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[Audio] Chapter 1 THE PROPERTY AND CAPITAL MARKETS.

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY.) Economic Growth and Real Estate Demand Philippine Economic Growth and Real Estate Demand: The Philippines has experienced significant economic growth over the past decade, influencing real estate demand across residential, office, retail, and industrial sectors. However, external shocks (e.g., the COVID19 pandemic) and structural challenges (e.g., high construction costs, interest rate hikes) have also impacted the market..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY) Economic Growth and Real Estate Demand Economic Expansion and Real Estate Demand (Pre-Pandemic: 2010–2019) Key Drivers: GDP Growth (Avg. ~6% annually): Strong economic performance increased household incomes and business expansion. BPO Sector Boom: The Philippines became a global outsourcing hub, driving demand for office spaces (notably in Metro Manila, Cebu, and Davao). OFW Remittances & Rising Middle Class: Sustained demand for residential properties, particularly mid-to-high-end condominiums. Infrastructure Development (Build, Build, Build Program): Improved connectivity (e.g., Skyway, MRT expansions) boosted land values in emerging areas (e.g., Cavite, Laguna, Bulacan)..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 1) Economic Growth and Real Estate Demand (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY.) Economic Growth and Real Estate Demand Real Estate Market Response: Higher Rents & Prices: Office rents in Makati CBD peaked at ₱1,100/sq.m/month (2019). Condo prices in Metro Manila rose by ~8% annually (2015–2019). Increased Construction: Office stock reached ~1.4M sq.m (2019), with vacancy rates below 5% in prime areas. Residential condo supply surged, with ~60,000 new units completed in 2019. Elasticity Observations: Office Market: Moderately elastic supply—developers quickly responded to BPO demand. Residential Market: Inelastic in prime areas (land scarcity led to price spikes)..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 1) Economic Growth and Real Estate Demand (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY.) Economic Growth and Real Estate Demand Economic Contraction and Real Estate Impact (Pandemic & Post-Pandemic: 2020–2023) Key Shocks: COVID-19 Lockdowns (2020–2021): GDP contracted by -9.5% (2020), reducing real estate demand. Work-from-Home (WFH) & BPO Slowdown: Office vacancies rose to ~12% (2021) as companies downsized. Interest Rate Hikes (2022–2023): BSP raised rates to 6.5% (2023), increasing mortgage costs and slowing homebuying..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 1) Economic Growth and Real Estate Demand (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY.) Economic Growth and Real Estate Demand Real Estate Market Response: Declining Rents & Prices: Office rents dropped by ~15% (2020–2021). Condo prices stagnated (0–3% growth in 2022). Construction Slowdown: Office completions fell by ~30% (2021). Residential launches declined due to weaker demand. Market Adjustments: Developers pivoted to flexible workspaces and logistics hubs (e-commerce boom). Affordable housing gained traction as luxury demand softened..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 1) Economic Growth and Real Estate Demand (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY.) Economic Growth and Real Estate Demand Conclusion: Cyclical Response of Philippine Real Estate Economic Growth Phase (Pre-2020): High demand → Price surges → Elastic construction response (office & residential). Contraction Phase (2020–2022): Demand drop → Rent corrections → Construction slowdown. Recovery Phase (2023–2025): Gradual rebound with sectoral shifts (logistics, affordable housing). Key Takeaway: The Philippine real estate market remains cyclical, with supply elasticity varying by sector. Future growth depends on economic policies, interest rates, and infrastructure development..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY,) Long-Term Interest Rates & Real Estate Asset Demand Interest Rates and Real Estate Asset Demand (Philippine Experience) Key Drivers : Bangko Sentral ng Pilipinas (BSP) Policy Rates The BSP adjusts overnight reverse repurchase (RRP) rates, affecting long-term mortgage and corporate borrowing rates. Example: 2012–2018 (Low Rates): BSP kept rates at 3–4%, fueling real estate demand. 2022–2023 (Rate Hikes): BSP raised rates to 6.5%to combat inflation, cooling demand. 10-Year Philippine Treasury Bond Yields Long-term bond yields influence investor decisions between bonds and real estate. 2019–2020:Yields fell below 4% → Real estate became more attractive. 2023:Yields peaked at ~6% → Investors shifted to safer fixed-income assets. Bank Mortgage Rates Fixed-rate mortgages rose from ~5% (2021) to ~8% (2023), reducing homebuyer affordability..