NCR construction materials retail price growth hits 34-month high

Retail price growth in construction materials in Metro Manila rose 2.1% year on year in October, the largest increase in almost three years, the Philippine Statistics Authority reported Monday.

According to preliminary PSA data, the rise in the October construction materials retail price index (CMRPI) accelerated from 2% in September and 1.4% a year earlier.

The 2.1% reading in October was the largest since December 2019, when retail construction materials prices grew 2.5%.

In the year to date, the CMRPI was up 1.4%.

The October result was driven by faster growth in plumbing materials (1.8% from 1.3% in September), tinsmithry materials (3.6% from 3.1%), and miscellaneous construction materials (2.8% from 2.5%).

Retail price growth in electrical materials was unchanged at 1.3%.

“(The increase) in construction retail prices may be due to the resumption of many construction activities as the pandemic situation improves,” Asian Institute of Management (AIM) Economist John Paolo R. Rivera said.

Mr. Rivera noted that even with increased demand, the supply of construction materials “may be slow to catch up” due to disruptions in the supply chain brought by the Omicron variant of the coronavirus disease 2019 (COVID-19).

“If the Omicron variant is contained and supply constraints from abroad are managed, we might see improvements in retail construction prices,” he said.

BDO Unibank, Inc. Chief Market Strategist Jonathan L. Ravelas concurred, adding that the supply chain bottlenecks are “still being felt in the prices.”

“Prices will continue to be elevated,” Mr. Ravelas said.

The Department of Health announced on Dec. 15 the detection of the first two cases of the Omicron variant in the Philippines. As of Monday, four cases have been detected.

Source: PSA and BusinessWorld

Infrastructure Spending Exceeds Target

Government spending on infrastructure from January to September hit P641.5 billion, exceeding the nine-month target by 8.9 percent, due to the construction of more airports, railways and roads.

The latest Department of Budget and Management (DBM) data on Wednesday showed that end-September expenditures on infrastructure and other capital outlays surpassed the P589.3-billion program and jumped 42.1 percent from P451.5 billion a year ago.

In a report, the DBM noted that the P190-billion increase in public infrastructure spending contributed more than half of the P353.6-billion rise in the national government’s total disbursements in the nine months to September.

“The implementation of various road infrastructure projects of the DPWH (Department of Public Works and Highways) nationwide, aviation and rail transport foreign-assisted projects of the DOTr (Department of Transportation) such as the Tacloban, Kalibo and Bukidnon airport projects and the Metro Manila subway project phase one, and projects under the DND’s (Department of National Defense) revised Armed Forces of the Philippines modernization program” boosted the end-September spending, the DBM said.

The DBM also attributed the above-target nine-month infrastructure expenditures to the settlement of accounts payables and faster implementation of infrastructure activities of the DPWH amid the looser community quarantine restrictions.

In the third quarter, infrastructure spending amounted to P214.9 billion, up 39.9 percent from P153.5 billion last year and 26.6 percent more than the P169.7-billion goal.

In September alone, the amount spent on infrastructure grew by a fourth to P71.2 billion from P56.9 billion a year ago mainly on the back of the “implementation of DPWH projects nationwide, such as the construction, repair, rehabilitation and improvement of access, bypass, and diversion roads, bridges, flood mitigation structures and drainage systems, and the construction of multipurpose building; and projects under the revised AFP modernization program of the DND,” the DBM said.

Lower subsidy releases

If the infrastructure components of equity and subsidies injected into state-run corporations as well as transfers to local government units were included, overall nine-month infrastructure disbursements would amount to P807.5 billion, up 35.7 percent from P595 billion a year ago and 1.2 percent larger than the P797.5-billion program.

However, the DBM said the growth of total infrastructure disbursements was tempered by the lower-than-programmed subsidy releases to the Bases Conversion and Development Authority and the National Irrigation Administration which were based on their special budget requests.

For the rest of the year, the DBM said the national government’s overall spending would continue to be driven by infrastructure and other capital outlays based on the submission of progress billings for completed/partially completed projects that were started in the earlier part of the year, and the reopening of classes that would jack up expenditures in the education sector.

