industries have significantly contributed to the city and region’s growth — we see higher take-up for office spaces and more hotels, both international and local brands, opening and under construction.” BE Residences is building their newest project along AS Fortuna Avenue, bringing them closer to the BPOs, shopping, and premier dining venues in Cebu and Mandaue cities.
“Real estate is growing in leaps and bounds, with a market that is more receptive to investing in rental properties than in Manila. And why not, when the rental yield is notches higher than investing in an average condo in Makati or Ortigas.” Benedicto adds that “Cebu has greater potential because the payment terms can stretch up to 60 months, the bank loan rates are at an all-time low, and choices abound mostly on the economic and affordable segment.”
While everything mentioned above appears to be very promising for investors, we know that every investment involves risks.
“In terms of risks, Cebu’s current infrastructure circumstances may not be able to handle the development boom in the end. If Cebu’s infrastructure planning cannot keep up with the developments, then the circulation of not only people, but also resources will greatly affect investments in the majority of areas,” explains Cazandra Galleros of Rockwell Land Corporation.
Benedicto is also concerned that non-local developers may offer a much lower price to their properties compared to the local developers because of their expansive capital. Soberano, on the other hand, believes that the best way to address these risks is to diversify their portfolios. Both Cebu Landmasters Inc. and Apple One Properties Inc. are developing mixed-use property investments.
Coronavirus And Rental
What about new challenges like the coronavirus? Before the lockdown, Caram-Castañeda cancelled 34 reservations on her airbnb units in February, and more cancellations followed. She is forecasting a loss of above P120,000.
Benedicto explains, “The effect of the COVID-19 to the industry is crucial. There will be buyers who may default in their payments as an effect of layoffs. Construction has halted and the importation and supply of construction materials has slowed down.”
Developers, however, believe that the coronavirus pandemic is just a phase and will soon pass. Losses are expected, but they believe that they will recover eventually.
Galleros confirms that “Real estate is promising in Cebu given that there is still a large portion of undeveloped land compared to Metro Manila, which is an opportunity for Cebu to develop more in the coming years. As local and foreign high-net worth individuals secure the biggest and most expensive units in luxury brands, they in turn maximize the value appreciation and drive the residential sale market.”
Benedicto agrees and adds, “Cebu is projected to have a population of 3.8 million by 2030 and with a young demographic structure, the opportunities for business and growth in Cebu City and the rest of the Visayas region are more promising and less volatile than any other city in the country.”
Manigsaca believes that they can bring to the region the world-class facilities and the benefits of flexible working and living spaces.
Soberano further says the private and public sector need to work together to solve issues that accompany rapid urbanization, and that we should all feel accountable and contribute to making sure the growth is healthy and equitable.