Most people think property value comes from land area, location, or improvements. While these factors are important, one of the most overlooked drivers of value is the existence—or absence—of property rights.
A recent property rights assignment involving an interior urban property illustrates this principle.
The assignment initially appeared straightforward. The property itself was an interior parcel located within an established urban area. At first glance, the issue seemed to involve only a narrow access corridor used for ingress and egress. The physical area involved was relatively small compared to the overall property.
Yet as the investigation progressed, it became apparent that the dispute was not really about land.
It was about rights.
For many years, neighboring property owners had relied on a shared access arrangement that allowed vehicles and pedestrians to reach the interior property. The arrangement had existed for so long that it became part of the ordinary use of the area. Access was rarely questioned because it was always available.
Over time, however, questions emerged regarding the legal basis of the access. Could the arrangement continue? Was the right enforceable? Could it be withdrawn? If access were restricted, what would happen to the value and utility of the property behind it?
At first glance, these appear to be legal questions.
In reality, they are also valuation questions.
Because the moment access becomes uncertain, the economic character of a property changes.
A parcel of land may remain in the same location. Its boundaries may remain unchanged. Its area may remain exactly the same. Yet the usefulness, marketability, financing potential, and development opportunities associated with that property may increase or decrease dramatically depending on the rights attached to it.
This is a reality often overlooked in conventional real estate analysis.
Many valuation discussions focus on square meters, comparable sales, and market trends. These are important considerations. However, some of the most valuable attributes of a property are not visible on the ground. They exist in the form of property rights.
A right-of-way.
An easement.
A development permit.
A zoning entitlement.
A water right.
A development restriction.
Each of these rights can significantly influence value without changing the physical characteristics of the property.
As our analysis progressed, it became evident that the access corridor was doing something extraordinary.
It was unlocking the economic potential of an entire property.
Without secure access, the property’s utility would be substantially impaired. Marketability would decline. Financing options could become limited. Development opportunities would be constrained.
With access, however, the property could fully participate in the market.
The difference in value was measured not merely in terms of land area, but in terms of economic opportunity.
The assignment reinforced a lesson that I have repeatedly encountered throughout my professional career.
Whether dealing with easements, expropriation, water rights, development restrictions, estate settlements, or land use planning, the most important issue is often not the land itself.
The real issue is the bundle of rights attached to the land.
Who owns those rights?
Who may exercise them?
Who benefits from them?
Who bears the burden?
And ultimately, who captures the value they create?
These questions are becoming increasingly important as infrastructure projects, urban development, environmental regulations, and land use policies continue to reshape the economic landscape.
At AA+ Appraisal & Consultancy, Inc., we believe that before value can be measured, rights must first be understood.
This is why our work extends beyond traditional appraisal.
We examine ownership rights, access rights, development rights, planning constraints, legal restrictions, and economic opportunities. We seek to understand not only what a property is worth, but why it is worth that amount.
Because in many cases, the most valuable part of a property is not the land.
It is the rights attached to it.
And when those rights are properly understood, protected, and analyzed, hidden value often becomes visible.
By Augusto B. Agosto, JD, EnP, Economist, Consultant
When most people think of property valuation, they picture land, buildings, machinery, and infrastructure—tangible assets that can be easily inspected, measured, and compared in the marketplace. For water-dependent enterprises, however, a more fundamental question often arises: What is the value of the resource that makes the entire enterprise possible?
A water treatment plant without water has little utility; pipelines without water cannot generate revenue; and reservoirs without water are merely empty storage facilities. Yet, traditional valuation approaches often focus heavily on physical assets while giving limited attention to the underlying resource and the legal rights that govern access to it.
Recent professional engagements involving bulk water supply systems, utility infrastructure, and water-related enterprises prompted me to revisit a question that sits precisely at the intersection of law, economics, environmental planning, and valuation: Can the value of a water enterprise be fully explained by land and physical improvements alone? The answer is considerably more complex than conventional appraisal practice suggests.
Who Owns the Water?
The starting point of any discussion on water rights in the Philippines is the Regalian Doctrine. Under Article XII, Section 2 of the Constitution, all natural resources—including waters—belong to the State. The Water Code of the Philippines (Presidential Decree No. 1067) further reinforces this by declaring that private entities may acquire only the right to appropriate and utilize water, subject to strict state regulation.
