Philippines property boom or bust?

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Land prices have risen considerably in Asia, and the Philippines is no exception, even if the country is no laggard. Even if the USA, Japan and EU are weak, the Asian and Latin American economies are still pretty robust, and at the end of the day, these economies can be expected to drive most global growth for the next 5-10 years. So what can we expect?

1. Lower interest rates. There are economists talking of the US treasury rate on 10-year bonds falling to 1%. This does not surprise me. The implication I suggest however is greater in those countries which are not overly indebted, i.e. Asian countries. I'm expecting a property boom, and you can expect this wealth growth to feed into consumption, before the USA and EU rejoin the party. Also expect Western investment in Asian property. The driver for this will undoubtedly be yields. Consider that Philippine rental yields are very attractive at 8.62%. Indonesia is less attractive for personal investors, because of regulatory issues, but even Indonesia might appeal with future reforms. Certainly the Philippines looks like the best market, for reasons like their 18-mth 'extended' stay on a tourist visa. In fact they are higher than they were several years ago, highlighting the fact that income growth is outpacing construction in these uncertain times. 

                                     Source: Trading Economics.

2. Strong fundamentals for the Philippines with high commodity prices, high remittances and of course the strong business outsourcing market. 

3. Improving governance - We have yet to see much change here. There is a top-down push for anti-corruption, i.e. The sanctioning of the Chief Justice and former President Arroyo, but this might well just be a changing of the guard, rather than heralding the end of corruption. 

Indoubtedly global debt levels have topped out, but don't for a moment think that this boom is over as long as 70% of the global population is liberalising. This is the Industrial Revolution...that one in the 17-18th century was a baby in some respects. This is just as significant. In fact, we might even expect political reform before the end of it. More realistically, I'd expect such reform because of a 2030s crash...but that's a long time off. 

Andrew Sheldon NZ Property Guide Philippine Real Estate Guide Foreclosed Japan Guide Applied Critical Thinking, Strategy, Integrity Investments SheldonThinks

Building or buying a house in the Philippines

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Here is a foreigner/expatriate who has built a house in the Philippines. I might note several considerations:

1. The opportunity to build with local labour to lower your costs; as long as you tightly structure contracts and manage performance to ensure your expectations are closely realised

2. The opportunity to buy foreclosed properties - remembering that not all banks offer good value, and to check to ensure you are paying a reasonable price

3. Take the opportunity not just to find out the prices of property from websites like Sulit.com.ph, but to also talk to landowners around your areas of interest. Why? At face value property in the Philippines looks like a rather illiquid market. Well, you'd be surprised how many sellers are out there, but its harder to connect with them.

4. Foreigners are like gold mines to Filipinos; a dollar sign flashes before their eyes when they see one. Its engrained in them from the age of 5yo. Its all a big joke; but at the end of the day, its their 'inter-dependence' culture that pulls everyone down. The difference between you and some other rich Chinese Filipino is that they will probably be assured that you have money, and that you are less likely to be committed to someone. 

See this blog by an expatriate who has built a house in the Philippines. You might expect materials to be more expensive in the Visayas. See here.

Andrew Sheldon NZ Property Guide Philippine Real Estate Guide Foreclosed Japan Guide Applied Critical Thinking, Strategy, Integrity Investments SheldonThinks

The Philippines is at war over energy

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Living in the Philippines at the moment you could be forgiven for thinking that the country is at war. It feels like D-Day. For the last 3 days I've seen helicopters, jet planes flying around with great conviction. Surely the Philippines is stepping up its military rhetoric as a result of ongoing clashes with the Chinese over the Spratly Islands. It is enough to suspect that this is going to be an awful shock for equity markets. Not that the issue will amount to anything; its just the surprising hostilities over something which was really off the radar....or more to point....such a pin-prick that no one thought much of it. It becomes just another reason to sell in a market with a confidence problem. Of course, for China it is a measure of conviction, an incidental issue to test whether the US would actually engage on an issue of real importance, like Taiwan.

Resort living in the Philippines

In actual fact, it makes more sense for the Philippines to simply give the offshore areas to China. Why? Well, ultimately the only reward the Philippines could expect is a royalty. Any oil or gas would be despatched to China, the only investors would be Chinese/Taiwanese, and this is ultimately the market.

Andrew Sheldon NZ Property Guide Philippine Real Estate Guide Foreclosed Japan Guide Applied Critical Thinking, Strategy, Integrity Investments SheldonThinks

Muslim rebels take another expatriate

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An Australian expatriate married to a Filipino is the latest person to have been held for ransom by Muslim rebels in the southern Philippine state of Mindanao. Read our interpretation of this state of affairs - you might be surprised by our thoughts on the incident.

