Small is the new big

by Steve Van Derodar

| Photo from juzinterior.com via steve derodar

We have always thought that big units for a condo property investment are the only way to make a sound investment. Think again.

While size is an acceptable norm, many believe that some can be adaptive to add value to an asset. I am trying to say that even a size must sacrifice for a need in real estate, and paramount of all is what matters most. In highly urban areas, a strong need for comfortable spaces, even size-deficient, is an honest answer for a comfortable investment.

Similarly, in real estate, space, more than ever, remains the currency of investment. As we always knew it, many have discovered that Hong Kong, Singapore, New York City, etc., are among the popular places where space is ultra-expensive. Even tiny spaces can command a price for an investment translating to good yields for rentals.

Not going far, in megalopolis cities like Metro Manila, several developments have to cater to respond to the market’s needs as seen in their portfolio. Condominium properties have been built-in large-scale buildings with a mix of sizes within the inventory and often, depending on the building’s prospectus. There could be more studio units or one-bedroom based on the building’s unit mix and are market-driven.

Suffice it to say, smaller units attract more single unit users and can be convenient for students, employees, young urbanites; hence, it has its target market. Small units can be just appropriate for specific users. In fact, according to the building code of the Philippines, the minimum single occupancy condo size is 18 square meters. In comparison, the Housing and Land Use Regulatory Board allows a minimum of 12 square meters if the area is in highly urbanized areas intended for students, employees, and workers. The deed in each unit must indicate the basic facilities.

“Suffice it to say, smaller units attract more single unit users and can be convenient for students, employees, young urbanites; hence, it has its target market. Small units can be just appropriate for specific users.”

For condominiums in the Philippines, the average size of the condominium is less than 50 square meters. Studios and one-bedroom in recent development offerings could come in 22 and 35 square meters, respectively, popularly acceptable, especially in Makati, Quezon City, Manila, Pasay, Paranaque, etc. These spaces are appropriately sized living room, kitchen, bedroom, and comfort room to fit in to be considered a unit.

Condo investments in general in the Philippines are considered a luxury. The Condominium Act defines it as an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. It means an acquisition is highly dependent on the proforma of a development. Developers construct the buildings by providing common spaces that add value to the property and lifestyle experience. These are evident in some dedicated spaces such as function rooms, grand lobbies, recreation centers, gardens, etc.

Even if you live in small units, but your property offers excellent amenities, spacious lobbies, and a highly accessible location, it must be a sound investment. It doesn’t always mean that they are cheap; there could be a premium added due to its overall appeals, like the quality of the building and the demand it serves. However, it can also mean that they could be more affordable due to size instead of bigger units.

As trends have it, small units can be well designed and furnished according to one’s taste, and if you go online, there are just tons of units that are attractive, quite livable, and are of the luxurious kind. Please note that certain developers have space specifications based on market classification. The minor units in ultra-high-end developments are generally bigger across market segments for its unit classification that its studio unit can already be 1-2 bedrooms from another developer.

If you feel like purchasing a big-sized property is becoming more expensive, maybe, opting for smaller units is a better option. Besides, the 200-300 square meters we know of from the past have skyrocketed in prices; they are almost unaffordable in today’s market. In Legazpi Village, Makati, I was still able to rent out a nearly 200 sqm-sized old regular condo without much amenities for Php 150,000 a month more than ten years ago, and it’s becoming so rare these days.

“They can interpret small as the new big as buyer’s consideration for moderate risk investment without much financial commitment”

There are many advantages to small units: condo dues will be lower due to their size, less use of electric bills, easy marketability, less maintenance for upkeep. Also, they are limited to a few occupants, if not restricted to single occupancy.

The value of units quickly appreciates and thus their rental rates. I recall 12 years ago, living in a Makati studio unit for Php 15,000 a month; you could just imagine how much they go for by now. Today, these units could command between Php 25,000-40,000 in rents depending on the location and building classification.

People see the significant increase of condominiums in the real estate market in the Philippines in the availability of options that now caters to more size adjustments and the pricing alternatives for smaller units. When considering an investment, it still matters on the intent of use. Is it for rentals, or is the space needed to be based on the space’s household size?

They can interpret small as the new big as buyer’s consideration for moderate risk investment without much financial commitment. For some, it could mean having just a tiny condo in the city while living big in savings or other diversified real estate acquisitions in a primary residence somewhere.

Small is the new big is a way of thinking for investment alternatives.

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(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. He has worked as an International Property Specialist to markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at derodarsales@gmail.com.)

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