Warning against dubious real estate agents

An interesting article posted in GMANews.tv on Dec. 15, 2008:

"OFWs advised against real-estate speculation"

The article is interesting due to several reasons:
1. The article pitted two known economists (Dr. Macaranas of AIM and Dr. Diokno of UP School of Economics) against the self-serving assessment of a certain real estate broker named Maritess Bigornia, owner of the Land Treasures Realty.

2. Ms. Maritess Bigornia is not a registered real estate broker and Land Treasures Realty is not also registered with the Housing and Land Use Regulatory Board (HLURB). The writer and editor should have checked this before publishing the article.

3. Developers and real estate brokers register with the HLURB and not the PRC. In the article Ms. Bigornia was quoted as saying that"it is important for a buyer to check whether the broker is accredited with the Philippine Regulation Commission."

4. Bigornia said that the broker must be trustworthy, "has a notable track record and preferably has an office." A web search of her company reveals a website under a certain Pedro Maque. He is in the list of registered brokers but lists his office at 7F Electra House, Legaspi Village, Makati. I checked the building and the only real estate company on the 7th floor is Leomont Realty. 

5. Bigornia said that “We are already at the tail-end of the crisis. We survived and we’re not thinking about that (falling prices)" which only proves Dr. Macaranas' point"But remember, the real estate agents are only interested in commission. They don’t care if your prices collapse later."

Buyers beware!

What is the worst thing that could happen to the Philippines?

Last Wednesday, I was invited by a senior class in the Polytechnic University of the Philippines (PUP) to give a lecture on the Global Financial Crisis. As students of Bachelor in Banking and Finance, they wanted to know the effects of the crisis on the Philippine banking system.

I tried to expand the lecture in such a way that the full title of my presentation was "Global Financial Crisis: Effects on the Philippine Economy and the Banking System." 

About 200 junior and senior students came to listen to my lecture (of course, not voluntarily). At the end of the lecture was the main event, the seminar organizers sang and danced in a variety show with shrieking teenagers blushing while male students dance half-naked. It was an awesome experience.

After the variety show was the forum (I read somewhere that there is no such thing as a close forum because a forum by definition is "a public meeting or assembly for open discussion.") Here are some of most interesting questions and my answer:

Q: What should we do to help the country avoid recession, spend more or save more?

This a classic Keynesian dilemma. To push a country out of recession, people must increase their consumption. With tougher times expected, people tend to save more, companies sell less, and the economy contracts further. However,  the situation is different in a case where you are trying to avoid recession.

It is not a matter of spending OR saving. For me, it should be spend wisely AND save wisely. Saving money by putting it under your bed will not help the economy. The money must be placed in a financial institution, it shows your confidence on the system and increases the resources available for investments.

Spending must also be done wisely. American consumers borrowed too much and spent it on unproductive assets, similar to what the government did to the US economy. To help the economy avoid recession, people must spend more on productive assets. Buy a new computer if that will increase your productivity and not because you simply want the latest model available.

A vacation every  now and then is helpful, but getting a second mortgage so that you can go to that Caribbean Cruise is disastrous. You cannot actually do that in the Philippines, but the idea on wise spending must be clear.

Q: What is the worst thing that can happen to the Philippines?
"Jinggoy Estrada elected president," I said jokingly and the students laughed. "Oh sorry. I forgot Jinggoy was your biggest sponsor." He was indeed the biggest sponsor, they thanked him at the start and at the end of the seminar. His name was also on the the top of the list of sponsors flashed on the stage.

Kidding aside, I really think that a President Jinggoy will be one of the worst things that can happen to the Philippines. Other than that was the two scenarios mentioned by Dr. Medalla in the EAEA Convention.
1. GMA trying to cling to power beyond 2010
2. Filipinos pulling their investments away from the Philippines.

A lot of foreign investors have already left when the credit crunch started in late-2007 to early-2008. Now, if Filipino investors would move all their money to other countries then that will be disastrous for the Philippines.

Q: What are the key sectors that will be affected the most by the global financial crisis?
I find this very difficult to answer. My best guesses would be sectors that are more reliant on foreign money or those more connected to the international economy. These sectors include Real Estate and Exports, especially electronics.

The fate of the BPO and call center sector is still unclear. While some call center companies in the Philippines are already downsizing, some are still expanding. The very few call centers left in the US are already trying to move out. BPOs catering to the financial sector will surely be affected. Call centers that handle complaints might be affected, if US consumers buy less products, they will complain less.


