From Asian Financial Crisis 1997 to Pandemic 2020

The vultures are now circling the struggling creature as it nears its death, waiting its last breath---and then, the feast begins. 

Vulturism, a skill that helps you identify the correct timing in order to reap the highest value of an asset. Some vultures fly in at the right time, while others fly in too early and get bitten from the creature’s final surge of adrenaline.

Through the various chat groups I'm in, I have observed that many prospective investors look for assets for sale at less than 70% of market valuations. It can be noticed that, when some developers are expected to broadcast price increases, secondary markets begin to make offerings of up to 20% off from 2019 highs.

Based on my learnings from the Asian Financial Crisis of 1997, the secondary market is not expected to crash. Instead, what we may expect to see is a substantial rise in the Non Performing Loans (NPLs) and subsequent collateral foreclosures as may be reported by banks and financial institutions. The Asian Financial Crisis (AFC) of 1997 saw the economy being hit badly by the weak peso and high interest rates of 35% to 42%.

Three years prior to the AFC, the country's economy was doing very well. Many businesses were gearing for expansion, with financing support being aggressively provided by banks, as long as these were supported by real estate mortgages. Unfortunately, these businesses were the heaviest hit, together with the real estate developers who had been given zero collateral loans. The NPL-to-Deposits Ratio was over 15%, with some Banks almost hitting 30%.

It took the Industry and Banks 6 years to put the Special Purpose Asset Vehicle Law in January 2003, which saw amazing discounted values in the foreclosure sector.

My fearless forecast of the COVID-19 pandemic's effects for foreclosures is that it will take 2 years after 2020 before we see a steep rise in foreclosure as the distressed assets are just off the Bayanihan grace period. Past due loans for restructuring and negotiation are currently just beginning to be identified.

Most borrowers are still in denial of the gravity of the present situation and don't realize that their assets are in danger of foreclosure. It can be well-noted that the foreclosure process of the banks is now better streamlined, taking only 90 to 120 days to be completed whereas it was longer in the past. Vultures have to keep flying to be ready to swoop for opportunities like this. 


Noli, known in the real estate industry as "El Subastahero", heads EL SUBASTAHERO AUCTIONS and is the #1 auctioneer in the country today.
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