When examining the real estate market, it is essential to have an understanding of the macroeconomic trends. The real estate industry is not self-contained. As a result, it is crucial for a real estate practitioner to understand the industry’s role, be aware of current affairs, and understand how macroeconomic factors influence the real estate market, including the overall supply and demand for properties as well as consumer expectations.
In the economy, real estate is significant. Families can live in residential real estate. For a lot of families, it is the biggest source of wealth and savings. Commercial real estate, which includes residential complexes, generates employment and provides locations for offices, retail, and manufacturing. Millions of people make money from real estate-related businesses and investments.
Real estate, renting, business and construction are both measured by and contribute to Gross Domestic Product (GDP). As shown in the graph, its growth continues. In 2016, it contributed P1.8 trillion, 13 percent of the country’s gross domestic product. It exceeded its 2000 record of P3.5 trillion. At that time, real estate, renting and business was a hefty 9 percent component of GDP.
Private construction, which is mostly done by property developers and individuals, contributed P1.2 trillion to the gross domestic product. It is one of the contributors to employment and helps in lowering the unemployment rate in the country.
Besides GDP, the real estate market in the country is fueled by increasing foreign direct investment. Since 2007, the accumulated foreign direct investment totaled P 2.1 Trillion. Meanwhile, the overseas Filipino worker’s remittances increased by 17% from 22 Million in 2013 to P 26.8 Million in 2016.
Understanding key real estate relationships have a strategic implication on real estate decision-making and portfolio management. the changing real estate environment can be linked to the macroeconomy. Knowing the relationship between macroeconomic variables and real estate performance, and knowing whether these links are consistent or changing over time can provide a useful tool in leveling up our service to our clients and to our daily real estate practice.
Real LexEcon 