This distinction is critical for valuation professionals: private entities generally do not own the water itself. Instead, they acquire the legal authority to access, extract, treat, distribute, and utilize water for beneficial purposes. While a water permit is merely an administrative authorization from a legal perspective, from an economic perspective, that authorization represents a monumental source of value.
Water Rights as Economic Assets
Economics teaches us that value arises from scarcity. Although the Philippines is traditionally viewed as an island nation rich in water resources, many regions face acute water stress driven by population growth, rapid urbanization, watershed degradation, groundwater depletion, and climate-induced seasonal variability. As access to reliable water becomes premium, the economic significance of water rights increases proportionally.
Water rights act as economic catalysts by providing:
Access to a Scarce Resource: Guaranteed entry into a restricted natural market.
Security of Supply & Legal Certainty: Risk mitigation against operational disruptions and litigation.
Priority of Use & Investment Opportunities: The baseline confidence required to deploy heavy capital for infrastructure development.
In effect, water rights serve as the operational bridge that converts unpriced natural resources into productive, revenue-generating economic assets.
Lessons from Practice: Beyond Tangible Assets
Several recent valuation assignments involving watershed-based bulk water supply systems and utility infrastructure projects forced a departure from standard real estate appraisal. These engagements required an evaluation that looked beyond physical infrastructure to assess raw water sources, regulatory authorizations, off-take contractual arrangements, and long-term hydrological sustainability.
One particular assignment involving a watershed-based bulk water supply system raised several non-traditional questions:
What precise portion of enterprise value is truly attributable to land versus physical improvements?
How should the raw, productive capacity of the surrounding watershed be quantified?
What is the isolated economic value of the right to abstract and distribute water?
How does the long-term reliability of the water source impact overall enterprise risk and value?
To what extent do administrative permits and contractual off-take agreements contribute to the ongoing economic viability of the operation?
Answering these questions required moving past conventional property appraisal and venturing into resource economics, institutional rights, environmental planning, and natural capital accounting. The valuation ultimately demonstrated that the economic performance of the enterprise could not be explained solely by its tangible assets. A massive portion of its utility and income-generating capacity was inherently tied to the underlying water resource and the institutional frameworks safeguarding access to it.
Two Paths to Water Production
Observation of water enterprises in Cebu reveals an interesting operational dichotomy. Different enterprises produce marketable water through completely different asset profiles:
Production Typology
Resource Reliance
Primary Value Driver
Natural Capital-Dependent
Watersheds, springs, and deep groundwater systems.
High reliance on natural replenishment and ecological health.
Technology-Dependent
Desalination plants and advanced treatment systems converting seawater or brackish water.
High reliance on produced capital, energy inputs, and technological investments.
While both typologies generate revenue by delivering the same end product, their underlying asset structures differ fundamentally. One depends heavily on natural ecosystems; the other depends on engineered physical infrastructure. Yet, both share the same economic reality: without access to the baseline water resource (whether raw fresh water or raw seawater), neither infrastructure nor technology can generate revenue.
Natural Capital and Water Resources
The emerging field of natural capital accounting provides a precise framework for modernizing valuation practice. Natural capital refers to natural assets capable of generating flow-of-resource economic benefits. In this context, it encompasses:
Watersheds, aquifers, and natural springs.
Rivers, recharge areas, and critical forest ecosystems that regulate hydrological cycles.
Without healthy watersheds and functioning hydrological systems, physical water supply infrastructure loses its utility. Consequently, the comprehensive valuation of water enterprises demands that we look upstream at the sustainability and ecological health of the resource provider.
Beyond Valuation: Understanding How Water Creates Economic Value
The appraisal of water-dependent enterprises often begins as a valuation exercise. However, the analysis quickly extends beyond traditional questions of market value and into a broader examination of how value is created.
Water enterprises derive their economic significance not merely from land, infrastructure, or equipment, but from the interaction of natural resources, institutions, and markets. Watersheds generate water resources. Legal and regulatory systems allocate access through water rights and permits. Infrastructure transforms the resource into a usable product. Markets create demand. Together, these elements produce economic value.
Viewed from this perspective, water rights valuation is not simply an appraisal problem. It is fundamentally an economic inquiry into how natural capital is transformed into productive capital through institutional arrangements and investment.
The valuation question therefore becomes a gateway to a broader understanding of resource economics, natural capital, and economic development.
