ANC ON THE MONEY: Cost of Living: House vs. Condo
WHERE DO I PUT MY MONEY?
Randell Tiongson | Philippine Daily Inquirer | January 23, 2013
QUESTION: Where should I put my money? In a bank, property, business or stocks?—Miccael Ibarra Naig via Facebook
ANSWER: I always believe that investing is a great idea and I pray that all Filipinos think and act the way you do. Before I answer your question, I encourage you to first consider three things: your investment objective (the reason why you are investing), time frame (how long you will keep the investment) and risk tolerance. It is critical that you know these three things before even selecting an investment option.
There is no such thing as a “best” investment. The investment instruments you mentioned have their advantages and disadvantages, their own merits and flaws. Let me discuss those choices that you are considering.
BANKS are the most popular choice of many. Banks are everywhere and this makes depositing your money in banks a convenient option. When you say “bank,” I’m assuming that you are referring to traditional bank products like savings accounts and time deposits. These bank products are among the most liquid investments you can make and the risks are also among the lowest. The downside, however, are the yields. They may be the safest options but they give the lowest returns. As they say, low risk, low returns. Having low returns, especially if below inflation rates, will erode the value of your money in the long run. Banks today offer other products other than the usual deposit products. You can invest in the instruments they offer like Unit Investment Trust Funds, mutual funds, bonds and insurance. Take time to know what your bank offers other than traditional deposit products.
PROPERTY is the investment every Filipino wants. Your parents and grandparents had probably told you that the best investment was land. However, saying that land is the best investment may be too ambivalent.
Real estate’s greatest attraction is its being a tangible investment—you can see and use it unlike paper investments. Land usually appreciates in value giving you capital growth, or it can generate a steady flow of income through rentals and capital gains, when you decide to sell it.
There are times, however, when real estate investments do not appreciate or, in some cases, their appreciation does not meet your expectations. Also, there are recurring costs in property investments such as real estate tax, administrative or association dues and common area charges. When you sell a property, you will be slapped a hefty capital gains tax on top of the broker’s fees. When you sum up all the money you need to spend during the time you are holding your real estate investment, you will realize that your gains are not as substantial as you thought it would be. Another downside in real estate investment is its cost—you need to spend a huge sum to buy land. If you decide to borrow money to finance your real estate investment, the interest that you have to pay may just eat up the gains you will make. Buying real estate because you need to live in it is another story as it is not an investment.
BUSINESS—another Filipino dream. Everyone wants to be an entrepreneur and why not? Businesses can potentially give you the highest returns. A business that succeeds can make one a millionaire, even a billionaire. There are many success stories of people who started with little but are now very wealthy because of their businesses. However, business endeavors are the riskiest among all these investment options, as they are speculative in nature. There are more businesses that fail rather than succeed, which is not encouraging for a “newbie” in the business world. Further, putting up a business requires more than just capital—competence, passion, timing, market and a lot of studying are needed when you are considering to do business.
STOCKS—today’s rising star. There is so much attention to the stock market today as more and more Filipinos are being enticed into investing in equities because of its stellar performance in the last two to three years. Many investors are very optimistic with our local stock market and you will find many experts predicting that our stock market will further go up this year. Investing in equities today is also more convenient. Even with only a small amount, you can buy stocks through brokers (and also online) or through pooled funds such as mutual funds or UITFs. Let me reiterate the risk-return relationship here—high returns, high risks, and vice-versa. While it is true that the stock market has been giving extremely good returns lately, there were also times when investors lost a lot of money. The stock market is not as predictable as people think it is and all the gains over the last three years can also be wiped out in a short period of time. More so, investing in the stock market, especially when you plan to trade, requires a lot of competency and time. If you don’t have the competency and the time to trade in the bourse, you should keep your day job.
My advice is for you to consider all the pros and cons of all the investment options you mentioned and choose those that will suit your objectives the most. I also recommend that you diversify your investments. All these options have their advantages (and disadvantages), but if you have a diversified portfolio, you are spreading your risks. A common but very wise saying we often hear with regard to investing is this: “Do not put all your eggs in one basket.” Here’s an even wiser advice for you: “But divide your investments among many places, for you do not know what risks might lie ahead.”—Ecclesiastes 11:2, NLT
PROPERTY EXPERTS NAME TOP PHILIPPINE CITIES FOR YUPPIES
Tessa R. Salazar | Philippine Daily Inquirer | April 13, 2012
IN METRO Cebu, the investments and opportunities are pouring in due to its strategic location.