The Cabinet-level Development Budget Coordination Committee had planned to spend P1.02 trillion on infrastructure development this year, equivalent to 5.1 percent of gross domestic product.

In a report this month, the UK-based think tank Oxford Economics said the Philippines’ ambitious “Build, Build, Build” program would provide vital support to the domestic construction sector.

Source: Inquirer.net

Millennials: The Next Super Investors

Millennials are now a force to be reckoned with in the property market, and despite the economic slowdown due to the pandemic, their interest in real estate investing is growing.

Snapshot: Excerpt from recent CBRE report into Asia Pacific Millennials

Who are these millennials, also known as the Generation Y segment? They were born between 1981 and 1996. According to a Statista survey, 70 percent of the global workforce last year was comprised equally by Gen X (born between 1965 and 1980 ) and Gen Y. Forecasts however suggest that the Gen Z (born between 1996 and 2015) will make up nearly a quarter of the workforce as they start to enter adulthood.

According to an article written by online newsletter Brink, “one-fourth of the Asia-Pacific workforce is made up of millennials, representing an estimated $1.1 trillion in buying power in 2020, making this demographic one of the most important consumer bases in the region”.

Similar socio-economic mindset

In the Philippines, most millennials are fully employed. Typically, the younger set occupies supervisory to middle level-income jobs, while the older ones are ensconced in the senior manager level category (director or vice president position).

Many of them are still single and reside with their parents but for the unmarried 30-something millennial, independent city living has become an aspiration.

Millennials are a diverse group but they all share similar socio-economic mindsets when it comes to homebuying. The elder millennials are well into adulthood.

On average, a big chunk (more than 70 percent) of my MBA students at the Ateneo Graduate School of Business are millennials. They are financially prudent and half of this segment have expressed their desire to eventually invest in a home. Many are still single but they are saving money so they can purchase their dream condo that’s conveniently closer to their places of work.

If Gen X has the three C’s (cash, condo and club membership), Gen Y is bent on having the two C’s (cash and condo), especially with pre-developed home prices and terms of payment practically within reach.

Admittedly, the surge in demand for residential purchases for more than a decade was disrupted by the pandemic and despite soaring unemployment that peaked in the fourth quarter of 2020, middle and senior level Gen Y executives are still optimistic about their long-term future.

Influencing the purchase decision

A digital-first generation, millennials rely heavily on social media to share content with their peers, promote the things they adore and get closer and personal with their favorite brands.

For property developers wanting to influence the purchase decisions of a millennial audience, social media provides you with limitless opportunities to do just that.

Millennials coming from a middle-income family tend to get a helping hand from parents eager to make sure that their children are secured with their first ever major investment—the purchase of real estate.

This practice of parents providing financial support and credit guarantees so their adult child can finally purchase a condo unit represents more than 60 percent of all homebuying purchases.

A typical millennial would usually shell out anywhere from P3 million to P7 million and their preferred locations in Metro Manila would be Makati, Bonifacio Global City, Taguig and Ortigas.

For Cebu, the hands-down favorites are the Ayala developments at the IT Park. In Iloilo, the preferred destination is the Megaworld township development, Iloilo Business Park.

‘Superior investors’

But developers must take note that there is also a category of high-net-worth (HNW) millennials coming from second generation business families or successful startup entrepreneurs and investors who have made a fortune and can now afford to invest and venture in high ticket properties.

We refer to them as super investors and they are savvy in many respects with excess money to spare for as long as these real estate purchases ranging from P10 million to P80 million would provide attractive yields.

This segment is something developers should cast an eye on. Pre-pandemic sales of condominiums were primarily driven by overseas millennials coming from China and these pent up demand fueled price surges in the Bay Area traversing the cities of Parañaque, Pasay and all the way to Manila.

With the slowdown of overseas investors, developers must now creatively establish a solid plan to lure this local yet powerful segment.

The real challenge for developers is all about creating a powerful differentiation on their products.

To shift the share of mind to share of heart to share of wallet, products must be compellingly and emotionally different.

Source: Inquirer.net