Firstly, I would like to congratulate all the new Real Estate Appraisers. Their role in determining the values of Real Estate Assets plays a vital role in determining the wealth of property owners, corporations, enterprises and government assets.
In the interpretation and rendering the services of real estate appraisal will include the keeping of data and records of properties appraised and their values. An appraisal corporation and individual holds very valuable databank needed in determining the Philippine Real Estate Price Index.
Last July 22, 2013, the front page of Business Wold, reported that the Banko Central ng PILIPINAS was to initiate the much needed information on real estate prices, construction cost, occupancy & absorption rates, and vital information to help Developers, LGU’s, Policy Makers and Legislators in the Monitoring , Management ,and Planning of Real Estate Development and Projects.
The research and information gathering will be in coordination with the National Statistics Office (NSO), and other Government agencies.
Business World reported by Diane Claire J. Jiao last July 23, 2013 that central bank Governor Amando M. Tetangco, Jr. said last Friday “We are working with the National Statistics Office (NSO) to come up with a real estate price index. It will monitor prices of houses, condominium units, office space and the like,”.
While the BSP currently monitors property prices, there is no index that allows it to track averages and compare these across time periods, locations and market segments.
During the early ’70s a brilliant Economist, Dr. Robert A. PALUZKA , of the Center for Research and Communication, with his ECONOTEC Research, a ” Think Tank ” Real Estate Group, that published a monthly Magazine called ECONOMIC MONITOR.
The Real Estate Monitor was a publication that indicated price movements of real estate classified into agricultural, residential, industrial, institutional, commercial and retail. It was divided into different locations. In the editorial portion Dr. Paluzka would write his forecasts analysis and conclusions based on his research from the data and information gathered.
The Real Estate Monitor also included price and value movements of Condominiums, Supply and Demand of Office Spaces, Movements of Residential Developments and Subdivisions, Valuations of Raw Land and Construction costs.
In 1979, after my Masters on Economic Research , at the Center for Research and Communication, now University of Asia and the Pacific, Dr. Robert A. PALUZKA, requested me to join his team in Econotec and help out with his Real Estate Monitor.
Dr. Bob and I would write about the data and information that we gathered from Classified Ads, Realtors, Banks, Register of Deeds, Government Agencies and Assessors. We were also in close collaboration with Developers, Professional Organizations and Associations in Real Estate and Construction.
By the 1990’s the Real Estate Monitor was one of the most sought after research and information magazine by Realtors, Banks, and Other Institutions of Government and the Private Business sector.
By the 1990’s the Real Estate Monitor was owned and managed by RF Cuervo, Inc. It was then that we formed, Cuervo Far East Inc. a new corporation to handle international real estate services particularly in South East Asia.
Our international partners then was Richard Ellis who provided us with transfer of technology and the necessary know-how to be globally competitive. In 1995, we launched the Cuervo Far East Inc. in partnership with Richard Ellis during and international conference held in the Philippines with over 500 delegates and represented by all local developers as well as foreign consultants.
During this conference, I lectured on the trends and business opportunities in real estate, thanks to the research materials from the Real Estate Monitor that my presentation and lecture proved to be as success.
I am delighted to know that the Bangko Sentral ng Pilipinas (BSP) will continue and even improve on the publication of financial and economic data, and the real estate price index.
Therefore , Real Estate Practitioners must learn and make use on how to analyze, and benefit from the financial and economic information and the Real Estate Price index.
Real Estate Consultants will need these information in doing Best Use and Market Studies while Real Estate Appraisers, will need to know how to keep tract of Market Values, Construction Costs, and Capitalization rates. For a professional appraiser these relevant data, inputs, and the price index is needed for rendering opinion of Values.
Real Estate Brokers, must learn how to be analytical. Using consultative selling to their advantage. This is done by knowing market trends, opportunities, supply and demand of specific types of Real Estate and its location.
Ms. Diane Claire J. Jiao wrote “… It also relies on other indicators to assess the expansion of the real estate industry, such as price-to-earnings ratios, which measure developers’ valuations, and price-to-income ratios, which indicate affordability of property.
The NSO, said Mr. Tetangco, will collect data for the real estate price index, similar to how it produces the consumer price index that is used to measure inflation.
“My hope is that we can have it by this year,” he added.
The International Monetary Fund (IMF) has long called for the creation of a real estate price index in the Philippines. While it maintains that there is no property bubble in the country despite the industry boom, it also believes an index will help show whether price increases are still healthy or are becoming speculative.
“Publishing more information on the real estate market is very much welcome. The BSP has already been monitoring prices. It’s good that they’re thinking of formalizing it,” IMF Resident Representative Shanaka Jayanath Peiris said last Friday.
While some property firms have their own indices, their information is partial and unofficial, he noted.
“You just want a series that is consistent and fairly representative. What’s important is to have an index that is broad-based and accepted by the markets,” Mr. Peiris said.
He said much of the work in managing financial markets was about public communication and that the central bank would be able better to send signals with an official price index.
“[The index] will create a benchmark. [As a market participant,] you will understand the movement of prices and the deviations,” Mr. Peiris said.
He also urged the government to be clear in what the index will measure and how it is broken down so the market can adjust to it.
Central bank Deputy Governor Diwa C. Gunigundo, for his part, said in a text message: “The idea [of the index] is to base it on actual transaction prices.”
Julius M. Guevara, associate director of property consultancy Colliers International Philippines, said the accuracy of the data collected would be crucial and that the central bank was on the right track by focusing on actual transaction prices.
“An actual transaction is the true measure of a value since a buyer and a seller have come to terms to determine a market price,” he said in a text message.
“[This] should be the basis and not appraisal data which is based on opinions of value and, by nature, is subjective.”
One problem, though, is the availability and accuracy of data.
A survey of appraisals may be conducted more easily but is less reliable, Mr. Guevara said, adding that it is more difficult to track actual transaction prices over a period of time. He also said actual transaction prices would likely be based on deeds of sale, which can show undervaluations when buyers and sellers want to bring down their tax obligations.
“The practice of undervaluation is a perennial problem. It is very hard to prove that the transaction was not above board.”
Therefore, I congratulate the BSP, NSO and NEDA for undertaking the much needed research endeavor. With these government agencies who are well equip with professionals, technical experts, financial analytists, who utilizes mathematical, quantitative and rational approach in determining the Philippine Real Estate Price Index, which is needed in the Real Estate Industry. Now we can be assured that our Government, particularly the Monetary Board, Policy Makers and Legislative bodies will be guided, so as to avoid a Real Estate Bubble or Bust.
” Prudence is the best means to Proper Judgement and Decision making…” – Ramon F. Cuervo Jr.