Tag: real-estate

My Comments on the BNC Report: Price Is Not Necessarily Market Value

The recent Bilyonaryo News Channel (BNC) report featuring Cuervo Appraisers President Jose Maria Fernandez-Cuervo raises important concerns about the reliability of property transaction records in the Philippines, particularly the alleged understatement of selling prices in deeds of absolute sale and the absence of a comprehensive Multiple Listing Service (MLS).

These concerns are relevant to professional valuation practice. However, I believe the discussion should extend beyond the availability and accuracy of recorded selling prices to the broader economic foundations of property valuation.

First, price and market value are not necessarily the same.

Price refers to the amount asked, offered, or actually paid for a property. Market value, on the other hand, is an estimate of the amount for which a property should exchange under defined market conditions, involving knowledgeable and willing parties acting without compulsion.

Even if every deed of absolute sale accurately reflected the consideration paid, the recorded prices would not automatically represent market value. Appraisers must still examine the circumstances surrounding each transaction, including whether it was conducted at arm’s length and under normal market conditions.

Second, the absence of an MLS should not be confused with the absence of reliable valuation methodology.

An MLS primarily facilitates the sharing of property information among real estate professionals. Some systems also record completed transactions, but an MLS does not necessarily provide independently verified selling prices.

While a comprehensive MLS or verified sales database would improve market transparency, neither is an absolute prerequisite for developing a credible opinion of market value.

Third, sales transactions constitute only one source of market evidence, and the Sales Comparison Approach is only one of the recognized valuation approaches.

Professional valuation also recognizes the Income Approach and Cost Approach. The applicability of these approaches depends on the nature of the property, the valuation objective, and the quality of available evidence.

More importantly, property valuation requires an understanding of the economic factors influencing value, including supply and demand, accessibility, location, land-use regulations, highest and best use, income-generating potential, development costs, and prevailing market conditions.

These factors help explain why properties command different prices and how market participants assess their economic benefits.

Fourth, incomplete or unreliable transaction information requires broader market investigation, not simply numerical adjustments.

Adjustments to comparable sales are legitimate valuation tools when supported by market evidence. However, adjustments alone cannot establish market value, particularly when the underlying transaction information is unreliable.

Appraisers must investigate the available evidence, evaluate its relevance, examine the economic characteristics of the property, and reconcile the findings using appropriate valuation approaches.

This is where the distinction between collecting prices and undertaking professional valuation becomes particularly important.

Finally, the reported understatement of consideration in deeds of sale is a legitimate concern that deserves further empirical investigation. Even assuming that such practices are widespread, the implications for valuation should be understood within the broader framework of property market economics.

The central challenge is not merely the absence of an MLS or the reliability of recorded selling prices. It is how professional appraisers interpret available market information and translate it into a credible and defensible opinion of market value.

Property valuation is not simply the process of collecting selling prices and adjusting comparable properties. It is an economic analysis of the property, its market, and the factors influencing its exchange value.

Ultimately, price is evidence, market value is the conclusion, and valuation is the economic analysis connecting the two.

Augusto B. Agosto
Economist | Licensed Real Estate Consultant | Real Estate Appraiser

Price Is Not Market Value: Rethinking Property Valuation Beyond Recorded Sales

A recent report by Bilyonaryo News Channel quoted Cuervo Appraisers President Jose Maria Fernandez-Cuervo expressing concern about the reliability of property transaction records in the Philippines. According to the report, selling prices declared in deeds of absolute sale are frequently understated, partly because of incentives to reduce tax liabilities. He also pointed to the absence of a comprehensive Multiple Listing Service (MLS), which makes gathering reliable property sales information difficult for professional appraisers.

These observations raise legitimate concerns about transparency and the quality of property market information. However, they also invite a more fundamental discussion about the economic foundations of real estate valuation.

The central issue is not simply whether recorded selling prices are accurate, but whether those prices constitute reliable evidence of market value.

Even if every deed of absolute sale reflected the actual consideration paid, the challenge of estimating market value would remain. An actual transaction price is not necessarily equivalent to market value, and the Sales Comparison Approach is only one of the recognized approaches to property valuation.

This distinction is particularly important in the Philippine property market, where incomplete transaction records, speculative landholding, varying development potential, and differences in market accessibility complicate the valuation process.

1. Price and Market Value Are Different Economic Concepts

In ordinary market transactions, price refers to the amount asked, offered, or paid for a property. Market value, however, is an estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller, in an arm’s-length transaction, after proper marketing, with both parties acting knowledgeably, prudently, and without compulsion.

The distinction is fundamental.

A transaction price is an observed outcome of a particular exchange. Market value is an estimate developed under defined assumptions about market behavior.

A property may sell below its estimated market value because the seller faces financial pressure, the transaction involves related parties, or the property was not adequately exposed to the market. Conversely, a buyer may pay more than the prevailing market value because of special motivations, strategic advantages, or other circumstances.

Thus, even a genuine and accurately recorded transaction does not automatically establish market value.

This is why professional valuation requires investigation of the circumstances surrounding a transaction rather than merely accepting the amount appearing in a deed of sale.

2. The Problem of Understated Selling Prices

The reported practice of declaring consideration below the amount actually paid presents a genuine concern for market transparency.

When recorded consideration differs from the actual transaction price, the information available to appraisers and other market participants becomes less reliable.

From an economic perspective, this is a problem of information asymmetry. The buyer and seller possess information about the actual exchange that may not be accurately reflected in documents accessible to third parties.

However, even assuming that understatement is widespread, the solution is not simply to correct the recorded prices or apply percentage adjustments.

The more important question is how appraisers evaluate available evidence and determine whether it reflects the economic conditions governing the property’s market.

Moreover, the assertion that understatement is the norm is itself an empirical proposition. Establishing its prevalence and magnitude would require systematic investigation of actual and declared consideration across a representative sample of transactions.

Professional observations can identify a potential problem, but empirical research is needed to measure its extent.

3. An MLS Is Not the Same as a Verified Sales Database

The absence of a comprehensive Multiple Listing Service is another concern raised in the report.

An MLS generally facilitates the exchange of property listing information among participating real estate professionals. Depending on its design, it may include asking prices, property characteristics, listing histories, and completed transaction information.

However, an MLS should not be confused with a verified database of actual property sales.

