Advantages of buying property shift from Japan to Philippines

We have long sung the praises of investing in Japan for a number of reasons:
1. Lifestyle, lifestyle, lifestyle - Japan's conveniences and services make it one of the best places to live.
2. Japanese property outside cities is cheap. If you are not bound by job restrictions, rural areas are surprisingly appealing and not so remote. Foreclosed property gets far cheaper in these areas because there is simply no buyers.
3. Attractive yields of 12% make this an appealing place, though you do need to acknowledge that homes do depreciation, and earthquakes can accentuate depreciation rates. Of course the key is to identify the appealing locations.
4. Regional strategy - There is a tendency to treat Japan as a 'single market' but its really a number of cities surrounded by rural areas that don't really matter to the nation's economy. Basically few people live there and they are 'subsistence based' retirees. They will keep doing that until they die. The point is that these areas are depopulating. The people of Niigata and Aichi, etc are however not moving so much to the city centre of Tokyo and Osaka, but mostly to the 'fringes' of these cities. This is one reason why I bought in Hanno City. In the last 8 years, this town continues to grow in population. There is a new Cainz Home Centre, a new library, a shopping centre under construction. There is a university at Motokaji (nearby), the road up the Naguri River Valley has been upgraded. In other regional centres like Masashi Ranzen, the growth is not as strong because it is 1.5 hours from Tokyo on the Tobu-Tojo Line. Hanno is just 36minutes from Ikebukuro, on Tokyo's Yamanote (green) line, and its recently been linked to the Shibuya through its connection to the Fukutoshin Line, with good connections to Shinjuku and Yokohama.

The important fact is that whilst the population in Japan might be falling, the major cities are actually growing, and the dynamics of rail development is shaping where people migrate to. The implication is - investing in Tokyo and other cities is about realising where train services will be built, and how lifestyle values are shaping those moves.

But this story is not 'good bye' to Japan, but hello to opportunities in the Philippines. Why do you need to live in one place. So many of us have the flexibility to do otherwise, or otherwise to buy investment property.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Malaysia pursuing semi- retirement expatriate demand

There are signs that there is going awareness of SE Asian governments in going after the high net worth individuals looking at retirement. Consider that if you have a $US 1million - you can retire in a place like Australia. You will of course have to place those funds into a fixed interest Treasury investment; with eventually some discretion to invest some in 'fully developed' or fully valued property, i.e. not development property.

I have long sold the benefits of the Philippines for non-millionaires. The appeal of the Philippines is that:

1. You don't need much money

2. You don't need a long term visa - you can stay for 18 months without ever leaving the country; and then you can just fly over to Singapore for a weekend, and some straight back.

3. Its a cheap place to live.

The Philippine people are of course very happy to have you; and they are lovely people to a large extent. The problem though is that the cities are polluted and the rural areas are not terribly 'culturally' interesting, and way under-capitalised for the foreign expatriate with a penchant for fun and services. There are of course plenty of resorts offering some form of 'lifestyle'; though I'm sure many of you welcome a more 'cultured' setting than a beach resort. There are places which are better, i.e. Davao City, Cebu City, perhaps Baguio City or even San Fernando City in Pampanga or nearby Subic.

Some of you however might like Malaysia. The government has recently offered a program to appeal to retired persons and semi-retired persons. The appeal of the program is that:

1. Malaysia is pitching it somewhere between the West and developing countries like the Philippines.

2. Its a very attractive country with great food, culture, etc

3. The real estate market is not overly priced - though not cheap either

The problems with it is that conditions are more onerous than for the Philippines as you'd expect; and then you have to tolerate the Malaysian religious thought police. I prefer the secular thinking in the Philippines; but then I'm probably inclined to live in the West for the next 10 years until a place like the Philippines becomes more interesting.

Read more about Malaysia's My Second Home Programme. Malaysians of course speak Bahasa Malay, a similar language to Indonesia's. The good news I found is that there are plenty of Indians, Chinese or kids who can speak English anywhere in the country, so you need not have a problem.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Buying property in the USA

Comment by Bring the pain:

"There are plenty of countries offering 8% - do some research. Rest of the world in a bear market - obviously you are a Sepo and think the whole world (America) is in a bear market. American property is in a bear market because you have a retarded financial and banking system flow on effects include high unemployment, low GDP and unsustainable housing market due to dodgy loans. Bear markets are the best time to buy in a business cycle you moron. Having an asset depreciate in value means you lose money benny boy; get a grip on your economics. Again, the quality of housing in Japan is shocking. Who wants to live in a rabbit cage made out of plasterboard. Good luck getting 12% for a 1dk piece of rubish, good luck keeping the piece of rubish standing for more than 2 years. Rather buy a house in Swedan, houses made out of brick, stable banking system, and no earthquakes. If you want to lose money in Japan buy an investment property".

