Mortgage market

‘So much in interest income is lost by transferring the mortgage to another lender. The bank gets back the loan but sacrifices future interest income.’ 

It is not the lesson from the collapse of the home mortgage market in the United States in 2008 that might have prevented the creation of a secondary home mortgage market in the Philippines.

There is no reason not to have a thriving secondary home mortgage market in the Philippines. If there is any at all, it may well be the low-interest-rate regime that has ruled the local financial world over the years.
Interest rates are low only in short-tenor investments. They are not that low for home mortgages with banks. The redemption period could be as long as 15 or so years.

One way of looking at it is the bank that lends the money to a borrower to buy a home sits on the mortgage that long and, in fact, waits for maturity. Instead of lending long, the banks could very well find other investments that may produce the same yields over a shorter period, shorter than the tenor of home loans.
This is more in the mind than in the market place. The simple fact is that, this time learning from the US experience, the danger of a mortgaged home being foreclosed by the lending bank has become minimal.
While there is a “rat” race especially for property developers to find buyers for their apartments, there is at the same time a caveat before loans are given to borrowers. The banks today are remarkably more careful in lending money not only to property but practically to all types of borrowers.

It is now relatively easier to get a loan to buy a car than to get a bank to agree to finance the construction of a home. Car loans have shorter tenors, the longest being about five to seven years.

Loans for apartments (or condominiums as they are called only in the Philippines) are paid over a longer period. The capacity of borrowers to pay is minutely scrutinized before the borrower is given a loan.

That must be the reason the default rate in the property sector is said to be less than 3 percent or thereabouts. If this is so, why do the banks seem to be rather indifferent in moving towards having an organized secondary mortgage market? Such a market would move money much faster and consequently attract more borrowers.

My answer or guess is the fact that in the present regime of low interest rates, it is not easy to find investments that produce at least 5 percent in fixed-income securities, not in sovereign liabilities.
On the other hand, yields on longer-term loans to the property sector can produce interest income of 10 percent or more, compounded annually. The rate is still reasonably low to the borrower but is considered high by the lending banks considering, as said above, that fixed income securities hardly produce 5 percent a year.

Given this situation, why would a bank transfer a home mortgage to another institution to lay its hands on more money? There seems to be no rhyme or reason to do so. The system is extremely liquid.

The lending banks do not have a penchant to transfer home mortgages to a competing bank because they want to keep the profits from interest on the loans.

Banks, particularly those with universal status, have come up with so many non-bank products precisely because loan demand is relatively low. They must come up with products that produce profits with “maximum” yields with minimum risks.

Property loans are such investments. It is for this reason that a bank would sit on a home loan and make interest income rather than transfer the borrower’s obligation to another institution for more money.
There is better sense to sit on the loan and wait for higher interest income compared with other just as risky or less risky lending.

Without the benefit of solid information, I would guess that the banks are reasonably comfortable with their home loan clients. They must be amortizing their obligations on time and paying more in interest compared with shorter tenor loans.

There is no reason to transfer the risk to another institution. So much in interest income is lost by transferring the mortgage to another lender. The bank gets back the loan but sacrifices future interest income. Of course, there is the comfort of averting a possible default, which hardly happens at present.

The bank must look for an instrument using the money produced by transferring the mortgage. Why do so when the mortgage a bank is sitting on is doing relatively well in terms of higher yields and hardly defaulting amortization?

There are clear indications that the market for property has the capability to pay. One of the better signs is the way DMCI Homes sells its apartments. The company practically gets the money for construction from its buyers. It pre-sells the apartments before it even breaks ground. It makes an income or revenue from prepayments.

DMCI Homes has one simple trick very few property developers are able to perform. When DMCI Homes promises the prepaid buyer his home on a specified date, the company actually makes sure the unit or apartment is ready for occupancy three months before the promised delivery date.

Towering urban resort lifestyle at Zinnia

Business Mirror - WITH the rapid urbanization that comes with a fast-paced lifestyle, it’s indeed quite impossible to find peace and solitude in the bustling metropolis. Such a trend even expands to suburbs that are slowly embracing progress and development, limiting the search of some urbanites for the bliss they truly deserve and forcing them to set their eyes beyond the Metro’s horizon.

Cherrie Lyn Cruz, marketing manager of DMCI Homes, however, says, “Not anymore.” She explained: “Our latest project in Quezon City—Zinnia Towers—is an ideal home for mobile professionals and start-up families who are looking for a serene, exclusive and secure place or sanctuary here in the busy backdrop of the city.”