Andrew Sheldon NZ Property Guide Philippine Real Estate Guide Foreclosed Japan GuideApplied Critical Thinking, Strategy, Integrity Investments SheldonThinks

The legacy injustice in the Philippines

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Here is a very interesting video describing corruption in the Philippines with the large oligopolies based on the split commercial-political interests of the major families - well in fact - one family, the family of the current president. A great deal of this is common knowledge, and yet:

1. The foreign media and governments do nothing

2. The poor Filipinos are uneducated and don't know. Their leaders are assassinated

3. The US government does nothing - because the 'oligopolies' control the Philippines government

4. The media in the Philippines is controlled by like-minded persons

We are all familiar with how the US government were apologists for the South American dictators in the 1960s to 1980s; the same has been occurring in the Philippines. Now that the Cold War is over; might it be time for the US government to be raising the bar. Maybe its time for the American people to start expecting more from their government. It is apparent that Western governments have no interest in preserving freedom; protecting rights. Their actions abroad are directed only towards their commercial interests.

We can argue that there is nothing wrong with preserving or pursuing one's interests; but what interest does the West have in allowing the Philippines oligopoly to preserve their tyranny over the Philippines people; not to mention foreign companies which invest there. Yes...Western companies which invest in the Philippines are subjected to a litany of tyranny by commercial interests. Any foreign enterprise that gets too big is subject to extortion. So what could or should foreign governments do to prevent this tyranny from existing in perpetuity? They can do several things:

1. They can stop sanctioning the illegitimate practices of the oligopoly-controlled government by publicly castigating the Philippines for undermining the sovereign interests of the landless Filipinos.

2. They can educate the Philippines people about the injustices perpetrated against the people.

This video just highlights the actions of the family of the current administration. If one takes a look at the injustices perpetrated against the Muslims of Mindanao, largely again because of the acquiesce of the US government, who administered the Philippines for a good period of time, then you can see that this is a huge problem for the Philippines, and why Filipinos have to largely leave the country for any prosperity. Which is why expatriated incomes are the life-blood of poor families in the Philippines, whilst the wealthy families life off their legacy of extortion extending back to Spanish administration.

What is important for people to realise is that this is not capitalism. This behaviour is not based on the mutual consent of people's in relationships of trade. These actions were perpetrated through the sanctioning of government. This is why principles of capitalism need to be respected, and not used as a smoke-screen to give legitimacy to despotic and unjust business and political interests.

Watch this YouTube video - and there are more at the end of it. Lobby your congressman or local parliamentary MP to encourage your government to do more. Perhaps the best chance that the Philippines has of restoring justice is for there to be a 'Thai-style' coup in the Philippines, however there is always the risk that such an action could replace one tyrant with another military dictator. Remember Ferdinand Marcos. Those were different times.

Andrew Sheldon NZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideApplied Critical Thinking, Strategy, Integrity Investments SheldonThinks

Filipinos cause environmental damage in NZ

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Filipinos are receiving a great deal of bad press at the moment. The answer is to understand them and to treat them appropriately. If they want to engage in international business they need to engage at international standards of care and preparedness. This is like the perfect storm because Greek society is just as indulgent and care-free as the Filipinos. Was this not destined to happen?

My thoughts about this episode.

Andrew SheldonNZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideApplied Critical Thinking, Strategy, Integrity Investments SheldonThinks

Stability in the Philippines

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A Colonel in the Philippines Armed Forces stands accused, or is being investigated for attempting to incite a military coup to overthrow the Aquino government. The story is covered here.

The Aquino administration argues that the man is a front man for the Arroyo administration, who stands accused of a great deal of corruption during her administration. The problem is that there is a great deal of scandal surrounding her and her husband....so she would have a great deal to gain from any efforts to overthrow the government.

The reality is that Aquino has invested a great deal of resources in investigations against corruption. This is of course a very positive development. The fact that it has been to the detriment of broader economic and social policy is understandable. This is a big issue, and the economy has a surprising capacity to look after itself...if government would leave it alone. After all the right of government to extort 'unconditionally' is ultimately the cause of corruption; and democracy is the ultimate tool for extortion.

I frankly place no trust in democracy; and the extortionary demands of colonels are a product of that illegitimacy. Consider the justification for his repudiation:

Deputy presidential spokesperson Abigail Valte said:

"The Armed Forces of the Philippines (AFP) considers Mariano’s action an isolated case in the organization.....It’s apparent that he is alone. No one came after him. We can see if a person’s action is isolated".

I think this is true as well. My PMA sources suggest there is no support for this action.

Valte: "We are confident that the soldiers know that they are here to uphold the Constitution, to secure the county and not to engage in partisan politics.”

That might be what the Constitution says but they don't have much of a shelf life in the Philippines. Was it 1987 that this one came into being? We are actually due for a new one. The reality is that ethical principles are the basis for issues of justice; not some arbitrary, 'dated', dogma drawn up by a group of people who purport to represent the 'majority'; whatever that means.

Andrew SheldonNZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideApplied Critical Thinking, Strategy, Integrity Investments SheldonThinks