There are other questions with particular concerns over the Philippine economy, how bleak the future will be. I think, it will not be far from what we use to experience.

A plane that never took off will not crash.  


update:
A clear sign that the crisis is now affecting the banking and the real estate industries.
Crisis dampens interest in home loans - Inquirer (Dec. 05, 2008)
We warned before that this will happen, but banks and developers tried to shrug it off.

Price falls and expensive condos

We were warning about it for about a year now... Philippine property prices will fall, at least at the luxury segment where data is available.

The dangers of falling property prices are catastrophic. Developers will stop construction, those who bought through pre-selling will lose their money... and these might lead to job losses, unfinished buildings, more bad loans for banks and possible economic stagnation.

It is ironic, however, that every time a get a flier or a pamphlet of a new condominium project I shook my head in disbelief. They are so expensive... a small studio/bachelor pad in Makati is well over one million pesos. Prices of one bedroom units range from PhP1.2 to PhP2 million depending on location. If prices are expected to fall, it should be good news for first-time home buyers... right?

According to international standards for affordable housing, the median price of housing units should be about three times the median annual income. In other words, the price of your house or condo should not exceed your annual income times three, or else it is too expensive. There are a lot of technical details to be discussed (is the median income before or after taxes? does it include bonuses?), but we shall leave them out for the meantime.

If the average price of a 1 bedroom condo in Metro manila is PhP1.5 million, then the median income should be around PhP500,000 per year or PhP41,666.67 per month. I searched for  data on wages in Metro Manila and there are people who earn that amount, Senior Software Engineers, HR Managers and IT Consultants.

The Minimum Daily Wage for Non-Agricultural Workers in Metro Manila is PhP382. Their annual income is around PhP100,848 if they work 22 days a month. Using the house price to income ratio: it will take them around 10 years to buy a house worth PhP1 million if they spend all their income on a house. 

The bottom line is HOUSE PRICES ARE TOO EXPENSIVE!!!

There are several reasons why Filipinos in the Philippines will find it difficult to buy a house here:
1. Developers focus mainly on Overseas Filipinos, their annual income is well-above PhP500,000 (US$10,000 using PhP50 = US$1).
2. Housing loan facilities in the Philippines are almost in-existent (Banks also tend to loan more on families of Overseas Filipinos).
3. Housing programs are uncoordinated, unsustainable and ineffective. 

There are more reasons... each one can be a topic for a separate blog. How to address these problems will take more space.... For the meantime... Happy Weekend!

"I thought you were Indonesian" and other snippets

I went to an international conference last weekend. I was told thrice that they thought I was an Indonesian. First by a Filipino at the registration table, next by a Malaysian participant (she said all the Filipinos she knew look Chinese) and last by a Japanese presenter.

I am definitely buying a flag pin.

- - - - -

Former NEDA Director-General Felipe Medalla said that even with the global economic storm, the Philippine ship will not sink... because it has never left the port.

However, he warned that the port might burn down with the ship.

He cited two scenarios that may spark the fire: 1) GMA clinging to the presidency after 2010; and 2) Filipinos moving their money out of the country.

- - - - -

I got a tip from a very witty and verbose professor on how to comment on a difficult paper. Just ask "What is the second-order condition?"

Since I really don't have any idea what "second order condition" is, I won't be using that tip any time soon.

- - - - -

After introducing myself as a researcher in a real estate website, most people asked me where the Philippine real estate market is going. If you tell them that the market is holding up, they will ask for an explanation and a long discussion will ensue.

When I confirm their perception that that the real estate market is going down, they shook their heads and leave me.

- - - - -

I met a lot of good and intelligent people in the conference... and I am forever indebted to them.

- - - - -

I read two interesting blog articles today:

1. When did "Married without children become gauche?" by Rachel Shukert of the Daily Beast

"But most of all, I find hardest to take the pervasive sense that a marriage isn’t really consummated until the arrival of a blessed event—that everything from “I do” until the snipping of the umbilical cord is a prelude to real life..." read more here

2. "Clarification on why I write this blog" by Prof. Willme Buiter of the London School of Economics, published by the Financial Times.

"I write this blog for me, not for my readers.  Writing things down is the only way for me to communicate effectively with myself about complex issues... There are minor vanity/ego rents to having people read what I write... But all that is secondary to my need to write.  I don’t know something unless I have written it down..." read more here.

