How Uber and Other Ride-Sharing Services Can Impact Real Estate in Metro Manila and the Economy
I first saw the convenience of hailing a taxi using a smartphone when I was in Singapore a couple of years back. The technology could easily solve the difficulty of finding a cab in Metro Manila during rush hour. But not the problem of taxi drivers refusing to go to specific locations because of traffic or asking for more than what is shown on the taxi meter. All pain-points that taxi users are familiar with in the Philippines.
Which is why when I first tried Uber a year ago, the whole experience was a night-and-day improvement compared to taking a cab. I became an instant fan. Think of it:
- In most cases, you get a car delivered to your location in 10 minutes or less. In 2014, I saw on the app a lot of Uber cars available only in Makati, Ortigas and Taguig but less so in Manila or Quezon City. Nowadays, I power up the app in Quezon City and there are Uber cars everywhere.
- The vehicles are new. In most cases they still have the new car smell.
- The drivers are properly oriented. A rating system at the end of the trip by passengers incentivizes drivers to render service well. I still recall one rainy trip home how the Uber driver went down to shelter me with an umbrella and accompanied me until the gate to our house was opened. HAVE YOU EVER HAD THAT IN A CAB???
- You feel safer in an Uber car. You see the details of the vehicle, the plate number and the picture of the driver on the app even before the ride gets to you. You can easily share the details with someone before riding. I feel more comfortable having my kids ride Uber solo than I do with taxis.
- Forgot something? If you took a taxi and didn’t note the name or plate number of the vehicle then there’s not much you can do. With Ride Sharing apps, you can just retrieve your ride information and you can get in touch with the driver of the vehicle.
- No cash is involved. You get on, the driver confirms your destination, sometimes asks you if you have a preferred route, then you just sit back. When you get to where you are going, the driver ends the trip and your credit card gets automatically billed. The driver doesn’t carry cash. You don’t need to carry cash. No one gets held up or robbed. Again, safer for your loved ones.
- There’s no haggling for the fare. You get an idea of how much the fare is from the app. If there’s more demand for cars, Uber follow a Surge Pricing scheme to incentivize Uber drivers to go out and drive. Sometimes the fare can go up 30%, sometimes double – maybe more – but at least there are no surprises. You KNOW before hand how much, in general, you’ll be paying. No negotiations to make you add more to the fare, no side remarks from the driver about how heavy the traffic is to your destination, short of telling you – pay more. No nego. Uber even discourages tipping.
- The rates are actually competitive with cabs. One happy example: the whole family decided to go to SM Aura from Quezon City on a number-coding day, there were 6 of us so we needed to take 2 separate taxis. Fare for the cab I took was P300, probably due to the route we took. My wife who was in another cab, using another route, paid P270. Going home I decided to get an Uber Black and fit all 6 of us in one vehicle. A new Mitsubishi Montero pulled-up at the mall and brought us home for P389. Still a better deal than getting 2 taxis and you’re in a new SUV.
- The vehicles are unmarked. So it’s not that apparent that you’re actually riding a car that you don’t own. For all appearances it looks like you just got picked up by your chauffer-driven car.
- Traffic in Metro Manila in 2015 is an energy-draining hell. Your ride sharing vehicle is driven by someone else. So all you need to do is sit back and relax.
For the FIRST TIME, one can actually seriously think of not having to own a car in Metro Manila. This is a notion that can positively impact real estate in particular and the economy in general.
Encourage People to Delay the Purchase of a Vehicle and Prioritize Home Purchases First
For the FIRST TIME, young employees in the country’s metropolis can now think of buying a real property asset first before a depreciating asset like a vehicle.
With better starting salaries for new graduates and young employees brought about by the boom in the Philippine’s outsourcing and offshoring industry and the general economy, more young people are finding themselves with disposable income.
Disposable income that feeds the share of wallet for fashion, the latest high-tech gadget, that tall-frap-with-whipped-cream-on-top and a new car. Purchases that, unfortunately, do not add up to the asset base of a young person.
With the advent of Uber and other ride sharing services like GrabCar, the purchase of a vehicle may be something that can be pushed back. The focus of a young person can now switch instead to investments: stocks, UITFs, mutual funds or real estate.
Instead of a shiny new car, young adults can start their financial journey with the purchase of a new home.
Assets Can Help Finance Future Businesses
The switch from an asset that lose a chunk of its value the moment it is driven out of the showroom, to an asset that, if chosen well, appreciates in value year after year – a house and lot, condominium, commercial property, etc.– will provide the asset base that a young person can use as a collateral for future investments – including new businesses. Helping transform today’s young employee to tomorrow’s young entrepreneur.
Expand the Orientation of Transport-Oriented Developments (TOD) from Rail and Bus Systems to Location covered by TNCs
One of the most sought after locations by property developers are land parcels located next-to or near Metro Manila’s LRT & MRT stations. These Transport-Oriented Developments encourage people to use the rail system instead of cars, just like in Hong Kong and Singapore. That’s the idea at least. But if you’ve recently used MRT-3 and LRT-1, you know riding these trains at the moment will put you off using public transportation for life. Enter the newly minted Transport Network Companies like Uber and GrabCar, which help fill the service void of the current rail system. These TNCs provide an alternative, albeit more expensive, mode of transport while waiting for the MRT/LRT to get their act together. TNCs currently service from as far north as Caloocan and as far as Paranaque down south. Developer’s planners and business development guys need to factor this in their site selections.
Help Reduce Vehicle Volume and Improve Traffic
Studies have shown how much the country losses when it is in traffic gridlock. From lost productivity to the hundreds of thousands of cars just burning fuel while idling. Ride sharing reduces the number of vehicles being added to our streets.
Ride Sharing Makes Financial Sense
The average cost to ride an Uber vehicle as of August 2015 with no surge pricing is P27.70/km for an Uber Black using Mitsubishi Montero, Hyundai Starex, for example, and P12.70/km for UberX using a Toyota Vios, Honda Brio or Hyundai Accent. All data is based on my past trips.
For comparison, I compared the total cost of running one of our vehicles (a Honda Jazz) for the past 8 years, divided over the total kilometers it has been driven: 99,565 km.
- Vehicle Cost: P674,000
- Accessories: P44,700
- Fuel: P423,159 (Based on 2015 Gas Prices)
- Maintenance: P169,500
- Total: P1,311,359
- Cost/km: P13.17
Additional Optional Expenses:
- Car Washing: P18,100
- Parking Cost: P81,000
- New Total: P1,410,472
- Cost/km: P14.16
Even if the car is never washed or never used pay parking (expenses a Ride Sharing customer never contends with), the cost per kilometer is still better when using an UberX. Factor in that the cost for a driver is not yet in the mix and ride sharing, particularly for the more affordable UberX, becomes a better deal compared to ownership.
Will Filipinos really hold-off buying a vehicle as their first major purchase? Time will tell. Technological developments in recent years have been steadily changing how we go about our lives.
Erwin M. De Pedro
Co-Founder / Director for Sales & Marketing
Real Estate Broker License
PRC Reg Certificate AA017736
PRC License No. 0015841
Real Estate Appraiser License
PRC Reg Certificate AA004279
PRC License No. 0004320
Member: Philippine Association of Real Estate Boards – Quezon City Real Estate Board, Inc.