Recent developments—including the enactment of the Philippine Ecosystem and Natural Capital Accounting System (PENCAS), the Philippine Statistics Authority’s Water Accounts, and ongoing national water resource assessments—reflect a growing recognition that natural resources are not merely environmental assets but fundamental contributors to economic development and national wealth.
These initiatives have significantly advanced the measurement of water resources, ecosystem services, and natural capital. However, an important gap remains. Much of the existing literature focuses on water availability, water use, allocation, pricing, and conservation. Far less attention has been devoted to understanding how water resources create economic value and how institutional arrangements governing access to those resources influence investment, enterprise development, and wealth creation.
In particular, limited research has examined the role of water rights as institutional mechanisms that transform water resources into productive economic assets. The interaction between natural capital, legal entitlements, infrastructure investment, and economic production remains largely unexplored in the Philippine context. Understanding this relationship is increasingly important as water scarcity, climate risks, and competing resource demands place greater emphasis on the economic significance of water resources.
These questions form the foundation of the author’s ongoing research, which seeks to examine how scarcity, institutions, and water rights interact to create economic value within water-dependent enterprises and, more broadly, within the Philippine economy.
Conclusion
The discussion on water rights ultimately leads to a broader question than valuation itself. While appraisal seeks to measure value, economics seeks to understand how value is created. In the case of water-dependent enterprises, the answer extends beyond land, buildings, treatment facilities, and infrastructure.
The experience of examining bulk water systems suggests that economic value originates from the interaction of natural capital, institutions, and investment. Watersheds, aquifers, springs, and other water resources provide the physical foundation. The State, through the Regalian Doctrine and the Water Code, establishes the institutional framework governing access and allocation. Water rights and permits create certainty, enabling investment in infrastructure, treatment systems, and distribution networks that transform natural resources into economic output.
Viewed from this perspective, water rights are more than regulatory instruments. They serve as institutional mechanisms that connect natural capital to economic production. Understanding their role requires moving beyond traditional discussions of water use and toward a deeper examination of how water resources contribute to enterprise value, regional development, and national wealth.
Recent initiatives such as PENCAS, the PSA Water Accounts, and national water resource assessments signal a growing recognition of the economic importance of natural assets. Yet important questions remain. How do watersheds create economic value? How do institutions influence the allocation of scarce water resources? How do water rights support investment, productivity, and long-term development? These questions remain largely unexplored within Philippine literature and present opportunities for future research.
The inquiry that began as a valuation problem has therefore evolved into a broader economic question: how does a water resource become economic value? Exploring that question may not only improve valuation practice but also contribute to a deeper understanding of water governance, natural capital, and sustainable development in the Philippines. As water scarcity and climate-related challenges become increasingly significant, the ability to understand and account for the value created by water resources may prove essential to both economic policy and resource management in the decades ahead.
Public discussions on Cebu’s upland resources often rely on a narrow and misleading definition of “economic value.” For years, local discourse has focused on equating economic worth with the revenues earned from quarrying and extraction. This creates the persistent and dangerous misnomer that natural wealth is measured solely by use value.
This belief is repeated in public forums, policy pronouncements, and fiscal reports. It suggests that whatever Cebu can extract, haul, crush, or sell represents the true economic contribution of its uplands. In reality, economics does not define wealth this way. Modern environmental economics evaluates natural systems differently. True economic valuation includes use values. It also includes non-use values. Ignoring non-use values results in incomplete analysis. This leads to flawed public policy. It causes environmental decline. It exacerbates climate vulnerability.
Before addressing this conceptual flaw, the scale of Cebu’s mineral economy must be clearly understood. The province is not operating a ₱600-million quarrying industry, as public officials often portray. It is operating a ₱20-billion extraction economy per year. When metallic and non-metallic activities are combined, the actual size of Cebu’s mineral economy becomes undeniable: ₱20.18 billion in 2024, ₱21.53 billion in 2023, and ₱19.32 billion in 2022. This is the real magnitude of extraction occurring in the uplands—far larger than what provincial income statements suggest.
Cebu’s quarry operators, processors, haulers, and construction supply chains transact between ₱7.5–₱12.5 billion annually in non-metallic sales alone, while metallic operations consistently exceed ₱18 billion per year. By contrast, government revenue—₱628 million in 2023—represents only 2–4% of Cebu’s total mineral economy. Thus, a massive private extraction economy generates billions in sales and profit. Meanwhile, public income is thin. It is too small to offset the environmental and social costs borne by the public.