(The second article was forwarded by my boss.)

- - - - -

Happy Monday!

The Audacity of the Audacious and the Race to 2010

I am currently reading Barack Obama's second book, "The Audacity of Hope." After he was declared as the president-elect, I could not resist the temptation of not buying the book. The book is very good (I am not yet finished, though). It provides insights on Obama's view on issues. It also provides a quick review of US and world history and current events. Ten years from now, you can judge whether his presidency changed his world view, for better or for worse, by reading this book.

According to some sources, the success of the book was actually one of the reasons why he was encouraged to run for president. The publishers and Obama's handlers were very surprised on how many people show up for book signing. It is also one of the reasons why Oprah endorsed him as "the one."

I once lamented that presidential candidates in the US write books, in the Philippines, they make movies, or movies about their life or join singing contests... or any other way for them to appear on TV.

American politicians who hoped to claim their party's nomination has a book of some sort, including McCain, Hillary Clinton, Biden, Giuliani, Kerry and Gore. It elevates their status as an intellectual, a person knowledgeable of issues and events, a statesman who can grasp the problems of their constituency and a person of experience with lessons to tell.

Here, writing books are for old, retired and nearly forgotten politicians writing their memoirs as their legacy. I am not sure who to blame for it, or if blame is actually necessary. If presidentiables write a book, I am not sure if they can actually sell more than a thousand copies. Even if they give it away for free, I am not sure if 1% of the 40 million electorate will read it.

After Obama won, I told myself (and my office mates) that at least one presidentiable will claim to be the Filipino Obama. Not a week has passed and Binay was audacious enough to claim the title (ginugel ko, audacious means bold). I can cite ten reasons why Binay is not an Obama but I'll wait to hear from him more.

So far, here are the possible presidentiables and their parties
Senate President Manny Villar: Nacionalista Party
MMDA Chairman and Celebrity Duets Champion Bayani Fernando: Lakas CMD (or his own party)
Makati Mayor Jejomar Binay: PDP-LAban
Prayer leader and losing presidential candidate Bro. Eddie Villanueva: Bangon Pilipino Movement
Senator and losing presidential candidate Panfilo Lacson: Independent
Senator Mar Roxas: Liberal Party
Senator and losing vice-presidential candidate Loren Legarda: Nationalist People's Coalition
Vice President Noli de Castro: Kampi

It is already a crowded race and I am sure a few nuisance candidates will join the race. I do really hope that there will a debate of issues and not just populist causes (Villar is pro-OFW, Legarda is pro-environment, Noli is pro-housing). Although 'causes' are good they are not good enough, not one will run as an anti-OFW, anti-environment and anti-housing crusader.

A significant issue that can and must be tackled is federalism. With two former local executives running for president, they can push for more responsibilities for local leaders. However, they probably run for president to consolidate power and they will not give up that power.

When Obama won, a lot of prominent African-Americans said that they did not expect that within their lifetime America will have a black president. Shall we witness a true presidential debates and real political parties within our lifetime?

Raising the Level of Political Discourse (w/ comments on the RH Bill)

Obama won! Although my prediction on how many electoral votes he will win is way off the chart (I said 32, latest projection is 365 with Missouri's 11 votes unsettled), he won nevertheless. 

As the US election campaign came to its close, it became dirtier. A lot of name-calling and fear-mongering. Obama was tagged a socialist, a radical, a liberal, a Muslim... not that they are bad or wrong to be one (definitely, I don't mind being called a radical, liberal, left-leaning Muslim.. it is just that, they are untrue).

Towards the end, McCain's campaign became more negative. In one of his speeches, he accused Obama and Democrats that "they are now planning to increase your taxes. My friends, they will raise your taxes... they are tax and spend liberals..."

There is one outrageous allegation that Obama is a baby-killer or that he will allow babies to die. With Obama and the Democrats generally pro-choice and pro-abortion, some people (especially conservative evangelicals) actually believed it.

It is actually disheartening  to see the level of discourse to go that low. I am actually surprised by Mccain's gracious concession speech. It was McCain the statesman, the war hero, the maverick who reaches across the aisle speaking... not the desperate, bumbling presidential candidate.

Turning to local politics, I am disheartened and disappointed by the way the Catholic Church has responded to the Reproductive Health (RH) Bill in the House of Representatives (HB 5043). For the past few weeks, I have listened to priests denounce the RH Bill in their homilies. However, instead of focusing on the Catholic Church's belief regarding life, intimacy and creation, they often resort to fear-mongering and name calling.