An MLS containing predominantly asking prices may improve access to available properties without necessarily revealing the prices at which transactions are completed.

This distinction matters because asking prices represent sellers’ expectations, not necessarily actual market outcomes.

In the Philippine setting, where some landowners retain properties for speculative appreciation or long-term investment, asking prices may reflect reservation prices substantially different from what prospective buyers are willing and able to pay.

A verified transaction database would provide stronger evidence of completed exchanges, although appraisers would still need to examine the circumstances of those transactions.

An MLS improves the availability of market information. A verified transaction database improves the evidence of actual exchanges. Neither, by itself, determines market value.

4. Sales Transactions Are Only One Source of Market Evidence

Property valuation is sometimes discussed as though the availability of comparable sales determines whether a credible market value estimate can be developed.

This view is incomplete.

Sales transactions provide important evidence of market behavior, but they are only one component of the valuation process.

Property values are influenced by numerous economic and physical factors, including location, accessibility, infrastructure, land-use regulations, development intensity, highest and best use, supply and demand, income-generating capacity, construction costs, and broader economic conditions.

These factors influence how market participants perceive the benefits, limitations, and economic opportunities associated with a property.

For example, two parcels of land may have similar areas and zoning classifications but substantially different economic potential because of accessibility, topography, infrastructure availability, development costs, or market demand.

Simply comparing their recorded selling prices may fail to capture these differences.

The appraiser must therefore understand not only the prices observed in the market but also the economic forces producing those prices.

This broader analysis is especially relevant in developing property markets where transaction information may be incomplete and land-use patterns are changing.

5. Sales Comparison Is Only One Valuation Approach

Professional property valuation recognizes three principal approaches: the Sales Comparison Approach, the Income Approach, and the Cost Approach.

The Sales Comparison Approach examines prices and other market evidence relating to comparable properties, with appropriate analysis and adjustments for relevant differences.

The Income Approach estimates value through the income or economic benefits that a property is capable of generating, using appropriate capitalization or discounted cash flow techniques.

The Cost Approach considers the cost of acquiring land and providing an equivalent improvement, with appropriate allowances for depreciation and obsolescence, guided by the principle of substitution.

Each approach examines property value from a different economic perspective.

Their applicability depends on the property type, the basis and purpose of valuation, the quality of available evidence, and the behavior of relevant market participants.

For an income-producing commercial property, the Income Approach may provide important evidence of investment value and market expectations. For specialized improvements, the Cost Approach may offer useful evidence when properly applied. For actively traded residential properties, the Sales Comparison Approach may be particularly relevant.

However, no single approach should be applied mechanically or assumed to be superior in every circumstance.

The objective is not necessarily to apply all three approaches in every assignment, but to select and reconcile those appropriate to the property and supported by sufficient evidence.

6. Valuation Is More Than Adjusting Comparable Sales

In conventional appraisal practice, comparable properties are often analyzed through adjustments for differences in location, size, accessibility, physical characteristics, and other factors.

These adjustments are legitimate valuation tools when supported by market evidence.

However, adjustments should not be confused with the broader process of economic valuation.

An adjustment does not automatically correct unreliable underlying information. Nor does a series of numerical adjustments necessarily produce a credible market value conclusion.

The appraiser must establish why a particular characteristic affects value, whether the market recognizes that difference, and how the available evidence supports the adjustment.

This requires an understanding of market behavior rather than reliance on predetermined percentages.

The principle of substitution provides an important theoretical foundation: a rational buyer generally would not pay more for a property than the cost of obtaining an equally desirable alternative, subject to relevant market conditions.

But substitution must be understood within the broader economics of land and property markets.

Accessibility, development opportunities, effective demand, financing conditions, and the availability of substitutes influence the alternatives facing buyers and sellers.

Consequently, reliable valuation is not simply a mathematical exercise involving comparable prices. It is an economic investigation into how market participants determine the exchange value of property.

7. Implications for Philippine Valuation Practice

The concerns about understated deeds and the absence of an MLS should encourage improvements in property market transparency.

More reliable transaction reporting, better information-sharing systems, and stronger verification procedures would undoubtedly benefit the valuation profession.

The implementation of Republic Act No. 12001, or the Real Property Valuation and Assessment Reform Act, also provides an important opportunity to strengthen valuation standards and institutional practices.

Nevertheless, improving market information should be distinguished from improving valuation methodology.

A complete database of property transactions would not eliminate the need for professional analysis. Likewise, incomplete transaction records do not necessarily make credible valuation impossible.

The essential requirement is that appraisers critically evaluate the available evidence, recognize its limitations, consider the relevant economic characteristics of the property, and apply valuation approaches appropriate to the assignment.

Where evidence is insufficient to support a reliable conclusion, that limitation must be acknowledged rather than concealed through unsupported assumptions or adjustments.

These principles apply broadly to valuation for mortgage lending, taxation, investment, financial reporting, property acquisition, litigation, and other professional purposes.

Conclusion: From Price Collection to Economic Valuation

The discussion about understated selling prices and the absence of an MLS identifies important weaknesses in Philippine property market information.

However, it should not lead to the conclusion that reliable property valuation depends exclusively on obtaining actual selling prices.

Even accurately recorded transactions require interpretation. Asking prices must be distinguished from completed exchanges. Comparable sales must be evaluated in relation to the property’s characteristics and market conditions.

Most importantly, the Sales Comparison Approach represents only one of several recognized approaches to valuation.

The broader responsibility of professional appraisers is to understand the economic forces influencing property value and to develop conclusions supported by relevant evidence and established valuation principles.

Price is evidence of a particular market transaction. Market value is an estimated economic conclusion. Valuation is the analytical process connecting market evidence, economic conditions, and professional judgment.

The future of Philippine property valuation therefore depends not only on improving access to transaction information, but also on strengthening the economic foundations of professional valuation practice.

About the Author

Augusto B. Agosto is an economist, licensed real estate consultant, real estate appraiser, and environmental planner. He is President and CEO of AA+ Appraisal & Consultancy, Inc. and a part-time university professor. His professional and research interests include real estate economics, property valuation, urban development, eminent domain, and the integration of law and economics.