This is not a response to anything I wrote - but its worth answering. It is true that there are countries offering more than 8% yield. Unfortunately, they are outside of my area of interest because it does not make sense as an individual to have property in too many countries because I'd need to employ staff to manage them.

It is a gross generalisation to say that the US market is 'over-priced', as there are many areas in the USA where the affordability index is 2-3, compared to cities where it can be as high as 10x annual income. The trick then is to find those areas which offer a reasonable balance between lifestyle values and affordability, or reliable rental income and adequate yield, if that is important. Good online marketing can make the difference as well.

It is true that Japanese properties do depreciate rapidly; but that's why you buy property which is old, say 10-12 years old, thus 60% depreciated, and its more than offset by a 12-13% yield. This is most particularly the case in Japan where you can get a local loan and the ability to leverage your investment. The reality is that many people want to live in Japan, and for good reason. Personally, I did not by there for the yield, I bought for the lifestyle. But I was happy to help my ex-Japanese GF get a property from which she gets a 13% yield - its paid off now.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Why buy property in Japan?

Comment by The real expert:

Why would I invest in something that has no capital appreciation? Instead of property investing with an unrealistic target of a 12% yield (never heard of a 5 million unit in north Tokyo), why wouldn't I put that cash into a fixed 8% term deposit? No risk and a guaranteed 8% return on investment, no maintenance headaches, no government red tape headaches, no flood headaches, no housing bubble headaches etc etc. Investing in the Tokyo real estate market would have to be the worst investment decision ever. If you buy a house in Western countries you will get appreciation on your investment, i.e the value of your house will go up unlike Japan where prices go down. Erik your article is total rubish and people should never buy houses in Japan for investment purposes.

The reason is because capital appreciate is just one issue - rent expense substitution or rental yield, depending on your perspective is the other issue. There is typically an inverse relationship between the two, i.e High capital appreciation or high yield. That is why Japanese yields are high. If you can find some structural distortion being corrected then you can get both, i.e. Say the Philippines today because it has 8% yield and good capital appreciation. i.e. There is the realisation that Asian labour is rising in cost, so even low-productivity Filipinos start looking appealing as a source of labour; most particularly because they make satisfactory call centre agents. This market does not rely upon the low-productivity ports in the Philippines. These issues will gradually be resolved, and the Philippines will be more broadly an appealing property market.

Japan only makes sense if you are buying a rural lifestyle property, an inner city land rental purchase of house, or suburban house for rent substitution; and even this might only make sense if you are earning Japanese income and planning to live there over 4 years. Since people love Japan, and 'hope' to live there, this can make a lot of sense.

The other issue is inflation and currency depreciation, which I have alluded to above. Bonds paying 8% in Japan? Unlikely - more likely 1% and paid is debased Japanese yen. The USD is also being debased, so need an bond indexed to inflation.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Trade deals likely to boost Philippines property market

The prospects for Philippines property look very good, and are getting better, after the Aquino government negotiates a $60 billion trade deal with China, after similar agreements with Korea and Japan. This is of course all very positive for the Philippines because this country is on the doorstep to these very large markets. Japan, Korea of course already have high cost labour, and in a decade, the Chinese labour cost, at least on the coast, is going to look a little scary. So the Philippines can expect to benefit from trade, tourism and investment. I expect a lot of these Asians to retire in the Philippines as the nation's standard of living improves. The Philippines has one of the most generous visa conditions in the world. I routinely go there for up to 18 months without having to leave the country. Learn more about the Philippines property market and these trade deals.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Outlook for Australia property

In a number of blogs, we have argued that the Australian property market is not going to collapse. The IMF has come out with the same prognosis. We must remember that the Australian economy has a number of advantages:

1. Currency flexibility - weaker commodity prices or volumes drive exchange rates, and with commodities priced in USD, currency movements provide the perfect hedge.

2. Immigration - The Australian government has the capacity to change the number of immigrants to stimulate domestic demand

3. Future fund - The Australian government has a $200 billion future fund, which could be used to build a high speed, train service around the SE-East coasts of Australia.

4. Business investment - Irrespective of any weakness in China, there will still be a desire to increase commodity supply capacity from Australia, whether coal, iron ore, coal seam gas, etc.

