This post is related to my previous one. So please read it if you haven’t yet. Note that this is an oversimplified explanation of the issue on hand and is by no means complete.
Done right, condominium development is the most profitable residential project to undertake in the Philippines. With a minimum of one thousand square meters of land, a developer can build a mid-rise condominium building of five to ten stories high (note that the number of stories is subject to the city’s or municipality’s building restrictions). For argument’s sake, with just, say, a very conservative number of six units per floor, that translates to 30 to 60 units per building.
The more stories or horizontal levels a residential project has, the less its cost per square meter becomes. This is true not just for condominiums but also for townhouses and single houses. Savings, ergo profit, is realized because of the following basic reasons:
- A single roof is needed for the whole structure.
- Only one foundation is needed. The taller the structure is, though, the more complex and more robust the foundation should be and, therefore, costlier. Add to that a much stronger set of columns.
- The land is optimized, i.e., with a small plot of land, so many homes can be built. Ayala Land’s Senta Condominium in Legaspi Village in Makati will seat on a 1,865 square meter lot; will have 39 stories and 438 units with an average of 14 units per floor.
In our example, imagine slicing those 30 to 60 units into single houses. Each unit will require its own foundation and roof. Imagine erecting these single houses in a “small” subdivision; think about the roads and the setback between or among houses. Can you fit them all in a 1,000 square meter lot? Add to that a more complex drainage system and the perimeter wall. Imagine how each house will look like. – “Bulilit, bulilit, sanay sa masikip, kumilos, kumilos, ang liit liit…”
To a certain extent, townhouse developers realize profits in basically the same way. Think of a quadruplex for example; just think of the side walls. This four-unit structure has two side walls and three partition walls or a total of five. Slice them into four single houses and you end up with eight side walls and at least three setbacks between houses that will require a bigger lot.
Construction of a quadruplex is also more simple and faster. Digging the foundation for the four units involves a single process and a single set up time. Divide them into 4 individual houses and the developer will have to do this process four times, albeit, each at a smaller scale. But there’s a set up time every time he does it, making the whole process longer. That’s just for the digging of the foundation.
These are just a few things I know why condominiums and townhouses are very popular among developers. They are a way for developers to “mass-produce” housing, reduce cost, maximize profit and sell at reasonable prices at the same time.
If you know of more reasons, feel free to leave them in the comment section or contact me. If you think some of my observations are wrong, kindly do the same and I will gladly edit or totally remove this entry if necessary.
Thank you so much.
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Hi Jun,
This is just a follow-up to my post .
You said that you never worked for an architectural firm, but now your an agent for Ayala Land, Inc.
“As a would-be home owner, assuming that you are neither an architect or a civil engineer, and you do your homework in earnest, you may remove the developer in the build process and derive savings that would have gone to him; but never the architect and contractor.”
Yes, Im a would-be home owner (and a buyer), and I’ll choose an “architect and builder” but not an “architect and contractor”. But then I prefer to buy a house within a planned community, so I’ll just search for the right developer that meets my needs. This is also the reason why I found this very informative blog.
I already have a short list of developers with a modern-contemporary design signatures. I just hate those houses with lots of stone works and mouldings (to me these are just “burloloys”). There’s also a developer with a proud “Energy Saving” slogan on their flyers, but their rooms dont have a cross-ventilation. It also has a second-floor carport,
(Funny but true).
Hopefully, there will be a developer that will allow interior changes without changing the design for the exterior massing, like pushing some walls, putting interior view windows, optional interior finishes, etc.
Keep posting sir, I added this blog on my favorites. I always wanted to post some comments on other categories but dont have spare time to create one.
Good day!
Hello Rev!t,
Actually, I never worked for an architectural firm.
We should differentiate among architects, civil engineers and developers.
Here in the Philippines, it is common practice among home owners, especially first-time ones, to get, first, the services of an architect to design the house. There are many cases when the architect is also tasked to act as the contractor at the same time.