Reference

Bilyonaryo News Channel. (2026). Presyo sa deed of sale, hindi totoo? Cuervo Appraisers chief flags undervalued property sales to cut taxes. https://bnc.bilyonaryo.com/presyo-sa-deed-of-sale-hindi-totoo-cuervo-appraisers-chief-flags-undervalued-property-sales-to-cut-taxes/business/

The Five-Year Affordability Trap: A Warning for the Expanded 4PH Program

What condominium cancellations reveal about temporary housing subsidies and the sustainability of homeownership

Roughly 9,000 condominium purchase cancellations and nearly 80,000 unsold units in Metro Manila raise a basic question about Philippine housing: are we producing homes that households can genuinely afford, or financing arrangements that only make expensive homes look affordable at the start?

According to Colliers Philippines, the 9,000 cancellations recorded in the first nine months of 2026 included about 5,200 units under construction and 3,800 ready-for-occupancy units. Colliers Research Director Joey Bondoc noted that many cancellations occur around the fifth year of payment, when buyers move from small developer installments to much larger bank-financed amortizations. In some cases, monthly payments reportedly jump from about ₱10,000–₱12,000 to ₱40,000–₱50,000.

High mortgage rates and the exit of demand tied to Philippine Offshore Gaming Operators (POGOs) have also weakened the market. Both explanations are sound: higher rates reduce borrowing capacity, and the POGO exit is a negative demand shock. Neither, however, answers the deeper question.

Why did so many purchases depend on financing that buyers could not sustain at turnover? And are we building the same vulnerability into government-assisted housing?

The Soft Entrance Mechanism

I use the term Soft Entrance Mechanism for any housing finance structure that lowers the initial burden of acquiring a home through low down payments, deferred principal, subsidized interest or temporarily reduced amortizations.

The mechanism is not inherently harmful. It can widen access to homeownership by easing genuine financing constraints. The problem arises when the introductory payment does not reflect what the household will owe for the rest of the loan.

Condominium pre-selling shows how this works. Buyers pay a small share of the price over several years, and the large balance falls due at turnover, usually through a bank loan. A buyer who can manage the installments may still fail to qualify for, or sustain, the mortgage needed to complete the purchase.

This is where the mechanism becomes a Soft Entrance Trap. The household enters the market under one affordability condition but must stay in it under another.

The Same Risk in Expanded 4PH

The Expanded Pambansang Pabahay para sa Pilipino (4PH) Program contains a financing structure that deserves the same scrutiny. Qualified borrowers obtain housing loans at a subsidized 3% annual rate for the first five years, which may be extended for another five years subject to conditions. The first 30,000 qualified borrowers under Pag-IBIG Fund’s Early Bird promotion may keep the preferential rate for ten years.

This differs from condominium pre-selling. One is a subsidized mortgage rate; the other is deferred financing of the purchase price. Yet both raise the same question: can the household carry the obligation once the introductory period ends?

The program’s aim is commendable, and lower rates do cut monthly payments. Pag-IBIG Fund reported that socialized housing units financed in the first nine months of 2026 rose to 10,904, from 3,987 a year earlier. That is a significant expansion. But loan approvals alone do not show that the resulting homeownership will last. A housing program should be judged not only when a family receives its loan, but also when the preferential rate expires.

What Happens in Year Six

Consider a hypothetical ₱1.8 million socialized housing unit financed over 30 years. At 3%, the monthly amortization is about ₱7,589. Suppose the remaining balance, about ₱1.6 million after five years, is repriced at an illustrative 7% and amortized over the remaining 25 years. The payment rises to about ₱11,311, an increase of roughly 49%.

PeriodInterest rateMonthly amortizationShare of ₱30,000 income
Years 1–53% (subsidized)₱7,58925%
Years 6–307% (illustrative)₱11,31138%

This is not a forecast of 4PH repricing. It illustrates the risk created when a temporary preferential rate gives way to a higher one. For a household earning ₱30,000 a month with unchanged income, the mortgage would go from a quarter of income to nearly two-fifths, before maintenance, insurance, utilities and transport.

Incomes may rise, the subsidy may be extended, and actual repricing depends on the loan agreement. These possibilities matter, but they should be built into the affordability assessment, not assumed to solve the problem. The question is not whether the first five years are affordable, but whether the household can sustain ownership for the full term.

Housing Need Is Not Effective Demand

Housing need is a social requirement. Effective demand is need backed by purchasing power. A household may need a home without the income to buy one at market prices, and a household may qualify for a subsidized loan without the capacity to carry it if terms change.

This distinction explains how the Philippines can have a large housing backlog while developers sit on thousands of unsold units. There is no contradiction: the housing being built may not match the incomes, locations or financial capacity of the households that need it.

Cheaper Credit Is Not Cheaper Housing

An interest subsidy lowers the cost of borrowing. It does not lower the price of the dwelling, raise household income or reduce the cost of producing housing. In effect, it increases how much eligible households can pay.

If supply responds with more homes at reasonable prices, access improves. But where supply is constrained by land prices, infrastructure, construction costs or regulation, part of the subsidy is absorbed into higher prices. Economists call this subsidy incidence: the intended beneficiary does not capture the full benefit, and developers and landowners may take a share.

This is not an argument against housing subsidies. It is an argument for pairing subsidized finance with policies that address the cost of housing production and the real capacity of beneficiaries. Otherwise, government raises what households can borrow without making the homes they buy any more affordable.

Public Financing for Unsold Condominiums

In September 2026, reports indicated that the Department of Human Settlements and Urban Development was preparing a modality allowing existing private condominium units priced at ₱3 million and below to be acquired through Pag-IBIG financing. The aim is to address both unsold inventory and limited access to affordable housing.

Offering suitable existing units at lower prices could help. But the policy must distinguish the developer’s inventory problem from the household’s affordability problem. An unsold unit does not become affordable simply because government-backed financing is attached to it.

The relevant tests are whether the price is appropriate, the location serves the household, condominium dues and maintenance are manageable, and the borrower can sustain the loan. Without these, public money could help absorb overpriced inventory while leaving the price-income mismatch intact. Any such arrangement should rest on independent valuation, transparent eligibility rules and rigorous assessment of repayment capacity.

Public housing finance should serve households’ housing needs, not serve as an exit route for unsold private inventory.

Three Tests of Affordability

Housing affordability should be judged on three linked dimensions:

  1. Price affordability: whether the acquisition price is reasonable relative to household income and resources.
  2. Financing affordability: whether the household can qualify for and service the loan under its terms.
  3. Long-term affordability: whether the household can carry the full cost of ownership for the entire term, including after subsidies expire.

