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News Top Stories Construction cost up 20%; property firms hurting
News Top Stories Construction cost up 20%; property firms hurting
| Construction cost up 20%; property firms hurting |
| Saturday, 21 June 2008 16:01 | ||||||
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Some are rushing to acquire raw materials several years ahead of the required schedule, while others are considering increasing the prices of their units to cover for the spike in construction costs. Eton Properties Philippines Inc., the real estate arm of tobacco tycoon Lucio Tan, has placed orders for 10,600 metric tons of steel for P600 million. Eton Properties president Danilo Ignacio said this would be enough for the four major projects the company was undertaking. Ignacio said steel prices had doubled to P66 a kilo today from P33 last year. “To hedge on our costs, what we have done is to make orders for steel for our four condominium projects—The Residences Greenbelt, Eton Baypark Manila, One Archers Place and Cyberpod Corinthian,” he said Ignacio said construction costs had risen about 20 percent, which would translate to an average increase of 10 percent in condominium unit prices. “This is to maintain the profit margin, but only up to the extent that your buyers can absorb that price increase—that’s how it affects our margins,” he said. “A developer would typically have a margin of 35 to 40 percent.” The rise in steel prices was caused mainly by an increase in the cost of iron ore, the basic raw material in making steel, as well as higher fuel and electricity prices, and the deterioration of the peso’s exchange rate. Cement prices have also risen P8 to P185-P195 a 40-kilogram bag, based on the latest increase last April by cement giant Holcim Philippines. Mall giant SM Prime Holdings Inc. said it would review the sizes of its malls, but was still going full steam ahead on its expansion plans. SM Prime president Hans Sy said, “Normally, we would make a study on a certain area, say if we would need 60,000 square meters [of mall space], we will say we will build 100,000 square meters to anticipate growth in five years. This time, we’ve streamlined it a little and looked at the growth for three years instead.” “In short, instead of spending capital right now, we spread it out and as cash comes in, we continue with the expansion,” Sy said. “We have hedged them already, but we have to study the sizes of our malls again.” This year SM Prime plans to open several malls—SM City Marikina in Metro Manila, SM City Baliuag in Bulacan province and SM Supercenter Rosales in Pangasinan province—to total 33 around the country. It is also expanding SM Megamall in Mandaluyong City and SM City Fairview in Quezon City. The total gross floor area of its malls will reach 4.2 million square meters at the end of the year. Homebuilder Vista Land and Lifescapes Inc., of the family of Senate President Manuel Villar, has increased prices of its housing projects by an initial 3 to 5 percent in anticipation of the increase in construction materials, company officials said. “Everybody is expecting inflation to be at double-digit figures. We have increased prices in anticipation of higher inflation,” said Manuel Paolo Villar, head of corporate planning for Vista Land.
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