Last March 31, before the country went into the Holy Week break, Inquirer Property revealed the 11 top criteria for ideal cities to settle into, according to property analysts.
In that story, Enrique Soriano, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business Advisory, David Leechiu, country head of Jones Lang LaSalle Leechiu, Lui Matti, executive director for asset services, CB Richard Ellis Philippines, and Claro dG Cordero Jr., Jones Lang LaSalle Leechiu’s head of research, consulting and valuation, explained that for the mid-level, upwardly mobile yuppies, the ideal cities should offer the quality of life that enhances the following: uncongested spaces, with the right balance of greens/fresh air and cosmopolitan lifestyle); job opportunities; peace and order; proximity to business contacts, malls, cultural places, theaters, meetings for intellectual discourse, and hospitals.
Cordero clarified, however, that, “Ideally, a formal survey/study should be conducted and a well-defined metric should be in place to rank cities in the Philippines; however, what we mentioned here are only indications and are based from the information that are readily available to us at this time.”
So, given these conditions, what are these most liveable cities for the young generation? Here they are, in no particular order:
Cebu (Metro Cebu)
The “Queen City of the South” is Soriano and Matti’s top pick, and Cordero’s fifth. They explain that in Metro Cebu, the investments and opportunities are pouring in due to its strategic location. Cordero said that “similar to Davao, the masterplanning should be significantly improved to ensure sustainable and efficient growth of various systems (infrastructure, crime prevention and ability to service the basic needs in the long run).”
Matti picked Cebu as a serious option (for young professionals like him to settle into). He described Cebu as “cosmopolitan enough to be interesting for someone from a big city, with a booming local economy, and thus, plenty of job options. The cost of living seems to be lower than in Manila, as well. Traffic is an issue, but still better than in Metro Manila.”
He added that Cebu is also a good jumping point to other places of interest like Iloilo, Bohol and Cagayan de Oro. “The international airport is also a plus. They also have good schools and nearby beaches.”
Taguig (particularly Bonifacio Global City)
Taguig, and in particular BGC, is Soriano’s third pick, while BGC is Leechiu’s top choice. Leechiu said BGC is a prime example of an ideal district. He said that in BGC, “you have everything one needs, full of symmetry and balance of developments, and culture; backed up by strong infrastructure and strong policies and strong owners.” BGC, he said, has the following qualities: the city chic, new buildings, sporty lifestyle and an international community.
BGC is Cordero’s second pick due to its “world-class design for infrastructure (controlled development density, underground facilities, transportation and sustainable designs and practices (i.e., recycling of non-potable water, presence of advanced sewage systems).”
Makati
The city that is home to the financial heart and soul of the Philippines is Cordero’s top pick, mainly for being the “traditional business district where most businesses thrive and mature property developments are located.”
MAKATI is considered the traditional business district where ‘most businesses thrive and mature property developments are located.’ FILE PHOTO
Makati is Soriano’s seventh, and Leechiu’s fourth. “Yes, it’s severely congested today, but gradually that should improve as Ayala Land puts more infrastructure in place. My hope is that Makati and BGC is integrated as one district. This will require a lot of effort and resources, but this is the inevitable direction,” Leechiu said.
“Makati’s congestion is being solved with more infrastructure projects in the pipeline, such as walkways, bus transits and more parks opening. Legaspi Village has been left behind but now there is an effort for old buildings to give way to new ones. Macea-Ayala needs to invest more in making Legaspi Village more pedestrian-friendly and open up more areas for parks and trees, such as replicating what they did in Greenbelt-Glorietta to the rest of Legaspi Village and Makati,” Leechiu added.
IS IT A GOOD TIME TO BUY REAL ESTATE?
Ask Nanay by Socorro C. Ramos, The Philippine Star, July 06, 2009
Q: The prices of stocks and real estate are going up and down because of the global crisis. I have enough money to make a down payment on a house and my family really wants to buy our own dream home. But we are afraid that the value of the property might go down and I will lose money. Our option is to just rent first and buy when the market recovers and is more stable. What should I do to make sure that my investment is safe and we will earn?