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 2) Long-Term Interest Rates & Real Estate Asset Demand (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY,) Long-Term Interest Rates & Real Estate Asset Demand Historical Scenarios: How Rate Changes Affected Real Estate Low Interest Rate Era (2012–2018) – Boom in Real Estate Demand BSP Policy Rate: 3–4% Mortgage Rates: 5–6% (fixed) Impact on Real Estate: Higher Asset Prices: Condo prices in Metro Manila rose ~10% annually. Strong Investor Demand: REITs (e.g., AREIT, MREIT) gained popularity. Construction Boom:Developers launched ~50,000 condo units/year (2015–2019)..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 2) Long-Term Interest Rates & Real Estate Asset Demand (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY,) Long-Term Interest Rates & Real Estate Asset Demand Historical Scenarios: How Rate Changes Affected Real Estate Pandemic Rate Cuts (2020–2021) – Temporary Demand Surge BSP Policy Rate: Cut to 2% (2020) Mortgage Rates: Fell to ~4.5% (lowest in decades). Impact on Real Estate: Short-Term Price Support: Despite economic slowdown, low rates kept demand for residential units stable. REIT Expansion: Companies like Ayala Land and Megaworld accelerated REIT listings..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 2) Long-Term Interest Rates & Real Estate Asset Demand (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY,) Long-Term Interest Rates & Real Estate Asset Demand Historical Scenarios: How Rate Changes Affected Real Estate Post-Pandemic Rate Hikes (2022–2024) – Cooling Demand BSP Policy Rate: Hiked to 6.5% (2023) Mortgage Rates: 7–8% (highest since 2008). Impact on Real Estate: Lower Homebuyer Demand: Residential sales dropped by ~20% (2023). Investor Shift to Bonds: Higher bond yields (6%) made real estate yields (~5–7%) less attractive. Slower Price Growth: Condo price growth slowed to ~3% (2023 vs. 8% pre-pandemic)..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 2) Long-Term Interest Rates & Real Estate Asset Demand (Chapter 1-THE PROPERTY AND CAPITAL MARKETS) (Section - REAL ESTATE AND THE NATIONA ECONOMY,) Long-Term Interest Rates & Real Estate Asset Demand Historical Scenarios: How Rate Changes Affected Real Estate Other Factors Influencing Real Estate Asset Demand A. Risk Perception (Political & Economic Stability) 2016–2019 (Stable Growth): Strong investor confidence → More foreign and local capital in real estate. 2020–2022 (Pandemic Uncertainty): Risk premiums rose → Developers delayed projects. B. Tax Policies & Incentives CREBA Law (2023): Proposed tax breaks for developers could boost supply. REIT Tax Revisions (2021): Lowered minimum public float to 33%, encouraging more listings. C. Foreign Investment Rules 60-40 Ownership Rule: Limits foreign direct investment (FDI) in land, but condo purchases (40% foreign quota) remain active..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 3) Credit, Construction Costs, and the Supply of New Space Credit, Construction Costs, and Real Estate Supply in the Philippines: The Philippine real estate market is heavily influenced by credit availability, construction costs, and regulatory policies. These factors determine the supply of new properties, affecting rental rates, asset prices, and overall market stability..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 3) Credit, Construction Costs, and the Supply of New Space 1. Financing Conditions & Their Impact on Real Estate Supply A. Interest Rates and Credit Availability BSP Policy Rates Influence Construction Loans: Low Rates (2012–2018, 2020–2021): BSP kept rates at 3–4% (pre-pandemic)and cut to 2% (2020). Result: Surge in construction loans → High-rise condo boom (~60,000 units/year). High Rates (2022–2024): BSP hiked rates to 6.5% (2023) → Developers faced higher borrowing costs. Result: New project launches dropped by ~20% (2023). Bank Lending Tightening (2023–2024): Banks became cautious due to rising non-performing loans (NPLs). Impact: Smaller developers struggled to secure financing, delaying projects. B. Government Housing Loans (Pag-IBIG, SHFC, SSS, Bank Financing) Affordable Housing Programs (2020–Present): Pag-IBIG Fund provided low-interest loans (5–7%), supporting mass housing. Result: Increased supply of economic and socialized housing (e.g., in Bulacan, Cavite)..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 3) Credit, Construction Costs, and the Supply of New Space 2. Construction Costs & Their Impact on Supply A. Rising Material and Labor Costs (2021–2024)  Developer Response: o Shift to modular/prefab construction to cut costs. o Focus on higher-margin luxury projects over mass housing..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 1- REAL ESTATE AND THE NATIONA ECONOMY, SUB-SECTION 3) Credit, Construction Costs, and the Supply of New Space B. Supply Chain Disruptions (Pandemic & Global Inflation) 2020–2022: Cement and steel shortages due to lockdowns and import delays. 2023: Ukraine war → Higher fuel and metal prices → 5–10% increase in construction costs.

