High-rise apartment buildings with glamorous names are springing up in the major cities of the Philippines. They are targeted at expats in the Gulf who are investing in homes for their eventual return. And this construction boom shows no sign of ending any time soon.
Filipino expats buy into a property dream
The condominium advertisement would not look out of place on a central London billboard.
"Knightsbridge: Smart, Sexy, Available", it proclaims, complete with a picture of a Tube station, Big Ben and a beautiful model draped on a chaise longue wearing Union Jack tights.
But this address is to be found more than 5,000 kilometres from the plush neighbourhood that is home to Harrods and Harvey Nichols.
Knightsbridge is just one of scores of high-rise apartment blocks built in the Philippines, named after the world's most desirable addresses, and sold to Filipino expatriates across the Emirates.
Developers in the Philippines are netting as much as a third of the remittances sent home by Filipinos in the Arabian Gulf to fund construction of apartments promising luxury on a budget.
They are doing it by selling lifestyles of the rich and famous in London, Paris and New York to expats toiling in Dubai, Doha and Riyadh.
Some have hired freelance sales agents in the Emirates, home to an estimated 600,000 Filipinos, to market the glitzy skyscrapers.
With names such as "Forbes Town Center", "Manhattan Garden City" and "Milano Residences", the advertisements are reminiscent of the flashy developments of the Dubai boom years.
The under-construction Trump Tower Manila being sold by Century Properties is typical of the drive to develop luxury branded apartments.
The property tycoon Donald Trump has nothing to do with his eponymous Manila tower beyond selling his brand so that the developer could sell more apartments.
"It's a way of attracting expatriate investors," says Alex Pomento, the head of research at Macquarie in Manila. "They are more familiar with 'Hollywood' names."
Big developers such as Ayala Land, Megaworld and Century Properties are stepping up their marketing in the Arabian Gulf, where many Filipinos have already invested in condominium projects.
Anna Liza Sanjuan-Gonzales, who works in publishing in Abu Dhabi, has lived in the Emirates for eight years. She bought an Ayala Land-built apartment in the commercial city of Makati as an investment.
"The Philippines real estate market was not affected by the downturn as much as other places," she said. "The value of our property has increased."
Christopher Tongco, a newlywed, has been living in Dubai for just a few months but has already signed up for a two-bedroom off-plan apartment in Manila that cost the equivalent of about Dh400,000 (US$108,908).
He bought his unit from Century Properties, the company that is promoting the Trump Tower in Manila.
About 35 per cent of the purchase price is paid over five years in monthly instalments of Dh2,500, with the balance due on handover.
"I think it is a good investment in several ways," says the 26-year-old IT worker from Cagayan de Oro in the south of the Philippines. "We can sell it on or lease it or move into it ourselves when we return."
The influx of expatriate cash into the property industry is helping the Philippines to shake off its reputation as an Asian underperformer while consumer confidence grows and government anti-corruption reforms begin to bite.
The Philippine Stock Exchange has gained about 29 per cent this year, making it the world's fourth best-performing bourse.
Standard & Poor's on Wednesday raised the country's debt rating to the highest in nine years and just one notch below investment grade.
Benigno Aquino, the president, also last week approved a 10 per cent increase in government spending next year to about $48 billion. Rampant residential development has led some economists to fear a Dubai-style boom and bust in the property sector.
Jones Lang LaSalle estimates 154,000 new units will be built in the country between this year and 2016 - 30 per cent more than the 118,000 units completed between 1999 and last year. The question is whether they can all be absorbed by end users.
But an asset bubble may yet be unlikely - at least for now. Property prices in the Philippines have risen by about 4 per cent annually in the past four years, according to S&P.
The ratings agency says the risk of a credit-fuelled bubble in the country is low because of a funding model that relies largely on expat remittances rather than bank lending.
Typically, the construction period of such buildings is longer than in other countries because of the smaller contributions paid by investors over a longer period.
From the initial marketing of the towers to their funding and eventual construction, everything is designed with the expat Filipino investor in mind.
Despite the residential building boom, banks in the country have comparatively low property exposure - with mortgages accounting for just 6 per cent of overall loans.
In the UAE by comparison, mortgages account for about 15 per cent of total lending, according to Central Bank data.
"We believe the low level of consumer borrowing is due in part to the country's sizeable remittance inflows, which partially negates the demand for consumer loans," said Ivan Tan, a credit analyst at S&Pin Singapore, in a report last week.
The relatively high transaction costs involved in flipping off-plan properties in the Philippines is also a deterrent to investors selling their units before they have been built - a major factor in the 2008 collapse of property prices in the Emirates.
Macquarie's Mr Pomento agrees that the housing shortage and high transaction costs limit the potential for a property bubble.
He says the market is still playing catch-up to compensate for the lack of development between 2000 and 2004 and the financial crisis of 2008 and 2009.
"There is a low cash initial outlay, so it makes it affordable," Mr Pomento says.
There are other factors instilling confidence among developers. The population of Manila can change by as much as 4 million depending on the time of day or night - reflecting the huge influx of commuters to the city centre every day.
That is creating an opportunity for developers seeking to push the boundaries of the capital's suburbs.
"Metro Manila's estimated daytime population of 14 million, as opposed to its nighttime population of around 10 to 11 million, indicates that demand for mid-end residential units is far from being fully served," said Claro Cordero Jr, the head of research at Jones Lang LaSalle in Manila.
The half-finished concrete skeletons of apartment blocks in Dubai might serve as a warning to Filipino expats of the dangers of off-plan property investment.
But so far such risks do not seem to be deterring people planning eventually to return home - to Knightsbridge, Manhattan and Milano.
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