The Soft Entrance Mechanism mainly addresses the second test, and only during the introductory period. It becomes a trap when entry is made affordable without assurance on the third.

Three safeguards follow. Loan qualification should test repayment capacity under plausible future rates, not only the subsidized amortization. Beneficiaries should receive illustrative amortization schedules showing what they would pay under alternative rates once the subsidy ends. And government should track delinquency, restructuring, foreclosure and continued ownership after the subsidy period, which says far more about program performance than loan approvals and takeouts.

Lessons for Cebu and Other Growing Cities

The implications reach beyond Metro Manila. Cebu and other fast-urbanizing cities face rising land prices, transport costs, uneven access to jobs and limited household purchasing power. More residential construction does not improve affordability if the units are beyond the reach of the people who need them, and more mortgage credit cannot substitute for sound urban planning, well-located housing, efficient infrastructure and lower production costs.

Housing affordability is not only a banking problem. It is a problem of land economics, household income, urban development and the allocation of scarce resources.

Solving the Problem or Postponing It?

The condominium cancellations are a timely warning about financing that makes housing accessible at entry without making ownership sustainable. Expanded 4PH has an important objective, and its subsidized rates can greatly benefit lower-income borrowers. But temporary financing assistance should not be mistaken for a lasting solution to affordability.

The policy challenge is to ensure that household capacity holds for the whole mortgage term, not just the years when government keeps payments low. A housing program should be judged not by how many families become homeowners today, but by how many remain homeowners tomorrow.

Otherwise, we risk trading one housing problem for another: from households unable to buy homes to households unable to keep them.

Augusto B. Agosto, DLVM, MA Economics, JD, EnP, is an economist, environmental planner, licensed real estate consultant and appraiser, and law scholar based in Cebu. A Housing Specialist and Consultant with the Asian Development Bank (ADB), he is President and CEO of AA+ Appraisal & Consultancy, Inc. and Founding President of the Society of Litigation Valuers (SOLVE). He writes and lectures on land economics, housing finance and valuation.

Will Metro Manila’s Real Estate Market Fall?

Condominium oversupply, geopolitical risk, and the 2028 election: an economic view

Metro Manila’s condominium market is under strain. Thousands of units remain unsold, vacancies are high, and rents in several districts are still far below their pre-pandemic levels. Some observers see structural oversupply; others argue that good location and management still set strong properties apart from weak ones.

The real question is broader: is this an ordinary real estate cycle, or a structural imbalance that global instability and the 2028 presidential election could prolong?

The evidence points to the second, but not to a crash. Metro Manila is going through a slow, uneven adjustment caused by a mismatch between the housing being built and what households can actually afford.

What the numbers show

Unsold condominium inventory stood at about 82,900 units in the second quarter of 2026, enough for 34 months of sales. By the third quarter it had dropped to about 80,000 units and 28 months, as take-up rose 17% to 8,454 units. Demand has not disappeared. But one good quarter does not clear an inventory that would still take more than two years to sell, and residential vacancy remains near 25%.

The adjustment is also uneven. Second-quarter rents compared with pre-pandemic levels:

DistrictRent (₱/sq.m./month)Change vs. pre-pandemic
Bay Area / Pasay706−59%
Alabang / Muntinlupa715−42%
Ortigas / Mandaluyong729−25%
Makati887−18%
Bonifacio Global City1,105+0.1%
Other Taguig715+15%

The Bay Area was hit hardest: heavy new supply, followed by the loss of tenants after the 2024 ban on offshore gaming operators (POGOs), left vacancy there near 58%. BGC, by contrast, has held its ground. There is no single Metro Manila condominium market, only district markets in very different conditions.

A housing shortage alongside unsold units

Metro Manila had a housing backlog of about 819,000 units in 2025, yet some 80,000 condominium units sit unsold. The contradiction disappears once we separate housing need from effective demand: what households are actually able to pay for at today’s prices. Developers build for the second, not the first.

The numbers make the gap plain. The median NCR family earned about ₱33,672 a month in 2023 (PSA Family Income and Expenditure Survey). Two-thirds of unsold units are priced between ₱4 million and ₱12 million. A ₱4 million unit with 20% down, a 20-year loan, and an illustrative 7% interest rate costs about ₱24,800 a month: roughly 74% of that family’s income, before dues, utilities, and taxes. A ₱12 million unit would cost more than twice the family’s entire monthly income.

Metro Manila does not have too much housing. It has too much of the wrong housing for the households that need it.

Why prices have not crashed

Real estate adjusts slowly. Developers and owners carry loans and sunk costs, and many expect a recovery, so they resist cutting list prices. The correction shows up first in other ways: longer selling periods, promotional discounts, rental concessions, and postponed launches. Watching list prices alone understates how far the adjustment has already gone.

Investor demand adds another layer. Many units were bought for rental income and capital gains, not to live in. When rents fall, returns shrink, investors stop buying, absorption slows, and rents come under further pressure. That cycle is hardest on investors who rely on rent to pay their own loans.

Good management helps individual buildings, but it mostly draws tenants from competing buildings. One property’s success is not the market’s recovery.

Global shocks and the 2028 election

The Philippines imports most of its fuel and depends heavily on remittances, so trouble abroad reaches the housing market quickly. Higher oil prices feed inflation and squeeze household budgets. Persistent inflation keeps interest rates and mortgage costs high. Conflict in host countries can hit overseas Filipino workers and the remittances that fund many home purchases. None of this adds supply; it simply weakens the demand needed to absorb the existing stock.

The May 2028 election adds domestic uncertainty. Real estate involves large, long-term commitments that are hard to reverse, so developers and investors often wait for policy direction to become clear. That waiting cuts both ways. Fewer launches would help clear the oversupply, but prolonged hesitation could slow investment and job growth. What matters is not who wins but whether economic policy stays predictable and credible.

So, will prices fall?

Three paths are possible to 2028:

  • Stabilization: energy prices and inflation ease, borrowing gets cheaper, incomes rise, and the inventory is gradually absorbed.
  • Prolonged adjustment: affordability stays tight and investors return slowly. Vacancies persist in oversupplied districts and effective prices drift lower in places.
  • Adverse shock: a new geopolitical crisis brings higher inflation and tighter credit. Combined with forced selling by stretched investors, it produces a deeper, longer correction.