A: You have to first realize that, like most other investments, the prices of real estate will fluctuate. Although as a rule the prices will go up over a long period of time, you can never be sure what will happen if you are looking at a much shorter time frame, like one or two years. Walang sigurado. (Nothing is sure.) Puwedeng tumaas ang presyo at puwede rin bumaba. (Prices could go up or down.) So if you are planning to buy the property and intend to sell it in one or two years to make a profit, baka talaga mahirapan ka (that might be difficult).
However, if you are buying the property with the intention of living in it for a long time, then it might be as good a time as any to buy a house or condominium. If you can afford it, then I would say go for it. That will also be forced savings for you. Otherwise, you might just end up spending the money elsewhere.
As I mentioned, real estate still tends to be a fairly safe investment. It is unlikely that you will make a lot of money in a short period of time, but it is also unlikely that you will lose your investment over a long period of time. And for a lot of people, there is nothing like the security of owning the roof over their head.
WHY INVEST IN REAL ESTATE?
Real Estate investment is an all-time investment instrument that gives positive yield, provided you know the strategy.
1. HEDGE AGAINST INFLATION
Adding real estate in your investment portfolio can protect it against the ravages of inflation. The value of a real property increases as inflation rises.
2. RESIDUAL VALUE
Real estate always has residual value. Although prices can certainly fall as well as rise, property values will never fall to zero unlike shares or hedge funds.
3. HYBRID ASSET
Property is a kind of hybrid asset that has a capital appreciation of a stock and income producing capacity of a bond.
4. EXCELLENT COLLATERAL
Real estate in prime locations is always an excellent collateral security against loans, and allows financing to be secured anytime.
5. PRE-DEVELOPMENT APPRECIATION
Units in project that are being sold in pre-development phase generally appreciate in value when the project is finished.
6. EASY TO RENT OUT
Units in project that are near in malls, schools and other high traffic areas are easy to rent out.
7. APPRECIATES AT AN AVERAGE OF 10% PER YEAR
Philippine property appreciates at an average of 10% per year, which is higher than 3% to 6% appreciation of U.S. properties. This translates to a higher Return of Investments (ROI).
7 REASONS TO BUY PROPERTY NOW
Tessa Salazar, Philippine Daily Inquirer, July 22, 2008
Do you realize that the money you throw on fuel could be your monthly amortization for a home? Here are top seven reasons you should invest:
1. Property is still the best investment out there.
“The stock market is very volatile for people who are looking for a place to invest or where to put their money. It’s still real estate. It will still appreciate in value,” said Bobby Disini, vice president of PS Bank’s mortgage banking division. He added that even if people already have houses and still have money to spend, it would still be wise to invest in property. They can sell it later on.
2. Government housing loan provider Pag-Ibig has competitive rates now, making homes more affordable to Filipinos.
(This however, doesn't apply to Robinsons Projects and most property developers' projects)
3. A roof-over-your- head principle
“The family will always want a house over anything else,” Disini said. “That’s why we have a lot of overseas Filipinos working abroad and the first thing in their mind is to buy a house and a car,” he explains.
4. Buy while prices are still low.
Alejandro S. Mañalac, president of the National Real Estate Association, revealed that developers are increasing their prices. “The soaring prices of major construction materials are eating up developers’ margins. If buyers will just compute, the 10 to 20 percent increase that the developers are planning to implement is not even enough since the prices of steel and cement have practically doubled since last May. Those who are constructing their own houses can relate to this.”
5. Cut back on travel cost.
Eduardo M. Alunan, president of the Subdivision and Housing Developers Association, said that whether oil prices are high or low, investing in property under the present environment should be made a priority. Location, especially factoring in the proximity to the workplace, has always been a major factor in order to save in travel costs in and around Metro Manila.
6. Borrow now.
“I would advise people to borrow now. The rates will not hold primarily because inflation is still going up. I expect interest rates to go up and right now I think it’s the best time to apply while the rates are still at this level,” Disini said.
7. Search for the best home financing rate available.
Go where you can find the best rates available because the rates won’t hold for long, Disini said.
“Try to fix (the financing rate) for 5 or 10 years so that you won’t worry about any rate fluctuations. If you go for home financing, look for a bank that’s stable, or a bank that’s going to offer you fast service. Once your rate is approved, it can only lock in for a certain period of time.”
