Wednesday, December 06, 2006 Osmeña: Cebu’s realty market By Antonio V. Osmeña Estatements
THE reall estate market in Cebu has now become active. In the early 1970s up to the late 1980s, the real estate market in Cebu was tremendously depressing.
During that time, north reclamation project lot owners were disposing of their lots at P10 per square meter. For those who had the foresight to keep their lots and buy more, the price today is no less than P20,000 per square meter.
Recent events showed that Metro Manila investors, land developers and Filipino spouses of foreigners are interested in Cebu’s real estate business.
Cebu’s real estate market involves residential, commercial, industrial, farm and special purpose properties or recreational land. In the specialized market of residential subdivision, the development covers urban, suburban and rural housing.
The sprawl of residential subdivision, from urban to suburban and rural, is now quite well spread. To illustrate, high-end residential subdivisions are mushrooming in Barangay Talamban, Cebu City.
Unfortunately the government has failed to support these residential subdivision projects with honest to goodness road system. The existing road network could not be classified as a road; it’s more of an alley.
The easy ownership of cars nowadays has encouraged people to live in the suburbs or rural areas, but the hindrance now is the obsolete road system.
Mactan Island is another area where a lot of residential subdivisions have been developed and more are being considered. But, again, the problem is the inferior road network.
Most real estate transactions involve the transfer of space or ownership in residential realty. This is understandable since shelter or housing constitutes one of the basic human needs, next to food and clothing.
The demand for shelter varies, of course, with changes in the number of population and in family composition. The recent trend toward smaller families, together with housing requirements that can be attributed to internal migration and “undoubling” of families, creates an annual market demand of thousands of dwelling units.
As a result, in the past decade, Cebu experienced extraordinary population gains and heightened activity in real estate market transactions. Rental activity, particularly in metropolitan areas, still forms an important part of the total real estate market.
The dwelling units that are often occupied are mostly located in the metropolitan areas and the owners of these units are more concerned about securing a fair return of their investment.
On the other hand, the rental market is highly competitive. Rent levels are in direct relation to cost of housing and contractual service requirements. If rents are set too high in relation to servicing costs, tenants will economize on space and there will be vacancies as a result.
Since housing supply cannot be withdrawn from the market, competition to maintain full occupancy will force prices down.
In the analysis of the real estate market, a study of prevailing vacancy relations of total rental supply should be of interest.
Ratios exceeding three to five percent are indicative of either an oversupply in rental spaces or overpricing.
In either case, downward adjustments in rent are necessary to stimulate demand.
The importance of vacancy ratios as a measure of the economic health of rental housing should be a concern of real estate boards, such as the Pareb–Cebu Realtors Board, to maintain occupancy records as an index of real estate market activity and guide to broker members.