The second path is the most likely. A full collapse cannot be inferred from condominium oversupply alone. That would take widespread financial distress, heavy leverage, and forced selling across other property sectors, and the evidence for those is not there.

A correction would not be all bad. Lower rents leave tenants more to spend, more affordable units improve access to jobs, and less speculative building frees capital for productive uses. Rising prices are not proof of economic success, and falling prices are not proof of failure.

The real question is not whether Metro Manila’s property prices will fall. It is whether the coming adjustment will finally close the gap between the housing being built and the housing Filipinos can actually afford.

*Figures are from published Q2–Q3 2026 property-market research and the PSA 2023 Family Income and Expenditure Survey; the scenarios are conditional assessments, not price forecasts.

Augusto B. Agosto is an economist and a licensed real estate consultant, appraiser, and environmental planner.

Beyond Homebuyer Subsidies: The Real Economics of the Philippine Housing Crisis

Why CREBA’s proposal should be examined in the context of housing supply, land prices, household incomes, and urban spatial development

The Chamber of Real Estate and Builders’ Associations (CREBA) has proposed a homebuyer interest subsidy mechanism as an alternative to certain existing balanced housing compliance arrangements. Under the proposal reported by Proud Bisaya Bai on October 24, 2026, developers would contribute funds to help reduce the interest burden of qualified housing borrowers, potentially through a program administered by Pag-IBIG Fund.

At first glance, the proposal appears reasonable. If the objective of socialized housing is to help low-income households acquire decent homes, why not reduce their monthly amortization instead of requiring developers to undertake housing projects that beneficiaries may ultimately find unaffordable? The argument recognizes an important problem in Philippine housing policy: the production of housing units does not automatically translate into affordable housing opportunities.

However, the proposal also raises a more fundamental economic and public policy question. Does subsidizing the purchasing power of homebuyers address the underlying housing shortage, or does it merely change the way developers comply with their statutory socialized housing obligations?

The distinction matters because the Philippine housing problem is not simply a shortage of financing. It is also a problem of land availability, location, infrastructure, household income, development costs, and the spatial organization of cities. For Metro Cebu, where housing, employment, and transportation extend across several local government jurisdictions, these issues are especially relevant.

The analysis that follows uses Metro Cebu as its illustrative case, but the underlying economics are not Cebu-specific. The same demand-supply distinction, the same mortgage-eligibility gap among informally employed households, and the same housing-location tradeoff apply with equal force to Metro Manila, Metro Davao, CALABARZON, and any other Philippine urban area where housing, employment, and transportation infrastructure are organized across multiple local government units. What differs across these areas is degree, not kind: in metros with scarcer developable land and stronger demand pressure, such as Metro Manila or Metro Cebu, subsidy capitalization into land prices is likely to be more pronounced; in areas with more abundant land and weaker demand, the same subsidy may translate more directly into affordability gains. The specific figures cited in this article—housing costs, contribution amounts, unit counts—are Cebu-specific illustrations and should not be read as national estimates.

1. Understanding CREBA’s Proposal

According to the published report, CREBA advocates a Direct Beneficiary Interest Subsidy Program under which developers would make financial contributions that could be used to reduce housing loan payments for qualified beneficiaries.

The article presents an illustrative case in which monthly amortization could decline from approximately ₱4,800 to ₱2,800 through interest assistance. It also describes a hypothetical ₱15 million developer contribution that CREBA estimates could assist approximately 310 families, compared with an estimated 157 housing units under a construction-based arrangement. These figures are presented as illustrations of the proposal rather than independently established program outcomes.

CREBA’s argument rests on the proposition that financial assistance delivered directly to qualified beneficiaries may produce greater immediate affordability than requiring developers to undertake separate socialized housing construction. This argument deserves evaluation because it shifts the focus from the number of units constructed to the ability of households to pay for housing.

But the comparison requires caution. A household receiving an interest subsidy is not necessarily equivalent to a household receiving access to a newly constructed housing unit. The former concerns financing affordability; the latter concerns physical housing supply. Both are important, but they address different economic constraints.

2. Housing Affordability Is Not the Same as Housing Supply

Housing markets operate through the interaction of demand and supply. Demand depends on household incomes, population growth, financing conditions, preferences, and location. Supply depends on land availability, construction costs, infrastructure, regulations, developer investment, and the availability of suitable development sites.

An interest subsidy primarily affects demand by increasing the purchasing capacity of eligible households. It reduces the effective cost of borrowing and may allow a family to qualify for a housing loan or sustain lower monthly payments. However, the subsidy does not directly create additional housing units.

This distinction becomes particularly important when housing supply is constrained. If more households become financially capable of purchasing homes but the number of available units remains relatively unchanged, competition for those units may increase. Developers and landowners may respond through higher prices, particularly in locations where developable land is scarce. Economists describe this possibility as the capitalization of subsidies into asset prices: part of the intended housing assistance may be captured through higher property values rather than remaining entirely with beneficiaries.

This outcome is not inevitable. Its magnitude depends on market conditions, competition, supply responsiveness, and program design. Nevertheless, it demonstrates why demand-side subsidies cannot be evaluated independently of housing supply.

A subsidy may make housing financing more affordable without making housing itself more abundant. A comprehensive housing policy must address both sides of the market.

3. The Problem of Mortgage Eligibility

Another important limitation concerns the households that can actually benefit from interest subsidies. Mortgage financing generally requires borrowers to demonstrate repayment capacity and comply with lending requirements. For households with stable employment and documented income, interest assistance may significantly improve affordability.

However, many low-income Filipino households derive their livelihood from informal employment, self-employment, small enterprises, and irregular economic activities. Their incomes may fluctuate or may be difficult to document according to conventional lending standards. These households may remain unable to qualify for housing loans even when interest rates are reduced.

This creates a potential policy mismatch. The beneficiaries most capable of accessing an interest subsidy may not necessarily be the households experiencing the greatest housing deprivation. A household that cannot satisfy the minimum requirements for a housing loan does not become mortgage-qualified simply because the government or a developer subsidizes part of the interest.

