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INNOVATION Needed in Property Market / "Key Node" concept


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INNOVATION Needed in Property Market / The "Key Node" concept

 

A new hyper-local approach may shift the balance towards Buyers & Sellers

 

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(this is an actual conversation from a viber chat. Only a few minor edits have been done.)

 

M: E,, have you looked around my website, makati prime.com?

 

M: The focus is on Real Estate related data ( a weak area in PH imho), and on developing a secondary market for certain targeted hyper-local areas in Makati

: If anyone is doing something similar, I might be willing to cooperate, but so far, there seems to me to be a gap in the market. The secondary market buyers and sellers are not well served at the moment. All the efforts seem to be going into the primary market

E: I think there are a lot doing the secondary market but it is not much publicized because the brokers doing it is not doing much advertisement nor do they put a lot in the real estate portals.. Usually, they do it on referrals and word of mouth advertising as well as localized MLS.. I have been buying properties in our buy-build-sell business and usually those properties are not much publicized.. It is being offered to us by the brokers or salespersons..

 

: The reason why they do it secretly and without much advertisement is because in the secondary market, the properties being offered for sale or rent is not on exclusive agreement from the owner so, they will not publish the property to protect their interest.. On the other hand, the primary market can be publish because it is open to all.. it is on a first come first serve basis.

 

M: I think what you say is true, E. I aim to change that for certain projects and parts of Makati. it will be interesting to see how long it takes to catch on. will be quicker if I choose the right projects and can get some help

I think the interest of buyers and sellers will be the first thing considered on my site, and they may both like more transparency, at least in searching for each other

 

E: As long as the seller/broker is protected, they will publish it in any media.. otherwise, if there is no protection, they will just keep if until they will be able to sell it.. my experience is this M., sometimes one property is listed by more than 3 brokers/sellers so, it is really difficult to advertise.. that is why, finding secondary market properties is quite difficult unless you have contacts with more brokers/sellers..

They will just offer it to people whom they trust and have personal knowledge about them..

 

M: "They will keep it"? who is that?
Imho, the model I see here is not fair to buyers and sellers - so I intend to disrupt it

: Haha. Just watch me. I have done it successfully before. But it will be very localized, not all over PH.
: I am curious - who is the "they" in this: they will just offer it to people whom they trust

 

E: Well, that is good if you can disrupt it.. my opinion on this is that exclusivity should be the best practice to exposed the property to more people.
They means that they will share only the listings to brokers or sellers personally know to them.. if it is a buyer, okey for them to share the listing.. but to advertise, it is a big NO..

 

M: Are you talking about brokers when you say "they"

 

E: Yes, brokers and agents..

 

M: I want to help BUYERS and SELLERS - and by doing that, present a different sort of opportunity to brokers and agents. There will still be opportunities, and maybe big ones, but the balance of power may shift in certain hyper-local areas

 

E: Example, If I have a listing in BGC - Alveo project on the secondary market, I will not advertise this if I know I am not exclusive because it can be identified easily by other brokers who may ask the owner to have also an authority..

 

M: Some people are afraid of change, but if people have a clear idea of the change and how they can get an opportunity from it, then they may embrace it

 

E: Sure, they will embrace the change as long as it is beneficial to them..

 

M: Imagine that Buyers and Sellers can more easily find each other in certain locations.... Might you want to be a buyer or seller operating in that location - I think you would, because it would mean more liquidity, easier transactions, and maybe even a higher valuation in the secondary market

If you agree, then maybe you see how Sellers benefit

 

E: Of course I would agree on that..

 

M: They present system suits the brokers more than it suits Buyers and Sellers - that is my opinion
: I know Buyers who would like to buy in the secondary market, but they are not finding enough opportunities, so they may want change too.

: Also, Brokers may win, if they are willing to get involved in this particular slice of the market in a new and innovative way
: Most of their business would remain the same, but for certain "Key Node locations" it could change
: The key to making this change happen, is to make it work well (for buyers and sellers) in a few Key Node locations - and find some brokers who are willing to work in a new way for those locations

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Possible Property Nodes Identified & under development:

====================

(Makati Area)

+ The Rise & Air Residences

+ Kroma & City Gate area

+ Jazz Residences

+ Chino Roces/ Waltermart (ATsanlo, Trevi, Cityland ... Beacon?)

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The Key Node concept can bring Buyers & Sellers together, & make the market more transparent

====================

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M:

The key to making this change happen, is to make it work well (for buyers and sellers) in a few Key Node locations - and find some brokers who are willing to work in a new way for those locations

 

E: If you can create a portal where buyers and sellers could meet, then, it is better.. otherwise, if the sellers will engaged the services of more brokers, then, it becomes a problem..

 

M: Why would Sellers come to my site? I have some answers for that...

 

E: Sure M., as I said, if there will be a good site where buyers and sellers could meet, that will be great.. A service to Seller and Buyer.

 

M: Exactly, That is the plan. I don't see much chance for that now. Skyscraper city could provode that - but they delete people as soon as they try to talk actual business. I do not know why. I have been banned more than once on SSC

If they allowed it, my site would be less unique

But I cannot offer this for all location. I have to focus on a small number

 

E: It's okay if you do it on a small number.. focus location or areas to at least start the ball rolling and quietly move on to a bigger (wider) area..

===

 

M: Yes. That is more or less the idea of Makati Prime, a key part of the mission:

making it easier for buyers and sellers to find each other, and making prices more transparent.