This fixation on quarry revenue—and even the broader ₱20-billion extraction economy—reveals the deeper misconception underpinning current policies. It is the assumption that the value of natural resources lies primarily in what can be extracted from them.
This is not how economics works. Modern environmental economics, natural resource theory, and the Total Economic Value (TEV) framework all provide important lessons. They teach that real economic worth consists of use values and non-use values. Use values include quarrying, water extraction, timber, and agriculture. Recreation and tourism are also included. These activities are easily monetized and prominently appear in financial statements. Yet these represent only a fraction of total wealth.
Non-use values, although invisible in budgets and COA reports, are economically real. They represent the benefit of simply knowing that forests and watersheds exist (existence value). They also include the value of leaving ecosystems intact for future generations (bequest value). Non-use values cover the value of keeping nature available for future or unknown uses (option value). They encompass the value derived from knowing that other communities benefit from intact uplands (altruistic value). These are precisely the values Cebu loses. This happens the moment a mountain is cut, a slope is excavated, or a watershed is bulldozed.
The consequences of ignoring non-use values are visible today in the worsening flooding across Metro Cebu. Cebu’s intense focus on use values and extraction leads to destruction. This destruction affects the non-use values that sustain long-term stability. When uplands are stripped, infiltration declines; runoff accelerates; sedimentation increases; river capacity shrinks; and flood peaks intensify. This is why Metro Cebu now floods even without typhoons and why ordinary rainfall brings cities to a halt. Every ton of aggregates removed from Cebu’s uplands reduces the natural economy. This reduction affects flood mitigation, slope stability, groundwater recharge, biodiversity, and climate regulation.
In short, this is the heart of Cebu’s political economy of flooding:
A ₱20-billion extraction economy drives upland degradation.
A ₱600-million public revenue creates the illusion of fiscal benefit.
A multi-billion-peso ecological loss is imposed on the public.
A non-functioning natural protection system results in chronic flooding.
Short-term extraction is displacing long-term security.
These losses constitute ecological depreciation—the downward adjustment of natural capital from human activity. Government does not record this depreciation. However, households and businesses pay for it. They endure flooded homes. Business districts are paralyzed, and infrastructure is damaged. Transportation is disrupted. There are lost workdays, medical incidents, and increased LGU emergency spending. Against these losses, quarry revenues are negligible.
The core economic argument is simple: Cebu is counting the small gains and ignoring the massive losses. The province records quarry taxes, permit fees, operator sales, and extraction-based employment. However, it does not account for the loss of watershed integrity, slope stability, and infiltration capacity. It also overlooks groundwater reserves, biodiversity, and climate resilience. Social cohesion, cultural heritage, and intergenerational equity are ignored too. This is not just incomplete economics—it is incorrect economics. One cannot claim economic benefit from quarrying while ignoring the far greater economic harm caused by upland degradation. A ₱20-billion extraction economy is running alongside a collapsing natural economy. The outcome is predictable. The province gains short-term financial flows but accumulates long-term environmental debt.
This dynamic lies at the heart of Cebu’s political economy of flooding. A ₱20-billion extraction economy continues to drive upland degradation. A ₱600-million public revenue stream creates the illusion of fiscal benefit. A multi-billion-peso ecological loss is imposed on the public. And a weakened, fragmented natural protection system results in chronic flooding across urban and peri-urban areas. Short-term extraction has displaced long-term security, and the costs are borne disproportionately by downstream communities—not the operators who profit upstream.
Moving forward, Cebu can no longer afford a development model that counts quarry revenue but ignores watershed collapse. The province must make rational, future-oriented decisions. To do so, it must abandon the misnomer that use value alone defines economic wealth. The real economy of Cebu’s uplands includes their role as natural flood buffers. These uplands function as water towers and contribute to climate regulation. They have cultural and identity significance. Their value is also crucial to future generations. Cebu cannot call itself progressive if it treats natural capital as expendable. It cannot claim resilience if it undermines the uplands that protect the lowlands.
Economics is not about extraction. It is the total value—use and non-use, present and future, private gain and public cost. Until Cebu adopts this full accounting, it will continue to profit in pesos. However, it will lose wealth in floods, landslides, and ecological decline.
In a strategic leap towards enhancing its service spectrum in the VisMin (Visayas and Mindanao) region, ABA Economics Consulting is poised to reshape the consulting paradigm. The unveiling of a pioneering Economics consulting practice marks a transformative milestone for the firm, with AB Agosto, a seasoned economist, steering this groundbreaking initiative.