For such households, other arrangements may be necessary, including rental housing, community-based financing, incremental housing, assisted land acquisition, and appropriately designed rent-to-own programs. The important principle is that housing assistance must correspond to the actual financial circumstances of the intended beneficiaries. A single financing mechanism cannot adequately address the needs of every income group.

4. Balanced Housing Is a Social Obligation, Not Merely a Development Cost

The proposal must also be examined within the statutory framework governing balanced housing. Republic Act No. 7279, or the Urban Development and Housing Act of 1992, as amended by Republic Act No. 10884, establishes balanced housing development requirements for covered projects. The amended law generally prescribes socialized housing compliance equivalent to at least 15% of the total subdivision area or project cost and at least 5% of the condominium area or project cost, subject to its specific provisions and implementing regulations.

These requirements reflect a public policy decision that private real estate development should contribute to addressing the housing needs of underprivileged and homeless citizens. The obligation is therefore more than an ordinary business expense; it represents a statutory mechanism for connecting private development with broader social housing objectives.

CREBA’s proposed alternative should consequently be evaluated not merely by whether it reduces developer costs or simplifies compliance. The more important question is whether it produces housing benefits that are legally permissible and socially comparable to, or better than, the existing compliance arrangements.

Financial contributions are not inherently inconsistent with housing policy. Certain alternative compliance mechanisms already exist under the applicable regulatory framework. However, any new substitution must be supported by the necessary legal authority and safeguards. A private industry proposal cannot, by itself, redefine a statutory obligation.

There is also a need to clarify the numerical basis of CREBA’s comparison. A hypothetical ₱15 million contribution represents 1.5% of a ₱1 billion project cost. The relationship between this amount and the statutory balanced housing requirement must therefore be explained before treating the proposed contribution as economically equivalent to construction-based compliance.

The public interest should remain the governing consideration.

5. Housing Location Is as Important as Housing Price

One of the most neglected dimensions of Philippine housing policy is location. Housing is frequently evaluated according to acquisition price, construction cost, and monthly amortization. Yet the economic burden of housing extends beyond the mortgage payment. A household must also consider the cost of traveling to work, accessing education, obtaining health services, and participating in daily economic activities. A low-priced housing unit located far from employment centers may impose substantial recurring transportation costs. In some cases, the apparent savings in housing expenditure may be offset by higher commuting expenses and lost productive time.

The relevant measure is therefore not merely the monthly housing payment but the combined cost of housing and accessibility. This relationship can be expressed as:

Effective Housing Burden = Housing Expenditure + Transportation Expenditure + Other Location-Related Costs

Consider two hypothetical housing options. A household purchasing a peripheral housing unit may pay ₱3,000 monthly in amortization but incur ₱5,000 in transportation expenses, for a combined housing and transport burden of ₱8,000 monthly. Another household may pay ₱5,000 for housing closer to employment but incur only ₱1,500 in transportation expenses, for a combined burden of ₱6,500. Although the second unit is more expensive in terms of housing payments, it is more affordable once location-related expenses are considered. These are illustrative figures, not observed Metro Cebu household expenditures.

The example demonstrates why housing affordability must be evaluated through urban land economics rather than financing costs alone. A housing subsidy that reduces amortization without addressing location may leave the household’s broader economic burden largely unchanged.

6. Metro Cebu: A Housing Problem That Cannot Be Separated from Urban Planning

Metro Cebu provides an important case for examining the relationship between housing policy and spatial development. Employment opportunities are distributed across Cebu City, Mandaue, Lapu-Lapu, Talisay, and other surrounding municipalities and cities. Households make residential decisions within this wider metropolitan labor market. Consequently, the housing problem cannot be understood solely through the administrative boundaries of an individual local government unit.

A residential development may be located in one municipality while its occupants work in another city. The resulting commuting patterns create transportation demand and infrastructure costs that extend beyond the jurisdiction responsible for approving the housing project. This is why housing policy must be coordinated with metropolitan transport, employment locations, and infrastructure planning.

For Cebu City, the issue is particularly relevant to the evaluation of its Comprehensive Land Use Plan. The city must determine not only how much residential land is required but also where additional housing can be accommodated efficiently. This requires examining the redevelopment capacity of established urban districts, the feasibility of higher-density housing, infrastructure limitations, and the relationship between residential areas and employment centers—as well as whether outward expansion is economically preferable to redevelopment and intensification.

Peripheral expansion may offer lower initial land acquisition costs. However, those apparent savings may be offset by additional infrastructure investment, longer commuting distances, and environmental costs. Conversely, urban redevelopment may provide superior accessibility but involve expensive land assembly, demolition, financing, and relocation. Neither approach is universally superior. The appropriate strategy depends on a comparison of their full economic, social, and environmental consequences.

The same structural dynamic—employment distributed across LGU boundaries, with residential decisions made within a functional labor market that no single jurisdiction fully governs—characterizes Metro Manila, Metro Davao, and other multi-LGU Philippine metropolitan areas. A single-LGU city or a non-metropolitan municipality, by contrast, faces a narrower version of the coordination problem, though the underlying location-versus-price tradeoff for households remains.

7. The Scale of the Housing Challenge

In an earlier working analysis of Cebu City’s housing requirements, a scenario involving 94,903 housing units was considered. Using an illustrative socialized housing price of ₱1.8 million per unit, the resulting gross housing investment requirement would be approximately:

94,903 units × ₱1.8 million = ₱170.83 billion

This amount should not be interpreted as a verified current official housing backlog or a government budget requirement. It is an illustrative scenario that requires validation against current household projections, housing-needs assessments, and official data. Nevertheless, the calculation demonstrates the potential magnitude of the financing challenge. Even a substantial interest subsidy program would address only part of such a requirement. A comparable exercise for Metro Manila or any other major urban area would naturally produce different figures, reflecting its own population base, land costs, and housing-needs assessment—but the same gap between financing assistance and the scale of physical supply required would likely persist.

The problem also involves the quantity of suitable housing land, construction capacity, infrastructure investment, household income, and the distribution of employment opportunities. The policy question should therefore extend beyond how to reduce monthly amortization. It should include how to increase the supply of adequate housing in economically accessible locations—requiring closer coordination between housing finance institutions, real estate developers, local governments, infrastructure agencies, and environmental planners.

