Cuervo Property Advisory’s Readings on the “Signs of the Times” 2014

In continuation from yesterday’s article, we shall dwell on some specific details on how to read important and meaningful Economic and Financial Data. I shall endeavor to include an analysis on certain variables that have direct effect to the trends and opportunities of real estate in the Philippines.

Anne Rozainne R. Gregorio of Businessworld Banking and Finance reported about “Liquidity growth seen to have eased”. This will have a direct relationship on the demand for funds in real estate development. Although, we are basically liquid and that’s why interest rates remain stable and being so is healthy for the needs of the real estate industry.

Quoting Ms. Gregorio of Businessworld, “Growth of the country’s money supply, which had hit multi-year highs in 2013, is expected to have started decelerating last month as banks had complied with additional restrictions to the central bank’s special deposit account (SDA).

“M3 is likely to slow down beginning December and the coming months.” Said Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo told reporters on Friday last week.

M3 or also known as “Broad Money Liabilities”. It includes M2 plus money substitutes such as promissory notes and commercial papers. While Special Deposit Accounts (SDA) consists of  fixed terms deposits by banks and institutions affiliated with the BSP. Introduced in 1998, SDA are fixed-term deposits by banks and trust  departments with the BSP, which uses it as a tool to siphon off excess domestic liquidity that could fuel higher inflation.

The Bangko Sentral ng Pilipinas (BSP) in its bid to push out money “parked” ;  there so it can circulate in the economy to support consumption and investments. This is definitely favorable for the economy and real estate.

However, despite spikes seen last year in domestic liquidity, inflation remained manageable. Inflation averaged 3% in 2013, hitting the low-end of the central bank’s 3-5% for the year, but lower than the central bank’s 2.9% forecast. The rise in consumer prices is targeted to settle within 3-5% range this year and 2-4% next year. Inflation is forecast to settle a t 4.5% this year and 3.2% in 2015.

As the month of January 2014 approaches its end, we shall celebrate the Chinese New Year and for this year would be the Wooden Horse. According to Chinese astrology, people born under the horse zodiac are very active and energetic.

According to Babe Romualdez of Philippine Star, “Chinese astrology tells us 2014 is the Year of the Wood Horse, bringing with it plenty of positive vibes. The horse is regarded as an intelligent and reliable animal that supposedly helps men achieve success and victory most especially in battle. The horse is the seventh sign in the Chinese zodiac, looked upon with favor by many Chinese who equate the animal with elegance, power, energy, stability and perseverance. ”

So, hopefully we shall be Lucky in 2014 ,  have a ” good horse”  to run and win us the race to the number one position in the ASEAN.

Most Filipinos have hopeful expectations for this new year, according to the latest SWS survey where 94 percent of respondents believe that 2014 will be better than 2013 – the Year of the Snake – which was marked by devastating calamities and disasters both natural and man-made, the most catastrophic of which was super typhoon Yolanda that pounded the Visayas region in November last year, dislodging the man-made disaster and scandal involving several congressmen and senators.

The “Janet of the pork scam ” was a shame for us Filipinos, and we ” lost face” to the international community. The Scandal marked us with the “fame” of being a Nation of Corrupt Government officials,  from the glare of media and public scrutiny.

However, despite all that, there were a number of positive developments last year, among them the impressive economic performance of the Philippines that outpaced the growth of many of its neighbors in Southeast Asia.”

In my forecast, this is the year of the “galloping wooden horse” , we might end up in just like a ” rocking chair” with unfinished PPP’s , delayed infrastructure projects, Bickering Politicians ” positioning” for the 2016 elections. If this happens, we will just be  riding the ” roller coaster” ; enjoying the ride with all the challenges, difficulties and road blocks that the real estate industry will face.

I shall repeat what I have mentioned early this year; we will have a “quantum leap” Economic Growth and Real Estate shall remain bullish. This will be true in key sectors of the Economy.

