Saturday, March 10, 2007

Record Low Interest Rates in the Philippines drive Investors to Condotels for Rental Income

Returns from lease of residential condominiums in the metropolis ranged from 8% to 15% yearly, with smallest apartments earning the highest yields, a Metro Manila property research firm said in a recent survey. In a study released last month, it said studio apartments in Metro Manila’s prime areas — Makati central business district, Ortigas Center, Eastwood City, and Bonifacio Global City — could earn between 13% to 15% in rental returns.

The highest returns, however, are enjoyed by studio units measuring about 30 square meters at an average of 15.1%. Larger studio condo units or about 40 sq.m. big, earn slightly lower returns at 12.9%. Rental returns are the expected gross annual rental earnings from a property, expressed as a percentage of the property value.

The study said that one to two bedroom units measuring 50 to 90 sq. m. could pull in around 12% to 15% in rental rates but smaller condo units or about 60 sq. m. earn the highest at 15%. One to two bedroom condo units, measuring 80 sq. m., could rake in lower returns at 11.5%. “The pattern is unusual. Instead of a smooth progression from high-yielding units to low, we have high to low with high yielding ‘ridges’ or ‘lumps’ at particular apartment sizes — which correspond to the smallest case of a particular number of bedrooms,” Matthew Pollock, Global Property Guide, publisher was quoted as saying.

The property research firm said interest rates in the Philippines are at historic lows, making such condominium unit returns highly attractive. It noted yields for the 364-day Treasury bills were less than 3.82% while interest rates on one year time deposits are around 1.5% to 2% annually. A five-year time deposit returns only 5% per annum, and a 5-year T-bond earns 5.68%.

Demand for residential condominiums in Metro Manila has been boosted by strong economic growth, particularly by the rapid growth of business process outsourcing firms, including call centers. Contact agents form a new breed of young urban professionals with tremendous purchasing power. Because most call center agents work at night, they need condominium units that are right next to their work place. The lesson is clear - to earn good money, buy a small unit in Metro Manila’s business districts, with very small rooms. The returns will be significantly better than in most cities in Asia.

Condo hotels have quietly become one of the hottest areas of the real estate market in the Philippines. The condotel concept provides buyers the benefit by owning a property in a hotel environment that they can use for themselves, and take advantage of the amenities not normally found in typical residential condominium developments.

When they are not using the condo hotel suite, the unit is put in the managed pool and rented out for them. The buyers have what is considered "hassle free" ownership. The condo hotel unit owners also benefit from having a professional onsite management company to handle to marketing, booking of their room and general expertise that they bring to the table. If a problem should arise with their condo hotel unit, the management company will take care of it instead of the owner having to worry about it. This makes the traditional landlord tenant issues a thing of the past.

The condo hotel buyer sees the benefit to owning a vacation property that also has the potential to produce income for them. The typical condo hotel produces higher levels of income than the traditional vacation home (and less headaches), making it all the more appealing to buyers.

Developments such as the Lancaster Suites Manila Tower I were sold out in less than 18 months and the building is set for completion this Summer 2007. Condo hotels are different from traditional condos because they are sold "turn key". Clients initially purchase the standard condo unit and then when the time comes for interior ‘fit-out’ they can avail of the in house Condotel package of furniture’s and furnishings for the unit. This means buyers do not have to worry about hiring a designer or contractor to come in to finish out the unit. Everything is included from linens, dishes, pillows etc…

Leading the way in the Metro Manila condo hotel market is Pacific Concord Properties Lancaster Brand of condotel investments. Pricing for condo hotels can range anywhere from $35,000"s up to $300,000 for Penthouse suites. Of course the pricing depends on location, views and types of finishes. The Lancaster Suites Manila Tower I development has enjoyed great success for its clientele with property appreciation already reaching 100% for its initial buyers. Lancaster – The Atrium, the latest development by PCPI in Shaw Boulevard, Metro Manila, is currently on preconstruction selling and looks set to sell out within the next few months. Lancaster – The Atrium offers clients the choice of Studio, One, Two and Three Bedroom suites that all have kitchen facilities as regular residential condo unit. In addition, Lancaster – The Atrium, as with the Lancaster Suites Tower I, offers unit owners and guests an extensive range of services and amenities.

For further info please do not hesitate to contact us:

Beth Collingz
PLC International Marketing Networks
Pacific Concord Properties Inc., Manila Head Office
Shaw Boulevard, Mandaluyong City. Metro Manila. Philippines
Phone: Manila [632] 717 1958
Fax: Manila [632] 718 1828

Pacific Concord Properties Inc., Cebu Office
Lapu-Lapu City, Mactan. Cebu. Philippines
Phone: Cebu [6332] 340 0721
Fax: [6332] 495 4938
Web: [Lancaster Condotels]

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