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Credit, Construction Costs, and the Supply of New Space 3. Regulatory Costs & Zoning Laws A. Stricter Building Codes & Permitting Delays New Fire Safety & Seismic Standards (2021–2023): Increased compliance costs for developers. Result: Some projects delayed by 6–12 months. Local Government Delays: Example: Manila City's slow approval process → Developers shifted to Clark, Cebu, and Davao..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Credit, Construction Costs, and the Supply of New Space 3. Regulatory Costs & Zoning Laws B. Foreign Ownership Restrictions (60-40 Rule) Limits foreign developers → Less FDI in large-scale projects. Exception: Condos (40% foreign ownership allowed) → Strong supply in Metro Manila. C. Tax Policies (VAT, CREBA Bill, REIT Rules) 12% VAT on Raw Materials → Raises construction costs. Proposed CREBA Law (2024): Tax breaks for developers could boost affordable housing supply.

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Credit, Construction Costs, and the Supply of New Space 4. Market Outcomes: How Supply Shocks Affect Rents & Prices A. Negative Supply Shock (2020–2023).

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Credit, Construction Costs, and the Supply of New Space 4. Market Outcomes: How Supply Shocks Affect Rents & Prices B. Positive Supply Shock (2015–2019 Boom).

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines Real Estate Markets and Public Policy in the Philippines The Philippine government has implemented various public housing and tax policies to address housing shortages (estimated at 6.5 million units in 2024) and affordability challenges..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines Publicly Assisted Housing Programs A. Direct Public Housing (Government-Built Units) Key Programs: National Housing Authority (NHA) Resettlement Projects Example: Northville Housing (Bulacan) – 10,000 units for informal settlers. Cost: ₱250,000–₱400,000 per unit (heavily subsidized). Socialized Housing (RA 7279 Urban Development Act) Requires developers to allocate 20% of projects to affordable housing..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines 1. Publicly Assisted Housing Programs.

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines 2. Local Government Development Regulations A. Metro Manila: Strict Zoning & Permitting Delays Key Issues: 1. Approval Timeline: 18–36 months for high-rises (vs. 6 months in Vietnam). 2. Zoning Limits: Only 30% of Metro Manila land allows high-density residential. Market Effects:  ↑ Land Prices: Up 20% annually in CBDs (Makati, BGC).  ↑ Rents: Office rents 25% higher than Jakarta due to scarcity. ↓ Construction: 2023 high-rise launches down 15% from 2019.

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines 2. Local Government Development Regulations B. Provincial Incentives (Ease of Doing Business) LGU Success Stories: Cebu City: Fast-tracked permits → 50% rise in condo supply (2020–2024). Clark Freeport Zone: No foreign ownership limits → ₱50B in FDI (2023)..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines 3. Tax Policies and Real Estate A. National Tax Incentives Key Policies: 1. VAT Exemption – Socialized housing sales (₱2M and below) are VAT-free. 2. REIT Tax Reforms (2021) – Reduced minimum public float to 33% (from 40%)..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines 3. Tax Policies and Real Estate B. Local Property Taxes Issues: Manila vs. Provincial Rates: Makati: 2% of assessed value → ↑ Holding costs for investors. Davao: 1% → 30% cheaper to own property. Effect on Market: ↓ Asset Prices in High-Tax Cities: Makati condo prices grew only 3% (2023) vs. Davao's 8%. ↑ Informal Settlements: 25% of urban poor avoid taxes via squatting.

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines Real Estate Financial Institutions & Regulations The Philippine real estate market is heavily influenced by financial institutions, mortgage regulations, and government-backed housing programs..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines Real Estate Financial Institutions & Regulations 1. Residential Real Estate Financing A. Key Institutions Supporting Homebuyers.

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines Real Estate Financial Institutions & Regulations 2. Commercial Real Estate Financing.

[Audio] B. Regulations Affecting Commercial Real Estate BSP Risk-Based Capital Rules (Basel III Compliance) Banks must maintain higher reserves for risky loans (e.g., commercial real estate). Effect: ↓ Loan approvals for speculative projects. SEC REIT Regulations (2021 Revisions) Reduced public float requirement to 33% (from 40%). Effect: More REIT listings → Increased liquidity for developers. Foreign Ownership Restrictions (60-40 Rule) Limits foreign investment in land → Hinders large-scale commercial projects..

[Audio] (Chapter 1-THE PROPERTY AND CAPITAL MARKETS, Section 2- REAL ESTATE MARKETS AND PUBLIC POLICY , SUB-SECTION 1) Real Estate Markets and Public Policy in the Philippines Real Estate Financial Institutions & Regulations 3. Impact of Policies on Real Estate Cycles A. Low-Interest Era (2012-2018, 2020-2021) Pag-IBIG & bank loans fueled condo boom (~60,000 units/year). REITs emerged, unlocking capital for Ayala, SM, and Megaworld. B. High-Interest Era (2022-2024) BSP rate hikes (6.5%) → Developers faced higher loan costs. Construction slowdown – Office completions dropped 30% (2023). C. Post-Pandemic Recovery (2024-2026 Outlook) Potential rate cuts (2025) → Could revive developer financing. REIT expansion – More listings expected (e.g., Robinsons Land REIT).