5. Gold mining - Australia can expect a gold mining boom. Australian companies are one of the biggest investors in mining around the world.

6. Government debt - The Australian govt has a significant capacity to sustain spending over 5-10 years. It is probable that this will involve capacity-building, e.g. ports and railways to facilitate future mining, mostly in Qld, NSW, Victoria, NT. I think public sector debt is around 50% of GDP if memory serves me. It could go to 120% without much complaint given the positive outlook.

7. Zoning laws - The government will persist in controlling the release of land, which will assist with sustaining high land prices.

8. Global political revolution - One might also expect a global revolution in terms of the way government is administered.

These parameters will ensure that property holders sustain their property investment value, and that Australia even needs more home construction in coming years. There is no over-supply.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Mini-housing demand in Tokyo growing

The demand for mini-housing in Japan has drawn the attention of CNN.com. See this CNN report on the increasing popularity of ultra-small houses. This house was built for $500,000 on a former car space...building up instead of laterally. There are similar opportunities to fitout ultra-small apartments. Specially designed furniture can make those 20m2 apartment units relatively spacious.

The appeal of course of these cramped apartments is the opportunity to live in nice communities. Maybe that means spending more time outdoors. Where you might ask? Well, some areas are more spacious than you think. I previously lived in Sumiyoshi, in east Tokyo. One of the benefits was the ability to spend time in the outdoors. Japanese rivers provide one of the most spacious environments in Japanese cities. There are pathways right stretching km's up rivers. For example, the Arakawa River.

I question the logic of this house. Does he foresee a trend of more Japanese mothers having incestuous relationships with their fully-grown sons. Japan is indeed weird. I meant all types in Japan...some with experiences stranger than fiction.

Question? What does he do with his mother when he wants to bring a GF home? Only in Japan.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

The humble chopstick - money making miracle

Today I would like to pay homage to the chopstick. After purchasing a property several years ago I greatly profited from the humble chop stick. Far from being simply a eating implement, it is also a versatile cleaning tool. Upon purchasing a property in Japan, some of you will simply contract a local cleaner to clean your home. I did it myself and to good effect thanks to the chopstick. It is particularly useful for cleaning the grime around the bathroom and window frames. You simply break the sticks into 'edged' implements and you get considerable value from what is otherwise a free give-away from your local take-away store.

The other treasure when you are buying a home is the Cainz Home Hardware chain. If or when I buy my next foreclosed property, I will be sure to buy near a Cainz Home store because they simply make renovation very easy. Their products are very reasonably priced, and with so many staff, you are bound to find someone with some level of English skill. They are so helpful I was even able to work things out with sign language, as I have limited Japanese. Check out their website for a location guide to their stores.

Another treasure for me is the Hoka Hoka-tei take-away chain store. I swear you do not want to be located too far away from one of these chain stores. They offer a great array of healthy take away meals for very reasonable prices. I used to always get a salmon and rice dish for Y380 ($US5). Very good meals. Make sure you live near one of those...they are everywhere. You will find them overseas these days, but its not the same menu as in Japan. eg. I have seen them in Australia, the Philippines, but that is a Westernised menu, with a far smaller range of choices.

In Japan they have over 2,000 franchise outlets. Sadly their store locator is only in Japanese, and the Google translator will not work with the Flash software. However, if you click on any 'graphical' 'prefectural button on the map, you will have the option of a scroll-selection in English if you remain in Google Translator, so you can find your nearest store.

The implication is that buying, renovating and living in Japan can be VERY CHEAP. Yes, contrary to popular belief life in Japan is not always the rip-off you might have believed. Food is expensive, but you can eat at izakayas very reasonably. The cost of drinking these days is also very reasonable. I often go to The Hub as a drinking venue in Tokyo and other cities because they attract a lot of foreigners, or Japanese people who want to meet foreigners.

I don't drink much now but the roof-top bars are also good value in you like summer drinking on top of shopping malls. The utilities and eating out in Japan are still expensive, but there are work arounds....some of which are not available in other countries. I can keep my electricity connected for months on a basic monthly service fee in I email them. You can also get pre-paid internet services which make a lot of sense. House insurance is very cheap, as is local government rates. Public transport in Japan is very expensive for inter-city travel, but if you get a few Japan Rail Passes before you go....its exceptionally cheap.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Australian property - is it overpriced?