If the architect has the “extended” knowledge of and is qualified to act as a contractor, I have no problem with that.
But you see, not all architects have such knowledge and many are not qualified to be a contractor.
I have an article in the offing about “Standards and Best Practices in Building a House.”
To give you a sneak peak into it, I suggest that home owners should always have a licensed architect design his house and have the design “bidded” out to at least 3 licensed contractors (civil engineers).
I do not advise removing the civil engineer/contractor in the build process – that’s not the Standard and is not according to Best Practices in house building.
You might have confused civil engineers/contractors with developers who are businessmen who build houses and employ architects and civil engineers to build the houses, and make profit in the process.
As a would-be home owner, assuming that you are neither an architect or a civil engineer, and you do your homework in earnest, you may remove the developer in the build process and derive savings that would have gone to him; but never the architect and contractor.
I will flip your comment in the future and post an entirely new entry about it; it’s already in my hard drive. But I can’t do it any time soon lest I break the flow of topics in my blog.
Thanks a lot Rev!t for dropping by and for your comment.
That’s why when building your own home, it is best to get the service of an architect instead of a (civil) engineer. You worked for an architecutural firm, so you know what I mean.
@thisistheday, I agree with you that the cost of constructing each condo unit is reduced because of the reasons I mentioned, among others. But it doesn’t necessarily mean that the selling cost will go down accordingly. That’s why profit margin, like you mentioned, is really big. It’s the reason why condo projects are the favorite of many developers.
It’s a good thing a certain company, G&W Architects, Engineers, Project Development Consultants pioneered the concept of Build to Own, whereby developers (and, therefore, their profit margin) are removed from the equation. This effectively brings down the cost of condominium units. They claim that developers profit by as much as 40 percent.
What’s good about G&W’s BTO is that they use Banco de Oro’s product called “Collection and Paying Agency,” whereby payment by buyers is not given directly to G&W but to Banco de Oro which disburses the money to G&W only if the money will go directly to the project in question.
How many times have we seen developers accepting payment for a certain project only to divert the funds to other projects or to pay their old debts or even to buy helicopters?
So, my two-cent advice for those who opt for a condo, go for BTO projects. G&W may have pioneered this concept but there are probably other companies that have followed suit.
Another company that’s doing the same thing (removed the developers from the picture; it’s not BOT, though) is Manosa Properties that calls itself a Real Estate Development Manager. Unlike developers who get big margin, Manosa Properties simply ask for a 10% fee of the project cost
So developers should rein in their penchant for large profit margins; they might become extinct if more and more companies like G&W and Manosa Properties come into the picture. At the end of the day, it’s the Filipino home buyer who will benefit.
Thanks a lot for dropping by, @thisistheday, and for your insight.
Drilling down into details, the cost of construction is usually quoted on a per sqm for example, 10k per sqm. Since as you said there is only one roof, construction cost is cheaper per unit but the price of a unit will not be as cheaper – in many cases – than if you are buying a house and lot – so the profit margin is bigger. One way for developers to bring down the cost of constructing the condo is the pre-selling stage. They’ll use your money to partially finance the construction and if they pre-sold a certain percentage of the project, they don’t have to borrow a lot of money to carry the project to completion. In short, a good marketing team can further reduce capital requirement in building the condo. Of course this is also true to subdivision projects but somehow I think it’s much more so for condo projects because condo is usually 1 building and surrounding areas so payment schedules are pooled into the same building while subdivisions are many units so payment scheduled must finance individual units as well.
mas madali kasing gawin at iisang bubong ngalang tapos hindi mo kailangan ng masyadong malawak na lupa.. puro pataas lang naman ang condo eh.. kaya siguro..
I can’t agree with you more.
Thanks for dropping by, Tyrone.
I liked that commercial by Camella Homes. Anyway, real estate business is one of the most lucrative kind of business but it requires a huge amount of capital. Therefore, it should be a must that a buyer should perform a detailed due diligence before he or she buys the property with his or her hard-earned bucks.