Mike Jugo, head of sales of Ayala Land’s Residential Business Group, recognizes the need to build large-scale, master-planned, mixed-use estates.
These mixed-use communities, he says, not only seek to satisfy the evolving lifestyle of homeseekers who continue to demand for an increasingly level of convenience, but also offer investors good potential for capital appreciation.
Ayala Land is one of the country’s leading real estate developers pushing to bring together residential units, commercial buildings and offices in these master-planned, integrated, mixed-use communities.
The Ayala Land executive shares with us more of his thoughts on the rise in demand for mixed-use estates and why these are good investments.
ZipMatch: What’s different about the Philippines Real Estate industry today versus. 5 years ago?
Mike Jugo: The last 5 years have been one of unprecedented growth for the real estate industry, particularly the residential business segment. The five residential brands of Ayala Land – Ayala Land Premier, Alveo, Avida, Amaia and Bellavita – have all posted banner sales years throughout this period. This growth has been present not just in established locations in Metro Manila but also in key growth areas across the country.
One can also look at the last 5 years as a period of innovation. This is partly a result of a highly competitive environment but mostly because of evolving client lifestyles and preferences. Clients, both end users and investors, have become more sophisticated and discerning across all market segments, and this has influenced the way most developers plan and sell real estate offerings.
What will it be like in another 5 years? 10 years?
MJ: The next 5 years will be critical for the industry as real estate developers complete and turn over projects. The ability to execute will be a major differentiating factor as clients – residents, investors and tenants – start accepting and living in the residential products. The residential brands that can deliver on their pre-selling promises will have a solid platform to grow their business in the future.
Buyer preferences will also continue to change as lifestyles evolve. This will push real estate developers to conceptualize and launch highly market centric products and be very selective in choosing project locations. Developers who are able to offer residential options within large scale, master-planned, integrated, mixed-use estates will be able to address this growing market need. An evolving and increasingly discerning market will also present opportunities for niche or boutique in-fill projects highly focused to a particular market segment.
Metro Manila traffic has gotten far worse in the last few years. How is this influencing what type of projects you focus on?
MJ: In many ways, because a strategic direction and key competitive advantage of the company is to focus on large scale, master-planned, integrated, mixed use estates – the residential projects of Ayala Land within these master-planned estates are not as or will not be as affected by traffic conditions. Bonifacio Global City is a fairly good example of this as residents prefer to live in Ayala Land residential developments within BGC because of the integrated live-work-play lifestyle.
Another development we are focusing on is Arca South. This 74-hectare, master-planned, lifestyle and business district will have multiple access advantages eventually via a direct access to the Skyway, which connects the development to the NAIA terminals, Makati City and BGC via C-5. This development shall also have a multi-modal transport hub that will provide future Arca South office workers, residents and visitors, transport options to different parts of the metro.
What locations outside of Metro Manila can we expect to see further investment?
MJ: Ayala Land has been continuously investing in real estate projects across the country as part of its growth strategy and its commitment and contribution to economic growth and nation building. There are major developments in key cities and growth areas in Luzon, Visayas and Mindanao.
The country’s new administration has declared a strong push for massive infrastructure spending with programs lined up to expand and increase the country’s road network and public transport system, power plants, power distribution systems and airports. We will be closely monitoring these projects to look for real estate opportunities to introduce Ayala Land residential brands to the areas and communities that will benefit from these infrastructure investments.
We’ve been in a “boom” market for a long time, will this last? Is it cooling off?
MJ: I think it’s important to understand “growth” in the context of the rapid expansion of the residential property market over the last 5 years. Many real estate developers, including Ayala Land, grew sales at a blistering rate – growing an average of 15%, 25 % to 35% per annum, with some segments experiencing exponential growth. Whenever an industry, real estate or otherwise, experiences this type of growth rate, maintaining growth will be very challenging given the larger base of comparison and greater competition.