There is no question that Australian property is over-valued. But we need to acknowledge that it is for structural reasons, and just as the Chinese govt is keeping its currency artificially low, the Australian govt is keeping its property prices artificially high. The Chinese govt using currency regulation; and the Australian govt uses land use regulation. So much for the communist-democratic dichotomy. Near-perfect synergy if you ask me....so we will meet somewhere in the middle, but since we will end up selling our individualistic souls in the process...engaging in moral relativism or moral scepticism if you prefer...we will end up with global collectivism...with govts working in synergy to control your lives. This is probably reason enough to have property or other assets dispersed all around the world. You know about having a diversified asset portfolio...well this is reason enough to spread your exposure. Governments are playing lottery with your money...and lives. The reason they hardly persecute anyone anymore is because you are drowned out by PC-compliant media and organisations, and because they have your money. Is there a conspiracy...its not centralised....and certainly not so conceptually well-planned. Its an alignment of economically and politically compatible interests. They don’t even realise what they are doing to their national values.

So back to the Australian property market. The IMF says the Australian property market is overvalued....Duh! It has been for a decade. The issue is whether its going to fall. The answer is no...at least not nationwide. They might do a few ‘strategically’ placed land releases to the poor, but expect the Australian govt to control prices. You might think they cannot do this. They can so long as they control interest rates (and they do) and the China has a requirement for our commodities. This will be the case for 20 years so no problem. We cannot therefore expect huge increases in Australian property, but you can reasonably expect good growth. Probably bubble? Not likely...at least not for the next 10 years. Strong commodity prices are going to demand interest rate increases. Expect a strong currency too as property prices rise. The AUD is going to break parity with the USD, and do even better. Yep we are probably looking at 1.15. Why? Paradoxically because of high property debt which will give Australians some sensitivity towards excessive consumption. The problem of course is greater import penetration. In a weak global market foreign enterprises will be targeting Australia. So in the long term, we might expect import penetration to balance out those currency gains. Govt spending will also have an impact. The high prices can be expected to remain in the cities because of strong population growth and employment.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

The AUD will continue to diverge from the NZD

We can see from the following chart that the NZD is in a long term decline against the AUD. We might ask why, and what prospects are there that this trend could turn around. The NZD:AUD decline since 2005 marks the start of huge capital investments in Australia, which has resulted in Australia's national income and savings surging whilst NZ's has gone backwards. This of course mostly arises due to mining and energy investment in Australia. See chart in Google Finance.

The significant rallies in the NZD that you see in that period relate to rises in NZ interest rates, and the NZ Treasuries efforts to quash NZ domestic spending....which was mostly on the rural batch, as well as the ancillary jet ski, motor bike, fishing boat and jacuzzi which went with it. Today the batch is perceived as a waste of money, courtesy of a change in government policy, which has ceased to reward such lifestyle decisions. Now, a great many NZ'ers are selling their 'sections' they use for trout fishing, or their holiday house by the sea. The market will probably resume however, and the strong Australian dollar might just be the impetus.

Australians have to be asking themselves whether anything is going to change. The answer is Yes, but not for probably another 5-10 years. Why do I say that? Well, NZ has to absorb a great deal of housing debt, so there is not going to be any significant spike in interest rates yet. Australia has even more debt, but far better prospects for paying it off. There will also be a stronger Aust economy, with the prospect of stronger interest rates making it even easier for the AUD to outpace the NZD.

It might not be so evident yet, but I see NZ having its own resource boom in a few years. Why? Well, NZ is a relatively small, unmineralised country. Its rocks simply have not been around long enough, and the mineralised core from the current mountain building will not be exposed for another 10 million years. The country does however have large tracts of maritime territory. In fact its the size of the EC. This maritime territory is known to possess vast resources of methane hydrates. In addition, these offshore sedimentary basins may contain vast oil & gas resources. They have not been significantly tested. Even NZ's sole producing basin - the on & offshore Taranaki Basin has hardly been explored, particularly at depth.

It was only last year that the country commissioned a relatively small oil & gas field called the Tui field. The impact of the field on NZ's terms of trade were significant, despite its small size. The Chinese, Indians and others are going to be looking for cheap energy inventories in future years. With access to such resources tied up by major oil & gas producers, extorting high prices for their products and resources, its probable that places like NZ are going to attract a greater share of the exploration dollars, and some of this will lead to success. A significant find is probable, and for a 4.3mil population, its probable that it will make a big difference, not only in pushing up the currency, but by stimulating interest in NZ's offshore basins, which will attract even more interest.