8. Can Housing Subsidies Produce Unintended Market Effects?

Public subsidies are generally intended to improve welfare by helping households overcome financial constraints. However, their actual effects depend on how markets respond. A subsidy that increases purchasing power may be particularly effective when developers can respond by producing additional housing units at relatively stable costs; in such a market, additional demand may encourage additional construction.

But where suitable land is scarce, infrastructure is inadequate, or development restrictions severely limit supply, the market may respond differently. Prices may increase. Landowners may capture part of the subsidy through higher asking prices. Developers may adjust their product offerings toward households that qualify for subsidized financing. Lower-income households outside the formal mortgage market may receive little direct benefit.

These possibilities reinforce the need to evaluate housing subsidies through market evidence. Before implementing a large-scale interest subsidy program, policymakers should determine whether sufficient eligible housing units are available, whether supply can expand, and whether program benefits will be captured by the intended households. Price monitoring, beneficiary targeting, transparency, and independent evaluation would be essential. Otherwise, the government may spend substantial resources improving nominal affordability while achieving limited improvement in actual housing access.

9. Toward an Integrated Housing Policy

The housing crisis cannot be resolved through a single intervention. Construction requirements, mortgage subsidies, rental housing, infrastructure investment, and land-use planning address different parts of the problem. The appropriate policy framework should combine these instruments according to the needs of different household groups and the characteristics of local housing markets.

For mortgage-qualified households, interest subsidies may be useful. For households with insufficient or irregular incomes, rental assistance, incremental housing, community-based financing, or other forms of support may be more appropriate. For areas experiencing severe housing shortages, increasing physical supply may be essential. For metropolitan areas with substantial commuting burdens, housing location and transportation accessibility must become central planning considerations. For cities with underutilized land and existing infrastructure, redevelopment and appropriate intensification should be evaluated before assuming that outward expansion is the preferred solution.

A comprehensive housing strategy should therefore be assessed against four outcomes:

Affordability: Can households sustainably pay for housing and related living costs?

Adequacy: Does the housing provide acceptable living conditions, security, and essential services?

Accessibility: Can residents reasonably reach employment, education, transportation, and other opportunities?

Additionality: Does the policy create or unlock housing opportunities that would not otherwise have been available?

The last consideration is particularly important when evaluating CREBA’s proposal. The number of beneficiaries receiving a subsidy is not necessarily the same as the number of additional households that become adequately housed because of the program. Public policy should measure the difference.

10. The Role of Developers and Government

The private development sector has an important role in addressing the housing shortage. Developers provide capital, technical expertise, construction capacity, and market knowledge. Government, meanwhile, establishes the regulatory framework, provides infrastructure, protects public interests, and intervenes where market outcomes fail to meet legitimate social objectives.

Neither sector can resolve the housing problem independently. Developers cannot reasonably be expected to finance every aspect of urban infrastructure and social housing. But the government should also avoid transferring the social costs of private development entirely to the public. Balanced housing requirements represent one mechanism for allocating that responsibility.

Any reform should therefore examine how development benefits and social obligations are distributed. If developers are allowed to satisfy their obligations through financial contributions, the mechanism should demonstrate measurable housing outcomes and maintain sufficient safeguards against underfunding. If the government provides subsidies, it should establish that the beneficiaries genuinely require assistance and that the program does not simply inflate housing prices.

The objective should not be to maximize compliance convenience for developers or expand subsidies without regard to outcomes. It should be to improve the quantity, quality, affordability, and accessibility of housing.

11. What Cebu City Should Learn from the CREBA Proposal

The debate provides an opportunity to reconsider how housing is incorporated into comprehensive land-use planning. Housing should not be treated merely as a land-use category or a projected number of residential hectares. It is an essential component of the urban economy. The location of housing influences labor mobility, commuting costs, household welfare, infrastructure demand, and the productivity of cities.

A CLUP that allocates residential land without adequately considering employment accessibility may reproduce the spatial disadvantages experienced by low-income households. Similarly, a housing finance program that ignores land-use patterns may subsidize households into locations that impose substantial long-term transportation and infrastructure costs.

Cebu City’s planning framework should therefore integrate housing-needs assessment, market feasibility, transport accessibility, environmental suitability, and redevelopment capacity. The same principle should guide coordination across Metro Cebu. A metropolitan housing strategy should recognize that people do not necessarily live and work within the same local government jurisdiction. The economic geography of housing must be understood at the scale of the functional urban region. This is where urban land economics becomes indispensable.

Conclusion: Housing Policy Must Go Beyond Subsidizing the Buyer

CREBA’s proposal identifies a legitimate problem. Housing construction does not automatically produce affordability, and reducing financing costs can help qualified households obtain homes. However, the proposal should not be mistaken for a complete solution to the housing shortage.

An interest subsidy primarily addresses the cost of financing. It does not necessarily increase the physical supply of housing, reduce land prices, improve residential accessibility, or assist households that remain excluded from conventional mortgage financing. Any proposal to replace balanced housing construction obligations with financial contributions must therefore demonstrate that it is legally authorized and produces comparable or superior social housing outcomes.

For Cebu City and Metro Cebu, the larger lesson is that housing policy must be integrated with urban land-use planning, infrastructure investment, employment accessibility, and metropolitan development. The housing crisis is not simply a question of how much a family pays for a house. It is a question of whether the urban economy can provide adequate housing in locations where households can sustain their livelihoods without bearing excessive transportation, infrastructure, and environmental costs. The same question applies, with locally appropriate figures and institutions, to every other Philippine metropolitan area confronting a similar gap between housing finance and housing supply.

The real measure of housing policy is not the number of subsidies distributed, the number of units constructed, or the number of developers who have complied with regulatory requirements. It is the number of households that obtain secure, adequate, affordable, and accessible housing—and can sustain that housing over time.

That should be the standard against which CREBA’s proposal, existing balanced housing requirements, and future housing reforms are evaluated—in Metro Cebu and elsewhere.

