If you think I was enthusiastic about purchasing Philippine property the last time I discussed it, you have not seen anything yet.

I had the privilege of listening to the Philippine team of the globe’s largest real estate advisory firm, CB Richard Ellis. Chairman Rick M. Santos heads the local office. Others who participated in their briefing included general manager Trent Frankum, their director of research and consulting Victor Asuncion and Chay Ong, who is associate director for residential services.

CB Richard Ellis probably understands the local and regional property market better than anyone around because the deal is both commercial and residential real estate. Its business activities include finding thousands of square meters for those American call centers to lease, as well as providing advice for that individual who owns a hectare or two, trying to decide how to develop that empty land. LandBank recently appointed it to handle a major auction of foreclosed properties.

There is no question that the good-old property days of pre-1997 are back. The phenomena we saw then of complete buildings being sold out before even one shovel of dirt was turned is happening again. However, there are very significant and fundamental changes from the mid-’90s that go hand in hand.

First is that the speculative nature of buying in the 1990s has been replaced by end-users wanting to purchase units for their own use, either to live in or to rent out as an investment. No longer is the mid- to high-end condominium market dominated by the “rich” who are simply trying to make a quick profit owning a unit.

Currently, the vast majority of buyers are those wanting to live in these condos or to use the property as an additional source of income. This is an extremely positive trend because this type of end-user tends to stabilize the property market from large speculative price swings. They are a more solid source of continuing sales for the property developers.

The second development that has helped create this particular market is that now owners do not have to purchase units with cash but can finance purchases through long-term fixed rate mortgages. This is a major and fundamental change in the Philippine market because it has opened up the possibility of owning real estate to buyers that were previously shut out of the market.

Even the government, through the Pag-Ibig Fund, has recognized the need for financing on multimillion pesos middle-class housing and not just providing loans to the lower economic groups. Further, Pag-Ibig is also venturing into project financing which helps developers build the units.

Although the CB Richard Ellis discussion covered the complete range of property from office space to residential, let me confine my own comments to the residential sector.

A little background. Supply and demand for mid- to high-end residential units was fairly balanced in year 2000 with supply exceeding demand in 2001. 2002 was a complete write-off as there were only a few units that came on stream and the demand, although exceeding supply, was also small.

2003 saw demand weaker than the increasing supply and the number of units available in 2004 was again small at about 1,000 units for the major CBDs of Makati, Ortigas, Fort Bonifacio and Alabang.

The boom started in 2005 with more than 2,500 available and the take-up rate was 100 percent. 2006 saw 1,000-plus units and demand was slightly higher than supply. The significant thing about 2006 was that vacancy rates dropped to about 1 percent, meaning that using a newly built unit for rental income is a very good proposition.

Estimates of supply for 2007 is very high at about 4,500 units and 2008 will be about the same. There is little fear that there will be any unsold units as the demand factors are still very strong. These factors include demand from overseas Filipinos, a need for residences to house the current influx of foreign expatriate employees in the BPOs and call centers, and a good economy which is allowing more of the middle class to enter the housing market.

Why am I so bullish on Philippine property? The estimate of the supply of new units in 2009 is only about 1,800. The demand-creating factors are very unlikely to diminish in the next two years while supply will fall substantially.

CB Richard Ellis is not prone to talk about a substantial increase in prices because of a supply-demand imbalance. Nonetheless, the numbers tend to validate the idea that there is the potential of a large imbalance if demand numbers continue the way they have in the last two years. We could see both purchase prices and rental rates of existing units increase very strongly in the next two or three years.