This will take 10-20 years to unfold of course. The implication however might be significant if you perceive NZ as a nice place to retire, or to buy a holiday house. In the short term, the NZD is certain to continue its fall, but it might be a good idea to consider these factors when considering retirement in NZ. In the short term however:

1. NZ immigration is mostly outwards to Australia - that is - Australia's is growing faster

2. Australian export volumes and prices are fairing better - even though NZ milk and timber is doing well

3. Australian business investment is phenomenable, NZ lacklustre

4. Australian savings are far higher

5. AUD will out-perform the NZD for the next 5-10 years, so expect the NZD and AUD gap to continue its divergence

6. Thereafter (say 15-20years off) you might expect the NZD to recover, and do rather well based on my expectations for the recovery of methane hydrates and conventional oil & gas offshore, as well as the mining of coastal titanomagnetite (titanium-rich iron ore), which will by that time be far more strategically important. Currently Ti-Fe is hard to separate and use, and the appeal of high strength steel alloys is only just starting to take off. NZ deposits are relatively remote, so early mining will be of Chinese, PNG and Russian deposits.

The other important factor when you make these Aust-NZ comparisons is to consider the extent to which NZ will benefit from integration with Australia. The issue of course is that NZ is a lovely place, but nothing happens here. If we want to look at what difference greater integration is going to make, then we only need look at South Australia. Does it benefit from being part of Australia? Not significantly, because like NZ, its a small population remote from the rest of Australia. And NZ is split into two islands, so its like two Sth Australia's. Australia is very much concentrated on NSW, Victoria, Queensland and WA. The other states are really mere appendages to the demand created by these states, whether its in existing population or population growth-related demand.

The appeal of NZ integrating further with Australia is mixed. It will make a marginal difference to NZ's competitiveness, but at the same time it will make it easier for NZ'ers to go overseas to capture some of that income disparity. Of course they can always come back to NZ in around 12 years time (to retire) when the currency bottoms against the AUD. The big difference for NZ will come from access to Australia's capital markets. Already the countries are talking about integrating their respective legal systems. This will make it easier for the countries to jointly regulate and administer business. This will make it easier for Australians to buy property in NZ, and it will make it easier for NZ'ers to invest in Australia, giving them access to a broader variety of investment opportunities. The appealing aspect of this is access to mining investment opportunities, and probably technology investments, as well as helping NZ technologists to finance their developments given the lack of savings in this country. This will of course aid NZ financial literacy....which has already been favourably impacted in Australia by compulsory superannuation, and most particularly a plethora of privatisations there. In NZ, the bulk of the funding for privatised assets was offshore.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Philippines property - contrarian investment

Property investors beware. You are about to be introduced to one of the best opportunities to buy property you will ever have. The Philippines has long been the 'dislexic' tiger of Asia. It always had a lot of promise, but it could never overcome the legacy of corruption and inept administration. There is perhaps ever reason to think that a solution is not far off, but it will be another 6-8 year. In the meantime, there is every reason to think that the economy will perform ok.

There is good reason to think you will get a great opportunity to buy property there. The reasons are explained in this post I wrote about the current president Noy Noy Aquino. I believe there is very good reason to expect a 'Thai style' military coup. This is of course the time to research, to set up your bank account, and to be ready to transfer funds. During the last crisis - the Asian Currency Crisis - a large amount of money was made and lost.

The implications are that you will never get a better chance to buy property in the Philippines. Any such military-police takeover of government will result in the Philippine peso plummeting to new lows. Check out the currency here, whilst I have indicated support levels on the following chart.

This is the time to be a contrarian investor - both for foreigners and Filipino expatriates. The Philippines is a good long term story. The population is growing at 2% per annum, the economy benefits from a lot of remittances from expatriates abroad, it is the focal point for outsourcing of Western businesses professional services like call centres, etc. The benefits will not be confined to Manila. It is also just a 'stones throw' from China, so expect a lot of tourism, investment when China becomes overheated. The Philippines already has a large Chinese community.

We have written a Philippine Real Estate Guide (2 eBook set) which describes the opportunities in the Philippines property market.

Philippine Real Estate Guide

Foreclosed Japan Guide NZ Property Guide AuthorAndrew Sheldon Applied Critical Thinking | www.SheldonThinks.com

Premium NZ property anyone?

Harcourts NZ, the local property brokers, have flown company representatives over to China and Hong Kong in order to sell a package of high-end NZ properties. NZ is of course an appealing market because of its idyllic natural environment, however given the small size of the local economy, during an economic squeeze like the current recession, it is often difficult to find buyers.

Prospective buyers will need to contend with the local foreign investment restrictions. Among the properties available for purchase are:

1. Private islands

2. Agricultural properties

3. High end residential apartments

Prospective buyers might be interested in our report on the NZ property market.