Priests talk about the evil intents of lawmakers to promote DEATH. They warn that the RH bill will destroy families, lives and values. One said that human life will cease if lawmakers have their way. From yesterday's homily, the parish priest said that if children were taught reproductive health in schools then parents lose their right to teach it to their children.

(I remember one negative ad against Obama saying that Obama promotes "teaching sex education to kindergarten. Learning sex before learning how to read." Obama actually promoted age-appropriate sex education, designed to prevent sexual abuse).

A few months back, I saw on TV a priest spraying holy water on the seats of congresspeople who supported the RH bill (is he implying that RH bill supporters are possessed by the demon?).

A lot of half-truths and misleading statements are said from the pulpit. And I am in shock and awe. As far as I know, priests are required to finish a college degree. They study theology, sociology, history, language and philosophy, on top of other subjects. Those who go up the hierarchy (Monsignors, Bishops and Cardinals) study much more. Of all people, they should be able to defend the faith based on the Bible, doctrines, dogmas and Church teachings. The Catholic Church should not resort to sweeping statements or making it just a fight between good and evil (with them on the good side).

I understand the difficulty and complexity of discussing the RH bill. It deals with two sensitive topics, privacy and faith. It is very difficult to debate on faith... sometimes it is even futile. But it should not stop us from elevating the level of discourse. The discussion can be raised on so many levels, economic, scientific, medical, political, philosophical, social and theological. It must be debated and then let the people, the couples and families decide. 

As the US campaign has shown, fear mongering and name calling are typically used by desperate people who are losing the debate. I am not exactly sure who is winning right now...

Kudos to professors of UP School of Economics and the Ateneo de Manila University for spearheading moves towards a meaningful discussion of issues!

Read here:
Full text of HB 5043: Reproductive Health and Population Development Act of 2008
Position papers of faculty members of:
UP School of Economics: Population, Poverty, Politics and the Reproductive Health Bill
Ateneo de Manila University: Declaration of support for the Reproductive Health Bill's immediate passage into law
and
ADMU Professors: Catholics can support the RH Bill in good conscience
Statement from the National Academy of Science and Technology in support of the RH Bill.

Catholic Bishops Conference of the Philippines: Our Firm Stand Against Contraceptive Mentality
Documents and Position papers by Couples For Christ: Foundation for Family and Life (CFC:FFL) including Catholic Teaching on Voting for Pro-Abortion Candidates.

Predicting an Obama win

Finally... November 4, 2008... Election Day in the United States of America.

With early voting in place, Nov. 4 is actually the last day for voting and the day votes cast will be counted. I expect Obama to win with 325 Electoral Votes against McCain's 213.

. (Interactive electoral map from ABC News)

Based on tactics and strategy, there are several reasons why I think Obama will win.
1. His campaign is very disciplined and calculated, which I think reflects on his character. He is in control of the situation because he placed the right people at the right position.
 
2. As a former community organizer, Obama knows his ground game. How to encourage people to vote and how to encourage people to encourage more people to vote.
 
3. The campaign was able to harness the full power of the techno-savvy youth and electorate.
He was able to solicit campaign funds from people ten dollar at a time through text.
 
4. His eloquence helps a lot, but the research behind his speeches and interviews are remarkable. He is thoroughly briefed on the background and personal circumstances of the reporters and interviewers (not surprising why the media is biased in favor of him).
 
5. They were able to take advantage of the situation by focusing on the issues. When he started his campaign, the economic crisis is the yet this bad. By luck or prophecy, a campaign based on hope and change sounds better when you are in crisis (as against McCain's campaign of experience and maverick-ness).

Final note... in almost all of McCain's rallies, you'll see his wife, Cindy, behind him. It is very seldom that you'll find Michelle Obama campaigning with Barack. It is because Michelle often campaigns on her own and draws her own crowd. The same thing with vice-presidential pick Joe Biden. With Barack, Michelle and Joe campaigning separately, with the help of Hillary and Bill Clinton at times, they were able to cover more ground.

On the other hand, McCain and Palin campaigned together for one month after the Republican convention. When they campaigned separately, Palin has bigger crowds than McCain.

Once the US election is over...  I hope I'll have the same enthusiasm over the 2010 Philippine Presidential Elections.