Seller Investment Guide
How will the Philippine economy fare amid COVID-19?
The Philippines is one of the more resilient economies in Asia, and will be one of the least affected by COVID-19, The government expects GDP growth to hover between 1.6% and 3%, within the market anticipated to bounce back in less than a year.
How is the market likely to behave when the Enhanced Community Quarantine is lifted?
Retailers, food and beverage, service sectors and other industries that were closed during the quarantine are expected to be aggressive in their push to attract sales.
The mid and upper-income market segments, which are the target markets of SMDC, will take the lead in the recovery of the economy.
For some fixed-income earners, their net cash flow may be EVEN BETTER from pre-quarantine levels due to more careful spending and in general, lesser opportunities to spend (e.g. less expense on transportation, dining out, entertainment) thus, INCREASED SAVINGS.
How should you approach potential investors?
Remind you clients that stable companies such as SMDC will continue to be excellent companies post-quarantine, and will have the resources to quickly recover from the crisis.
Seasoned investors are always on the lookout for good investments. While they may put discretionary purchases (e.g. gadgets, travel, apparel) on hold, they understand the long term horizon of a real estate investment, and that is value will continue to grow with time. The message is: "Life goes on, we will weather the storm". So, it is important to stay the course. As an added push, entice them with time-bound, limited special promos or incentives to push sales if available.
Some things do not change. Emphasize the unchanging truth in real estate investment: the best time to buy is still NOW rather than later.
However, be mindful. While the mid and upper-income markets may have the means, they may be more hesitant to part with their cash as a matter of caution.
Here are some things to keep in mind:
Be sensitive to the needs of your potential investor. Ask questions. Know their priorities, and see how real estate fits into their investment strategy.
Be a reliable, truthful source of information. Provide complete, truthful and accurate information that they may need in order to decide and slowly regain confidence in investing. Sell the opportunity that it's a buyer market.
There will be uncertainly; be a source of assurance. Buyers need to be assured that recovery is on the way, starting by 3Q of 2020, and will continue to grow unto 2021. Also, emphasizes the stability and the role of SM and its companies in nation-building.
Be patient. Sales velocity and turn around may not be as fast, requiring multiple meetings and presentations. It is best to gradually re-introduce options.
Which investments are you competing with?
First, remember you are selling the best financial instrument in the market - real estate property, and you represent the number one real estate developer in the country. Bear in mind, however, that there are other forms of investment vehicles available in the market. Depending on your potential client's risk appetite and investment horizon, the options are aplenty. Knowing the nature of each investment will help you counter objections, and highlight the merits of investing in reals estate.
Let us cite several common investment choices in the country.
TYPES OF INVESTMENTS
LOW RISK, LOW RETURNS
Bank Products. One of the safest investment vehicles, they come in the form of Savings Accounts, Checking Accounts, Certified of Deposit (CDs). Money Market, Placements and Federal Insurance. Generally, bank deposit accounts are liquid i.e. you can withdraw money whenever you need it. However, the safety and liquidity of bank deposits come at a steep price: they are one of the least rewarding ways to grow your money.
Bonds. When purchasing Bonds, an individual is essentially lending money to a company or the government, which then agrees to give the investor interest on his or her capital. However, while they are less volatile than stocks, Bonds are strongly affected by rising interest rates, market volatility, and most especially, institutional stability.
Life investments. This type of investment provides financial protection for loved ones. They include products such as Education Funds, Insurance and Retirement Funds. These are time-or milestone-bound investments that require annual premium payments, to be recovered only upon policy maturity.
HIGH RISK, HIGH RETURNS
Stocks. This is investment instrument is perhaps the most well-known. People are quite familiar with how this particular instrumentality works: when you purchase stocks, you become a part-owner of a business. It is also common fact that stocks are one of the most volatile forms of investments. It is natural for stocks to fluctuate daily, and there is no guarantee that a person will profit from it.
LOW RISK, STEADY RETURNS
Real Estate. Typically, real estate investments generate better-than-market returns, and are an ideal way to protect your assets from markets volatility and inflations. Real estate is a broad-asset class that acts as a buffer against economic fluctuations. The risk involved is manageable since the investor will have the complete control over his investment - use it, manage it while the capital appreciation increases, rent it out to generate passive income, or sell the property at a higher-than-acquisition cost.
What makes REAL ESTATE investment particularly advantageous?
Among the types of investments cited, ONLY real estate can provide TWO streams of income: RENTAL INCOME and PROPERTY VALUE APPRECIATION
Real Estate investment offer FLEXIBILITY: IT DOES NOT HAVE A LOCK-IN PERIOD. An investor can DIVEST and RESELL whenever he chooses. It offers a steady, supplementary income stream that is within hi CONTROL. Through a long-term or a short-term lease, an investor can choose the flow of rental income his property can generate, depending on his needs and requirements.
LOW MAINTENANCE Investment. No daily monitoring of asset value is necessary.
Real Estate is a defensive investment. It is a wise ASSET for those who want to build a strong financial portfolio. While other forms of investment are subject to market volatility, inflation and low-interest rates, real estate is a tangible asset, fundamentally driven by a very basic human need for shelter.
In times of economic slowdown, it is human instinct to protect one's home. This is why residential rental revenues are typically resilient to economic shocks, as demand for housing remains steady even during, and after, a financial crisis.
Real Estate is a Legacy. It is an asset that can be passed on to a designated heir.
What makes an SMDC property the ideal real estate investment?
THE REPUTATION OF THE DEVELOPER
SMDC is the residential property arm of SM Prime, one of the largest real estate conglomerates in Southeast Asia. It has a sound and strong financial standing that allows it to engage the best technical partners, suppliers ad property managers in the industry. SMDChas an excellent record of delivering commitments to its buyers.
LOCATION, LOCATION, LOCATION
Location is the MOST critical factor to consider in investing in real estate. SMDC developments are located along major highways, with some directly connected to mass transit, or walking distance to schools and central business districts. A good location will bring about an accelerated appreciation of value over time, and ensure the rentability of the property.
OPTIONS ARE AVAILABLE TO SUIT AN INVESTOR'S REQUIREMENTS.
Investors have the option to purchase an SMDC property at either the pre-selling stage where it is more affordable via stretched payment terms, or at RFO where they can immediately cash in on rental income..
Borrowing may be cheaper after the community quarantine, as banks are projected to offer lower and more competitive lending rates to spur economic recovery.
FREQUENTLY ASKED QUESTIONS
Do you think that residential real estate prices will go down after the COVID-19 situation?
Real estate is demand-driven. Demand for housing will continue to exist so values should remain steady. However, there will be a slowdown in take-up, which we foresee as temporary. Special promos and incentives will help accelerate velocity.
How soon do you think the real estate market can return to pre-quarantine levels?
The market is anticipated to bounce back in less than a year.
What government programs will help the real estate market?
The BSP is expected to reduce interest rates to introduce spending and boost the economy. This should mean more affordable loans for potential investors.
if and when the POGO industry slows down, or possibly stops after the current administration, will there be a void in the rental business?
The real estate market was already bouyant before the POGO phenomenon. In any event, there are other sources of rental income aside from POGO. There are outsourcing companies, foreign and local investors, as well as tourists (domestic and international) that will continue to sustain demand.