NZ Property Guide Philippine Real Estate GuideForeclosed Japan GuideAuthorAndrew SheldonApplied Critical Thinking | www.SheldonThinks.com

Australian property - Morgan Stanley misguided

I am going to weigh into the Australian property debate. The issue was sparked by an academic Steven Keen, who was unsurprisingly proven wrong with assertions of a dire collapse in Australian property prices. Its just not going to happen. Now there is a guy from Morgan Stanley saying there will be a slow decline in Australian property prices. I care to differ. The reasons are the following:

1. Interest rates in Australia will not rise, the Australia dollar will go up. Is that a concern? No, because I think commodity prices will be buoyant, and the govt would prefer commodity producers to suffer rather than homeowners.

Sydney, CBD, 2009

2. There is a raft of huge energy, iron ore, coal, coal seam gas projects to be developed in Australia, each spelling a huge amount of investment in the country

3. There will be a raft of Chinese and Indian investment in these projects over the next 2-3 decades, and that will free up Australian equity to fund all manner of investments and consumption, not to mention tax receipts.

4. There is still strong (i.e. bent up) demand for first homes and home upgrades, and that will continue

5. Neither government is going to allow land releases to severely undermine urban land prices. I see utterly no discussion on land zoning.

6. Mineral exports will increase over this period because of strong demand from China and India. China is not going to stop spending. It is finding even more reasons to invest. It now has to produce a lot of its own iron ore because Australia, Brazil and India are playing hard ball. So they will need new steel mills, new power stations, new railways, etc.

Mosman - Lower North Shore, Sydney, NSW

We are in the midst of an economic era which will never be seen again. There is really no historical precedent for the period we are currently passing through, and it will not be repeated again on this scale. You have half the world's population undergoing liberalisation, at a time when population growth rates can only fall, so the stimulus is never going to be greater from population growth. Even if governments ceased to be centrally controlled, and reason was the standard of value, it is doubtful that the current wealth production would be achieved because of the reliance on consumption by politicians (i.e. Because they undermine productivity through their very existence).

For this reason, I don't see a collapse in Australian property prices, or even a slow leak. I see a government which will be looking to achieve a sideways movement in property prices in order to allow household debt levels to come down. If they spark a property bubble by preventing interest rate increases, they will leave voters with no one to blame in an uncertain international climate. They will be able to do this because employment, immigration and capital inflows will sustain economic activity and per capita incomes.

There are however some caveats to this:

1. If the Liberals win government, they plan to cut immigration so this can be expected to reduce demand for property. I don't think this will have too much difference.

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AuthorAndrew SheldonApplied Critical Thinking | www.SheldonThinks.com

Election implications for Philippines property

I was actually in the Philippines immediately after the election result. Just for 6 weeks mind you, but long enough to observe some of the political play, as well as time for a holiday. I visited Camiguin Island and Puerto Galera. Camiguin Island was recommended to me years ago by a resort developer there. Having been there, it has some attractions, but its way too under-developed. I will publish a separate post on the place, as well as Puerto Galera for property buyers interested in those places.

El Nido, Palawan, Philippines

My assessment of the election is that the economic spending will fall a bit after Arroyo's unsustainable 'spend' on roads. I am suspicious of the new president Aquino's anti-corruption credentials based on some statements, but his appointments look credible. He has conveyed that his economic policy is the same as Arroyo by appointing her finance minister. The Philippines GDP grew 7.1% last quarter....as anticipated by us 18 months ago. The fundamentals for the Philippines are very good. A lot of construction going on, remittances continue, call centre business grows. Expect the poor Aussies and Kiwis, etc to come over for their dental services next, and Americans for their 'uninsured' medical. Out-sourcing continues.

NZ Property Guide Philippine Real Estate GuideForeclosed Japan Guide AuthorAndrew Sheldon Applied Critical Thinking | www.SheldonThinks.com

Are OFWs really buying property?

The Philippines Inquirer "Property sales to OFWs are rising" (7th Mar 2010) seems to suggest inconclusively that Overseas Foreign Workers (OFWs) are buying more property in the Philippines. This strikes me more of biased reporting by interests aligned to the property developers. Certainly remittances are rising - up some 16% if I remember correctly. Though I would suggest increases in interest rates, new property sales, non-property-related remittances and long 20-year loan commitments could readily account for those increases, not to mention uncertainty about the US market, the talk of weakness in the USD, concerns for family during recession, volatility or uncertainty in investment markets.
I suggest instead that the ratio of OFW buying has increased as a proportion of total sales because local property buying has declined significantly. The increase in domestic tourism might suggest that Filipinos are spending more on recreation rather than capital investments. I think if there was more to this story, they would have provided more detail on absolute sales numbers. This is not an easy number to determine because some OFWs are inclined to buy in the names of local family. My experience tells me to be suspicious of this argument. Property developers will benefit from prior commitments to incomplete properties. They should thus record reasonable sales for this year, though I suggest it probably does not look so good for 2011.
You can read the article on the Philippines Inquirer website.

