The real estate industry is expected to continue on its uptrend this year although developers should be cautious about building up too much inventory as the probability is that it could reach a plateau very soon, an industry expert said.
Victor H. Manarang, president of the Earth+Style Corp., said the industry, as a whole, remains bullish as the factors fuelling the growth are still there such as low interests, high GDP growth, and rising income level of the population.
“But the supply side has also grown substantially in the last few years so a lot of inventory is coming in, and therefore, we cannot say for sure if we have balanced the supply and demand, or supply has actually overtaken demand. That is why we, at Earth+Style, are cautious in growing our supply,” Manarang, who has personally witnessed the movement of the industry as an insider since 1987, said.
Just like in 2009 and 2010, Manarang said 2011 should see the continuation of the uptrend. But when it will begin to plateau is something that the industry should watch out for.
“If we use supply and demand as the basis, there will be no sudden drop. It will rise, reach a plateau, and then start the downtrend. We think the plateau will come, but we are not sure when,” he said.
Manarang said some would predict the cycles by counting the number of years from the last experienced uptrend to the downtrend as gleaned from the past 20 years. But there are economic and industry factors that should also be considered, including the period of the delivery of the supply and the re-sale of units that were bought by investors.
He said a lot of the buyers are not acquiring properties for end use but for investment, like having them rented or offer them later for re-sale.
These, Manarang said, will greatly affect future market conditions as plenty of re-sale or rental units will cause oversupply.
Unfortunately, he said, it is not easy to separate which purchases are for end-use and which of them are for investment purposes.
Also, Manarang said the 3 to 4 million housing backlog as announced by the government is not a good gauge in determining the size of the demand.
“This is derived from the survey of the population and while it says how many of the populace needs housing, it does not say how many can afford to buy. And considering the state of our economy, many who need actually could not afford. So this is not ‘actualizable’ demand because while the desire is there to purchase a house, they don’t have the capacity to buy. But they can also become the tenants or customers of our buyers,” he said.