And although growth has slowed down for some segments of the market – Ayala Land’s consolidated residential business fortunately continues to increase. This is a testament to the company’s ability to plan and deliver market centric products that provide residential living experiences that is unique to the Ayala Land brand.
As to the market’s overall growth prospect in the future, that will mostly depend on the overall macroeconomic fundamentals of the country, which, at this point, continues to be positive.
What changes do you expect in the industry from the new administration?
MJ: One program we look forward to with the new administration is the accelerated and magnified investment plan in infrastructure. This is a key component to ensure that the national economic growth of the country is sustained.
Where do you think land values are most likely to grow in the next few years?
MJ: Land values will grow in areas where demand for residential units (for sale or lease) will be stable to robust. Makati CBD, BGC & Nuvali prices should continue to be stable given the steady demand in these areas. Units and lots in newer master-planned estates such as Arca South, Circuit, Vertis and Vermosa should have good potential for capital appreciation given the existing pricing in those areas today and the development and build out that will happen within the next 5 years.
Land value will also grow in areas where the government or private sector will invest in infrastructure projects.
We understand that Ayala has introduced a type of bond that can be put towards home purchases. How does this work?
MJ: Introduced to the market 10 years ago, the Homestarter Bond was created to provide potential homebuyers with an investment instrument that allows investors to save up for a down payment to be applied to an Ayala Land property while creating a future customer base for Ayala Land’s residential products. Its innovative structure included first-of-its-kind features like the Early Downpayment Application (EDA) and Bonus Credit. The EDA feature, subject to terms and conditions, allows bondholders to apply their bond holdings, including principal and net interest, as downpayment for an Ayala Land property of their choice during the life of the bond or upon maturity. The Bonus Credit feature, on the other hand, again subject to terms and conditions, provides an incentive to bondholders exercising the EDA option by way of a discount to the net selling price of the property equivalent to 10% of bond principal.
Since 2006, the company has successfully issued almost P10 billion worth of Homestarter Bonds and there has been to date, an almost P1.7 billion worth of Ayala Land residential inventory that has been partially purchased through this instrument.
If you were to make a personal real estate investment in the Philippines, where would you choose?
MJ: This type of question is always very difficult to answer as purchasing or investing in real estate is a very personal decision and the answer will vary greatly depending on who you ask – what is their existing real estate investment portfolio, what is their timeline and exit strategy, etc.
But given my existing lifestyle and current investment portfolio, I would personally take a look at the condominium projects in Arca South. In many ways, it has many of the conveniences associated with a business district like Makati or BGC, but it will have a very different living and pedestrian experience as most buildings will not be high-rise developments. Because of this, natural light and breezes will be different compared to Makati or even BGC. Arca South also has several residential options (Ayala Land Premier, Alveo or Avida) that different market segments may choose from.
Another option is to landbank and invest in residential lots either in Nuvali or Vermosa. Investing in residential subdivision lots in these master planned, integrated, mixed-use estates will be a good store of value in the medium to long term.
How has technology affected homebuyers?
MJ: Technology has empowered homebuyers as they now have greater access to real estate information. They are able to do research at a time and place that is convenient for them and they are able to make better choices because of this. The same digital tools that real estate companies and professionals use have allowed prospective homebuyers to understand and appreciate project details better.
And how has technology changed the way Professionals sell or lease properties today?
MJ: Technology has magnified the reach of real estate professionals both in terms of geography and time. The digital platform has made information more accessible to different markets across the globe. Real estate professionals have enhanced their sales and marketing capabilities by leveraging on real estate specific websites (such as ZipMatch) and engagement in social media. Successful professionals have also employed the use of digital sales tools such as augmented reality or virtual reality, digital brochures or apps and chat facilities to allow sellers to market and sell real estate products better.
What advice do you have for Philippines Real Estate Professionals today? How can they get an edge on the competition?
MJ: The most important advice I could give to real estate professionals would be to uphold the highest values of integrity. Trust and credibility are two critical foundations to succeeding in this industry over the long term.