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Andrew Sheldon
Applied Critical Thinking | www.SheldonThinks.com

Philippines attractive to Europeans

A gentleman the other bought my report from Spain. It was my first customer from Spain, so I was surprised; however I quickly made a connection with the current banking and currency crisis in Europe. I am aware that wealthy Greeks, Portuguese and Spanish investors are pulling their money out of Euro. This is understandable given the possibility of these countries being ejected from the EU. I actually think this is a desirable occurrence. These 3 countries and a number of Eastern European countries would be better served by their own currency.
I can nevertheless see the interest of this particular customer in the Philippines because of the historical Spanish influence in the Philippines, the similar values, the property fundamentals, the economic fundamentals. The Euro is not faring great against the peso, but even still the trading band is relatively narrow, so no great loss in making transfers now. Over the last 5 years the Euro has traded between PHP60-70, so not much variation.
The Philippines is some of the best exposure you will get to Asia. Its about as Western exposure as you can get to Asia without paying a premium for the currency; as you will do buying property or other asset classes in Australia, Canada or NZ.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide

Philippines property report - reform minded economy

We have just finished our latest report - the 2nd edition of the Philippines Property report. This report is updates the 1st edition, which was already a very comprehensive 2 volume report. The latest report is 345 pages. Some people would prefer a shorter report, however everyone has different knowledge on each country we look at, so we attempt to consider all pertinent material. For those wanting specific information, there is a detailed table of contents included, which can be downloaded from this site.

Some of the pertinent facts which might interest readers is the opportunity for people to buy rural banks in the Philippines. For those of you with a reasonable about of money, a micro-finance business might appeal to you; particularly as you could play a part in the improving standards of micro-finance or banking in the Philippines. These banks have higher rates of non-performing (foreclosures) loans than the main banks. Some rural banking reforms are currently under consideration including foreign investment (up to 40%) and the ability to offer insurance products.

Another big development in the Philippines is the growth of tourism. The Bicol area has recorded a 163% increase in domestic tourism in the first nine months to Sept 2009, including an increase of over 20% in foreign tourists. The Dept of Tourism has been spending a lot of money on tourism. I have noted the difference on my last tour around the Bicol region and Mountain Province. The Bohol area is another popular place, both for local and international tourists. This is of course important for resort developers. Resort developers are looking further afield than places like Boracay and Cebu, which appeal mostly to the Koreans and Chinese.

Property yields in the Philippines are still pretty reasonable at 9%. I would expect these to rise again from the middle of the year as a result of inflation; though I suggest they will rise in lock-step with higher property prices. Buyers are still interested in the residential market, with the commercial market taking the brunt of the recessional doldrums. The fact remains that remittances to the Philippines are strong, Business Process Outsourcing (BPO) is strong, tourism is up 16% and commodity prices are strong as well. By all measures, the Philippines is ready for business and investment.

We considered in the report the appeal of other markets. Thailand is one country which ranks highly, and others might consider property in Indonesia, which offers higher yields. However Indonesia has very tight visa conditions, and does not demonstrate the same level of fiscal reform. I have for the last 2 years been impressed by the progress of reform in the Philippines. More progress is needed in areas like productivity, reform of the ports, the efficiency and fairness of tax collection, reduction in corruption. Aside from corruption I can see some progress in these areas, but a lot more needs to be done. Thailand's yields are not as attractive at this point.

The improvement of infrastructure will mean a great deal for the country. A few years ago we bought some land in Lipa for P750, and already we are fielding interest at P2,000 per m2.