Targeting the end-users and upgraders from Quezon City, as well as the neighboring cities of Manila, Pasig and Camanava area all the way to North Luzon, Zinnia Towers is designed to be a perfect home for professionals and young independent families working their way up in life.

“This is our gateway from North Luzon,” Cruz noted, citing that more than the promise of luxury and prestige, its strategic location brings to them the reality of a safe, comfortable and peaceful high-rise, urban lifestyle they hardly find in other similar developments nearby while giving them easy access to various places of interests.

Joining the five Quezon City residential projects of leading property developer DMCI Homes, Zinnia Towers will soon rise on a sprawling 1.9-hectare property along the dynamic vicinity of North Edsa. The entire development will have two high-rise condominium buildings—the North and South towers—each standing up to 35 floors dedicated for housing complemented by eight parking levels.

Approximately, both structures will have a combined total 1,662 units, 836 of which will be housed at the North Tower and the remaining 826 at the South Tower. Designed to attract discriminating homebuyers, unit mix options are one-bedroom, two-bedroom and three-bedroom spaces ranging from 25 to 85 sq m. For the North Tower, which is in the construction and pre-selling stage, 7 percent of the total inventory is dedicated to studio units, 34 percent for one-bedroom units, 42 percent for two-bedroom units, and 7 percent for three-bedroom units. 

According to Engr. Gerardo Ancheta Jr., vice president of Engineering Design and Construction Division of DMCI Homes, the units can be designed to suit the market’s varied requirements due to their flexibility. But since all the units will be turned over with first-rate finishing and fixtures, he said there’s no need for some modifications or alterations upon acquisition.

Mindful of giving its future residents a first-class condo living experience, DMCI Homes allocates 70 percent of the land area of Zinnia Towers to festive gardens and various lifestyle amenities.

For the outdoor lovers, they have many options, such as the pool complex with its own provision of gazebos and cabanas, a palm promenade, koi pond, barbecue pit, picnic grove, children’s play area, open field, jogging paths, badminton court, well-landscaped open areas and garden trails, and the main clubhouse. On the topmost level, they have additional havens at the sky park and roof deck garden for relaxation, play and socials.

Those who are indoor-bound, on the other hand, have places to frequent to, such as the fitness gym, entertainment or game room, and the reading area. There’s even a multi-purpose hall that can double as a private venue for business or social gatherings.

Zinnia Towers will also feature a convenience store, laundry shop, water delivery service, six high-speed elevators, one centralized mail room per tower, Wi-Fi-ready indoor areas, stand-by power generator, as well as CCTVs in common areas, 24/7 roving guards and guarded entrance gate. A professional team of property management office personnel will also be available throughout the day.

DMCI’s signature trademark, the Lumiventt Design Technology, is apparent in all its high-rise projects in different parts of the metropolis. This allows the maximum entry and flow of natural light and air inside the structure.

Not to be ignored also are the central atriums on every five levels of the building, which bring in the feel of the outdoors through gently manicured greens and organic landscaping. The single-loaded, double-row configuration of the tower makes each condo unit open to the view of the corridor, instead of the neighbor’s door.

“We have a standard pricing to all of our projects. I believe we have the lowest cost for construction. DMCI Homes is also linked with the DMCI construction group of the company, wherein we already have equipment and our own formwork system. We also do the construction ourselves. In fact even the design for the architecture is in-house. We only outsource the other trade designs just like the electro-mechanical and structural works. So, in terms of construction, we would say that more or less we are about 20 percent lower than the other developers,” explained Ancheta.

Cruz says DMCI Homes offers condo units at Zinnia Towers for P73,000 per sq m, which is lower than its competitor’s offering within the vicinity. The pricing scheme, she said, has contributed to the brisk sales as early as the pre-selling stage of the first building.

“We officially launched the project in June 2012 and started constructing the first building in November. By December, we already sold 30 percent for North Tower. Just like our other developments, we expect to sell out the first tower in about one-and-a-half years with a total sales value of around P2 billion. More or less, construction activities will be finished by end of 2015. So we intend to turn over the units at North Tower in May 2016,” Cruz disclosed.

Taking pride in D.M. Consunji Inc.’s (DMCI) legacy with almost 60 years of expertise in the construction and development industry, Cruz looks forward to Zinnia Towers’ imminent success and its company’s continued developments of modern-day living solutions for urban families built with world-standard craftsmanship.

For more details on Zinnia Towers you may contact Reby Ramirez @ 0919.699.3572 / 0916.4044.555 / 0922.883.9308 / 02-4044-534 or e-mail at reby_ramirez@yahoo.com

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.ph.