I advice my fellow Real Estate Practitioners to take advantage of the economic and financial well-being of the Philippines. in my opinion, one can profit most for 2014 will be in infrastructure projects, construction, industrial properties, information technology regarding real estate, tourism development projects, medical and health services and building new cities by expanding urban growth in all major regional centers reaching, not only the Yolanda affected areas but also northern territories of Luzon such as the Subic-Clark Corridor in Pampanga, Ilocos region up to the southern cities of Mindanao.

Building a sustainable Philippine Economy: “Show me the money”

Next year’s national budget has been caped at p2.606 trillion as the government looks to invest more to support continued economic growth and rebuild areas devastated by super typhoon Yolanda.

The proposed p2.606-trillion ceiling for 2015 is 15% or p342 billion more than the p2.265 trillion approved for this year. Next year’s expenditure plan will support a targeted growth domestic product (GDP) growth of 7-8% up from 2014’s 6.5-7.5%.

Growth last year is expected to have fallen within the 6-7% goal, with Yolanda’s impact expected to have pulled down the above target 74% achieved as of the third quarter. The Full-year data will be released on Jsnuary 30 which happens to be the Chinese New Year or year of the “Wooden Horse”.

Kathleen A. Martin from the Philippine Star Business reported last Saturday, January 11, 2014, “net foreign direct investments surge 66%”, she stated that there are net foreign direct investment inflows rose 66 percentage to $254 million in october last yer from $153 million in the same period in 2012 amid the country’s robust growth and favorable macroeconomic fundamentals, the Bangko Sentral Ng Pilipinas reported yesterday.

“The notable rise in foreign investments into the country reflects favorable investor sentiment on the back of the country’s  macroeconomic stability amid challenging global conditions, ” the central bank said.

Another good indicator of confidence in our economy and the real estate industry is reflected by net foreign direct investments.

Foreign direct investment are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. This series shows net outflows of investment from the reporting economy to the rest of the world and is divided by GDP.

Yet, the winner in “showing us the money” has consistenly been cash remittances from our patriotic and generous “kababayans”.

Remittances have reached a record high last November, 2013, reported in Business Philippine Star by Ms. Kathleen Martin, “cash remittances could have amounted to $2 billion in November,  last year, UK-based Barclys said, as Filipinos abroad sent more money to their families affected by super typhoon Yolanda.

This translates to about $2.062 billion as money sent home by Filipinos abroad amounted to 1.918 billion in November 2012 according to central bank data.

Moreover, Filipinos abroad tend to send more money during the Christmas season as previous BSP data showed.

The central bank expects remittances to have increased by five percent to $22.5 billion in 2013 from the $21.391 billion seen in 2012.

To conclude, Bettina Roc of Businessworld reported today, January 14, 2014, that despite the outlook still ‘broadly positive’ by Fitch, sustainability is an issue. Sustainability will be the main question hounding the Philippines as the economy continues to grow and the government works on further improving the country’s credit profile, Fitch Ratings yesterday said.

Andrew Colquhoun, Fitch’s head for Asia-Pacific sovereigns, said in  a teleconference that the debt watcher’s view remained “broadly positive,” given that it just upgraded the country’s sovereign rating to investment grade last year.

“The macroeconomic performance of the country is relatively strong.” He added.

“But the question at the moment – which remains an open one for us – is to what extent the recent growth pickup is likely to be sustained, especially with the less sustainable construction and real estate boom the country has been.” Mr. Colquhoun said.

“The current administration is also focused on further strengthening the country’s profile, in terms of improving its finances and also governance. Would that be sustained? These questions will contribute to the direction of the Philippines’ outlook.” He added.

Structural factors, like political stability and governance standards, are also credit weaknesses. Mr. Colquhoun said, a common theme for the majority of Asia Pacific sovereigns given several emerging challenges.

“Structural reforms and their contribution to prospects for sustainable grown over the medium term – that’s what we will look for when considering our outlooks for the countries in the region.” He said.

These protections are at par with the debt watcher’s expectation of stable but muted growth in emerging Asian economics for this year and next.

For tomorrow, we shall look into how to be more competitive using research which necessary to meet international standards for Real Estate Consultants.


Philippine Star


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