NZ Property Guide
Philippine Real Estate Guide
Foreclosed Japan Guide

Regional growth in the Philippines

Here are further signs that the Philippines economy are retaining their strength as we predicted in our property report. The implications for Philippines property are significant. It must be appreciated that call centres are emerging as a significant employer of Filipino labour in the country, as call centres around the world close in favour of Philippine operations. Well not close, so much as downsize, as there are significant constraints teaching a Filipino to speak like an Aussie or NZ, or how to spell Auckland. General knowledge was never a strong point for any country in Asia. English is a strong point for the Philippines, so expect this trend to continue. The lack of general knowledge is a cultural divide which will closely be closed. In the meantime there is still a huge market for call centres in the Philippines.
Most call centres are being established in Metro Manila, but slowly they are shifting out into regional satellite cities as well as other cities around the country. More call centres will be built in regional cities as communications infrastructure improves. The attraction is the cheaper labour in these regional areas. The cost of living is lower and staff are more loyal since there tends not to be so many competing call centres to poach your staff. People are more relaxed and lifestyle orientated, but that is an obstacle as well, as much it might help to retain staff.
The impact of call centres is readily apparent. You can imagine the impact on a small city to suddenly have a few call centres in an area. Each of these students is living at home, earning $400 per month, and they want to eat out and drink with friends. Whereas I used to eat at empty restaurants in Lipa City, now they can be full of young people. There is a Starbucks coming to Lipa City.....about a year after a number of smaller coffee shops sprang up. Likely some of these businesses will fail and become upmarket bars instead. The growth of such services will make these places more attractive to business executives wanting to relocate out of Metro Manila. The Southern Highway from Manila is currently being upgraded. Eton City is planned in between, which will be just a 1hour commute from Lipa City. There are already a number of high class golf-residential resorts in the Lipa City area. There is already 3 shopping malls - SM, Robinsons and Fiesta. The place is overrun by franchises, but expect more boutique-style businesses in future.
This is just one of the locations progressing in the Philippines.
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Andrew Sheldon www.sheldonthinks.com
http://foreclosedjapan.sheldonthinks.com
http://nzproperty.sheldonthinks.com
http://philippinesrealestate.sheldonthinks.com

The attraction of buying Philippines property

We encourage people to buy property over the next few years in the Philippines. There are a number of reasons for this we have described in our eBook, both market related and also regulatory. There is the 2% population growth that few countries can match. There is the even higher rates of growth in satellite cities as people migrate to get jobs. There is the changes to the regulation of land use, which make it harder for people to develop land, and developers to build condos. These factors are just some of the factors which are going to increase property demand and reduce supply. These ideas and many others we explore in our eBook on "Buying Philippines Property". The Philippines is the only property market which has yet to experience a property boom. Its on the doorstep to China, its regional airports are already receiving direct flights from China, and the Philippines is already a Chinese-affiliated country.
The Dept of Tourism in recent years has also upgrades national tourist infrastructure. All the trends are good.....its just a matter of time. The Philippines offers more generous visa conditions than any other country. You can stay on a tourist visa in the Philippines for 18 months before you are obliged to leave. Hardly an obstacle since flights to Japan, China, Singapore and other places are only $US100+taxes, and most people have reasons for a change. The country is of-course English-speaking. Buy the report now!
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Andrew Sheldon www.sheldonthinks.com

Aust-NZ common market will drive property prices

The leaders of Australia and NZ - PM's Kevin Rudd and John Keys - have moved a step towards a common market which will reduce the cost of flights between Australia and NZ. The steps to be taken in the next year will see trans-Tasman customs and immigration abolished, so an entry into NZ is essentially an entry into Australia. This will spell a travel revolution for Australia & NZ, a property boom in areas, but it could also be expected to cause a flight of more people and jobs from NZ (in general). It will mean more tourism for NZ though. The implication is clear:
1. NZ Property around airport hubs like Christchurch, Palmerstown North, Dunedin, Wanganui, Hamilton are going to get a lot more expensive.
2. Queenstown-Wanaka are going to benefit the most because of its tourist icons and restricted land because of its mountainous geography.

The operating costs on trans-Tasman flights will fall by at least 30% and expect an increase in the number of new routes being flown. Jetstar says the savings for the airlines will be about $60 a passenger one-way.Typical prices can come down from $200-$210 to $140-150 [one-way]. Even greater reductions are possible by using the smaller airports. New destinations could include Avalon (Melb), Newcastle and Hamilton in Australia side and Hamilton, Palmerston North and Queenstown in NZ. The implication is that NZ property is looking very attractive for Australian buyers.

The common market is motivated by NZ's desire for greater access to the Australian market, as well as the airline's desire to stimulate travel by removing the government imposts (extra airport charges and government taxes) that don't apply to domestic travel.

Bruce Buchanan, the CEO of Australasia's low-cost carrier, Jetstar, has been a leader in the campaign to integrate the two countries aviation industries.

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Andrew Sheldon www.sheldonthinks.com

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