SMIC executive sees imminent property glut
MANILA -- A top executive of the Sy-led SM Investments Corp. (SMIC) expects a glut in the property sector in the coming years.
But SMIC Chief Financial Officer Jose Sio said he was uncertain on when it would come and how big the excess would be. Sio spoke during a forum conducted by the Economic Journalists Association of the Philippines (Ejap) and ING Bank.
Earlier this month, the real-estate services firm Jones Lang LaSalle reported that in the next five years the future of condominiums supply in Metro Manila alone would reach 149,920 units.
The bulk of this, he said, would come from real-estate developer SM Development Corp. (SMDC), accounting for 23 percent, or 34,482, units of the total supply in the pipeline from 2013 to 2018.
From all the condo projects to be built by then, the majority would be mid-end horizontal projects, which will have a lion’s share of 96 percent, or 144,330 units. The high-end ones would contribute only about 4 percent
or 5,590 units. Price- and size-wise, the mid-end condo projects range between P1.5 million and P10 million and below 150 sq m per unit; the high-ends are P10 million and above, with over 160 sq m each. Sio said property companies should have few debts so they could sustain their growth once the glut happens.
“If you’re a highly leveraged you cannot service the interest, you cannot service the maturing debt. That’s the problem,” he said.
Apart from real-estate developers, the executive said he was also worried about banks that have too much exposure on property lending.
Sio, likewise, raised a concern about the Association of Southeast Asian Nations (Asean) market integration in 2015, when the country would allow banks in Singapore, Malaysia, Indonesia and Thailand to come in—the same way the other Asean members would allow local banks there.
“The bigger banks [now] are in Malaysia, Indonesia and Thailand. We have too many small banks here that when that thing comes, we don’t know the picture. But these bigger banks, I’m sure they want to expand here,” Sio said.
To help sustain the Philippine economy in the long run, he sees more consolidation and mergers of local banks.
“I see, I feel that there are many discussions going around,” Sio said.