Developers note backlog in Cebu, not oversupply
Despite the numerous residential projects being undertaken in Cebu, the demand for low-cost housing has continued to increase, a property development company executive said.
Alexander Ace Sotto, general manager for engineering and construction of listed low-cost housing developer 8990 Holdings, Inc., said the backlog as of this year is about 5.5 million housing units, a 5 percent increase from the 4-million estimated backlog in 2011.
“I don’t believe there is an oversupply of housing. Rather, I think there is a backlog of housing,” he said, in reaction to an observation by Colliers International Philippines head of research Julius Guevara that an oversupply of residential projects is being felt in Cebu.
For Cebu, Sotto said the demand for socialized and low-cost housing is still very high. Socialized housing refers to housing units with a price ceiling of P450,000 while low-cost housing has a price ceiling of P1.25 million to P3 million.
Sotto noted that the Housing Development Mutual Fund (Pag-IBIG) has lowered its annual interest rates to 6.5 – 8.5 percent, a “clear indication that the housing industry is still growing.”
“All our projects are selling good at this point,” he said. The company is behind the Deca Homes and Urban Deca Homes brands.
Boler Binamira, Jr., assistant vice president and area sales head for Visayas of Filinvest Land, Inc., said he does not foresee an oversupply in the short term.
“To objectively look at an oversupply scenario, you may consider two things: trailing indicators and leading indicators,” he said in a statement.
Trailing indicators study driving forces behind real estate, including fiscal and economic conditions, short-term prospects of business process outsourcing, and overseas Filipino worker remittances.
Leading indicators “analyze the stimuli that may trigger radical improvements or transformations in the real estate landscape.”
“So far, these trailing indicators point to a robust real estate growth over a short-term period, one that is highly visible now in the real estate landscape of Cebu. The leading indicator also points to Cebu as the next modern global eco-city,” he said.
Binamira said these factors will possibly trigger increased migration into Cebu and good local business climate. However, he acknowledged that several residential or housing projects in Cebu may suffer from unsold inventories and business losses.
But he said these challenges are due to the developers’ failure to study market behaviors, investment concepts, construction cost fluctuations, and proper value increments that may affect pricing competitiveness and investment yields of real estate investors.
Guevara, in his presentation during the Cebu Property Summit last week, also advised residential developers to study the market well and “do proper market research” before delving into projects. He also advised developers to look at strategies that will mitigate losses or difficulties.