 

EXAMPLE

========

Cheapest seller now at the Rise Makati? At P 4.2 Million
The Rise / 26.49 SQM, no balcony
Selling Price: 4.2M / 26.49 = P 158.6k per sqm
(The developer is now offering 1BR flats at P5 - 5.2 million.)
Question is:
WHY do people continue to buy from Developers when such big discounts are available in 2nd market?

 

Possible answers:
=======
1. People prefer to buy from developers, because the marketing staff is aggressive in pursuing the business
2. People cannot buy unless they can use the developer's financing schemes - ie the don't have cash, or access to bank finance
3. Potential buyers are scared off by "unknown risks" in buying in the secondary market - they don't know how to do it
4. Buyers are simply unaware of the bargains they can get in the secondary market

More here: http://risemakati.com

(note: Views were < 1,935 when the Link was posted)

 

E: Yes M, they thought that buying form the developers are quite easy because of the ready financing scheme.. Second, sometimes, they are thinking that the reseller of the unit in the secondary market is getting big profit .

 

M: I see many resellers making no money or even losing after their expenses. exception may be those who paid cash and or bought below the Vat threshold. this is based on the secondhand sales where I know the price.

 

E: Yes M. Because it is very difficult to sale a unit if the developers has still units for sale in the area.

 

M: Secondhand price Examples:

1 BR in One Central bought by my friend at P115k per sqm including parking space, when Megaworld was selling two central at p150k or p160k.
Also my own place I bought at P95k per sqm in an avida project, and Avida is now offering nearby projects at P150k per sqm, But will I get closer to p100k or p150k?. I reckon, unless I am lucky it will be closer to p100k based on other units I see for sale here

 

One reason I am driven to create this type of site, is I do not see the present market as function very well for myself & friends as we act as buyer or sellers, and I can imagine something better.

 

BTW, the market works more efficiently in other places I have owned property: NYC, London, HK,... So it was a big shock to me that the secondary market was a 25-35% discount to primary market prices. And so I began thinking about how to improve efficiency.

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Falling Rents & Rising New prices should be driving Buyers to the 2nd Market,

but it is not happening much yet. Problems: investor awareness, high bank spreads

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M: People are buying new properties, being told or expecting that they will get a rental yield of 7-8% or higher, and the reality may be more like 5-6%. (or 4-5% see below*)

 

E: Yes M.. It is entirely different in the Philippines. Maybe it is because of the culture and customs of the Filipinos that they want direct from the developers rather than buying in the secondary market.. Seems the mentality of most filipinos are like that.. Besides, it is only now that investors especially on rental properties are learning the science of investment with all the details such as ROI, Price against rental and many others.. Before, very few are doing it.. they just buy and rent it out.. they are more concerned about the rental income and the appreciation of the property.. maybe because not so many investment vehicles are available and familiar with the filipinos.. very few are investing on papers such as stocks, mutual funds, bonds and derivatives.. In fact very filipinos before are getting insurance for their benefit.. its only now that there are lots of information regarding this matter and also in terms of real eatate investment.. In fact many Filipinos especially the old generations have their money parked in the banks without thinking about the inflations, the exchange rates and many other factors. Security is what they are after.. Now is the time of the younger generations with money and open mind to different investment vehicles..

 

M: Yes... The Insurance sector is another area crying out for disruption

 

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*M: Someone is telling me now (in a side conversation) that yields are now down to 4-5% if you buy new

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M: The basic problem is that banks pay maybe 1%, while charging 5-6% on their mortgage loans - this a a huge huge spread of maybe 4.5%. In Hong Kong the spread is only 1.5% or so. Why are PH banks so inefficient? If I was Du30, I would open up the markets - and bring in more competition.

 

E: I really look at the Philippines a lot backward than any other countries that I have visited.. Hongkong, Singapore, Japan, Malaysia and Thailand are far advance that our country which to my mind also creates more opportunities fro investments.. Property prices in those areas are sky high while ours is not that expensive.. European countries have expensive properties as compared to the Philippines.. so far, 4-5 percent is better than the 1-2 percent from the bank.. you may be gaining a little return on the i vestment but the appreciation of the property is more or less concrete..

 

E: The Philippines is open for foreign banks but the problem is they find it quite difficult to do business here in the Philippines.. so, they are either closing or limiting their branches. Example is citibank..

 

R (here enters the conversation): Agree with E. Over time people will learn more investing and efficiencies in property, stocks etc.. No different from China, Indonesia and other developing markets. Platforms become more sophisticated, transparent and efficient.

 

E: But honestly, 5 percent interest is the lowest that we had.. Before, it was 10 and up..

 

M: That is true... If the banks bring their lending rates down to 5%, then 4.5%, then 4%, and maybe lower (thru competition), then this will help to sustain prices. In fact. cheaper properties in the secondary market with 8%-10% yields may be worth buying. But smart buyers are nervous when they see falling rents, and are looking to buy as investors, rather than for own-use

 

M: I agree. Citibank is indeed an interesting example, since they have successfully entered many foreign markets all around the world

 

E: We are still in the learning process and the developing stage.. yup, I agree with you because you have opportunities to invest in other areas.. very few filipinos are doing that now..

 

M: It is surprising to me, since 10% of the citizens of this country live overseas as OFW's and they are exposed to other countries every day

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THIS TOPIC, "Innovation in Marketing Secondhand properties"

 

May be the subject of discussion at a future meeting

of the

Manila Real Estate Investors Group (previously called: "Makati Mastermind")

=====

> see : https://www.meetup.com/Manila-Real-Estate-Investors/

 

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(The group typically meets at 10:30 am Saturday at a Coffee Shop in Makati.)

 

I will advise the date here, when it is agreed

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