Agosto’s wealth of expertise, derived from practical applications of economics across diverse industries, positions him as a dynamic leader for this venture. His notable contributions as a consultant for the Asian Development Bank (ADB), coupled with his policy consulting engagements for the Cebu Chamber of Commerce and comprehensive analysis for a Mindanao real estate developer, underscore his ability to translate economic theories into tangible strategies.
Headquartered in Cebu, the newly established Economics practice aims to elevate ABA Economics Consulting’s capabilities, focusing on economic analysis within the domains of economics and urban planning. Key services encompass policy advisory assessments, valuations, cost and benefits analysis, demand analysis, property taxation, public finance, and investment analysis.
This strategic expansion solidifies ABA’s commitment to delivering holistic solutions in the VisMin region. Under the astute leadership of AB Agosto, the Economics consulting practice signifies a pivotal shift in the firm’s trajectory, ensuring its continued prominence in delivering impactful and tailored services across various economic sectors.
“The development of an Economics practice is the next step in the firm’s exciting growth journey and further widens our service offering in the dispute resolution space,” expressed AB Agosto, emphasizing the strategic importance of this innovative endeavor.
As the lead of this transformative practice, Agosto’s dynamic leadership is expected to play a central role in positioning ABA Economics Consulting as the go-to partner for clients seeking expertise in economic analysis and comprehensive dispute resolution solutions. The launch of the Economics consulting practice is poised to redefine consulting standards in the VisMin region, ushering in unparalleled insights and strategies for a diverse clientele.
As an urban economist scrutinizing the proposed Resolution of Both Houses (RBH) No. 6 in the Philippines, which aims to amend economic provisions, particularly in foreign ownership restrictions, my analysis delves into the intricate interplay between policy shifts, land dynamics, and the urban economic landscape.
RBH No. 6 seeks to introduce a clause, “unless provided by law,” particularly targeting the easing of limitations on foreign ownership of industries, including public utilities, currently adhering to a 60% Filipino – 40% foreign ownership rule. This proposed change has sparked concerns and discussions surrounding its potential impact on land prices, speculation, and housing dynamics.
With the nation’s total land area officially designated at 30 million hectares, featuring 14.2 million hectares of alienable and disposable land and 15.8 million hectares classified as forestland, RBH No. 6 introduces a crucial clause, “unless provided by law,” indicating a strategic move to ease restrictions on foreign ownership, notably in public utilities.
From an urban economic standpoint, the proposal is a harbinger of potential shifts in the demand and supply dynamics of the real estate market. The envisioned increased access to land ownership by foreign entities is anticipated to stimulate demand, particularly in prime urban locations or areas ripe for development. This surge in demand, coupled with heightened competition for available land, is poised to exert upward pressure on land prices, creating a complex economic environment.
Historically, rising land prices have been a catalyst for speculative activities in real estate markets. Local and foreign investors may strategically position themselves, acquiring land not for immediate utilization but with an eye on future profit margins. The resultant speculation poses challenges to the principles of efficient urban economic markets and warrants careful consideration in the broader economic landscape.
In the field of urban planning, the proposed changes present both opportunities and challenges. Increased foreign capital may translate into a wave of urban development projects, shaping the physical and economic landscape of cities. This influx of investment has the potential to bring innovation, modern infrastructure, and sustainable practices to the forefront of urban planning initiatives, aligning with contemporary economic paradigms.
However, the lens of an urban economist also necessitates a nuanced understanding of potential pitfalls. Gentrification, a potential byproduct of increased foreign investment in select urban areas, raises concerns about the equitable distribution of economic benefits. As property values rise and the cost of living increases, the risk of displacement for existing communities becomes a significant urban economic consideration.
Navigating the economic implications of RBH No. 6 requires adept policy responses. Effective government intervention, characterized by judicious regulation and strategic urban planning, is essential to harness the positive economic forces while mitigating potential negatives. Measures such as targeted taxation, zoning regulations, and policies to safeguard affordable housing are paramount.
As RBH No. 6 continues to be a focal point of discourse, urban economists emphasize the need for a holistic approach. Rigorous economic analyses, coupled with an understanding of urban dynamics, are imperative to inform policymakers on how to balance the influx of foreign investment with the preservation of economic equity, sustainable urban development, and the overarching economic resilience of the Philippines.