References and Legal Framework

  1. Proud Bisaya Bai. (October 24, 2026). CREBA seeks homebuyer subsidies as alternative to existing balanced housing compliance arrangements. https://proudbisayabai.ph/story/2026/10/24/creba-seeks-homebuyer-subsidies-as-alternative-to
  2. Republic Act No. 7279. Urban Development and Housing Act of 1992.
  3. Republic Act No. 10884. An Act Strengthening the Balanced Housing Development Program, amending Section 18 of RA 7279.
  4. Republic Act No. 11201. Department of Human Settlements and Urban Development Act.
  5. Alonso, W. (1964). Location and Land Use: Toward a General Theory of Land Rent. Harvard University Press.
  6. Bertaud, A. (2018). Order without Design: How Markets Shape Cities. MIT Press.
  7. O’Sullivan, A. (2019). Urban Economics (9th ed.). McGraw-Hill Education.
  8. World Bank. (2017). Philippines Urbanization Review: Fostering Competitive, Sustainable and Inclusive Cities.

Metro Cebu’s Urbanization Crisis — Part 3: Cebu City’s Commercial Land Expansion

Why redevelopment should come before reclassification — is Cebu City running out of commercial land, or failing to maximize the economic potential of its existing business districts?

The question becomes particularly relevant when examining the Comprehensive Land Use Plan (CLUP) 2023–2032, which proposes a substantial expansion of land allocated for commercial purposes.

Based on the land-use figures examined in this study, Cebu City had approximately 983.16 hectares of existing commercial land in 2020. Under the proposed CLUP, the commercial allocation increases to approximately 2,038.63 hectares — an additional 1,055.47 hectares, equivalent to an increase of 107.35 percent.

The figures are striking, and they require careful interpretation. The 2020 figure describes existing land use; the proposed figure represents planned allocation. The difference doesn’t necessarily mean that 1,055 hectares of agricultural or undeveloped land will be converted into commercial establishments. Still, the magnitude of the proposed increase demands an economic explanation.

Where will the additional commercial demand originate? How much commercial floor space will Cebu City actually require? How much of that can be absorbed within existing business districts? And what are the infrastructure, environmental, and financial consequences of expanding commercial development into new locations? These aren’t peripheral questions — they’re fundamental to the economic justification of the land-use plan.

The Historical Creation of Cebu City’s Business Districts

Cebu City’s commercial development didn’t begin with modern business parks. Historically, the city’s economic geography developed around the port, waterfront, Colon Street, Carbon Market, and the surrounding downtown commercial districts. Maritime commerce, warehousing, wholesale distribution, retail activity, transportation, banking, and other commercial services concentrated within a relatively compact urban area, with the port moving goods and Colon, Carbon, and adjoining streets providing the markets, services, and distribution networks.

Cebu’s commercial geography then expanded through a series of major development initiatives:

PeriodCommercial district or developmentDevelopment significance
Historical periodCebu Waterfront and Port DistrictMaritime commerce, shipping, warehousing, wholesale trade, and logistics
Historical periodColon–Carbon–DowntownTraditional retail, banking, trading, and commercial services
1960s–1980sNorth Reclamation AreaExpansion of port-related, warehousing, commercial, and urban land
1989–1994Cebu Business ParkRedevelopment of a former golf course into a planned business district
1990sNorth Reclamation commercial establishmentsExpansion of major retail and commercial activity
Late 1990s–2000sCebu IT ParkTransformation of the former Lahug Airport into an employment and technology center
2000s onwardSouth Road PropertiesGovernment-led reclamation creating new development land for mixed commercial and other uses

This history reveals something important: Cebu City’s major commercial centers were not created merely by assigning additional land to commercial zoning. They emerged through strategic location, infrastructure investment, land redevelopment, institutional decisions, private capital, and effective market demand working together.

Cebu Business Park was developed through the transformation of an existing urban property; Cebu IT Park emerged from the redevelopment of the former Lahug Airport. Both show how urban land can be reorganized toward higher-value economic activity without necessarily expanding the city’s physical footprint. South Road Properties took a different route — the creation of additional urban land through reclamation, backed by major public infrastructure investment. Each model carries different economic and environmental implications.

The Forgotten Economic Potential of Colon and Downtown Cebu

Colon Street and its surrounding commercial districts are among Cebu City’s most historically significant economic areas, even as much of the city’s contemporary development attention has shifted toward newer business centers. That shift raises a real planning issue: the relative decline of commercial activity in portions of downtown Cebu shouldn’t automatically be read as evidence that these areas have exhausted their development potential. If anything, the presence of older commercial buildings, underutilized properties, fragmented landownership, and aging infrastructure may point to redevelopment opportunity rather than terminal decline.

Colon already holds advantages that many proposed commercial expansion areas would need substantial investment to reproduce — established commercial activity, public transport connections, surrounding residential populations, existing roads, utility networks, and a recognizable urban identity. The challenge isn’t simply to preserve its historical character; it’s to restore its economic competitiveness while retaining its social and cultural significance.

A comprehensive downtown redevelopment strategy could include adaptive reuse of older buildings, rehabilitation of commercial structures, selective vertical redevelopment, improved pedestrian circulation, drainage modernization, public transport integration, and incentives for assembling fragmented land parcels. Heritage conservation and economic redevelopment need not pull against each other — with appropriate planning controls, heritage buildings can accommodate retail, hospitality, cultural, professional, educational, and other economically productive uses. Colon’s redevelopment should be examined as an economic development strategy, not merely as an urban beautification project.

The Waterfront and Port District: An Existing Economic Asset

The same reasoning applies to Cebu City’s waterfront, port district, and North Reclamation Area — decades of public and private investment in commercial and transport infrastructure. Historical planning records for the North Reclamation project identify approximately 169.3 hectares of reclaimed land, with planned allocations for retail commerce, wholesale trade, warehousing, offices, and related activities: roughly 14.67 hectares for arcaded retail commerce, 18.60 hectares for wholesale commerce, 3.67 hectares for mixed commercial uses, plus additional areas for offices and warehousing.

These are historical planned uses, not a current commercial inventory. But they establish that the waterfront and reclamation area were conceived from the start as significant economic development locations — which makes the live planning question whether these areas are being used at their economically and environmentally sustainable potential today.

Port modernization, logistics restructuring, redevelopment of obsolete commercial facilities, improved transport connections, and rehabilitation of underutilized waterfront properties could all generate additional economic activity. Operational port facilities, though, have to be distinguished from ordinary commercial land — port security, cargo handling, transport requirements, and the statutory responsibilities of port authorities impose constraints that any redevelopment strategy has to respect. The right approach integrates maritime economic functions with compatible commercial and urban activity, rather than simply replacing port uses with real estate development.

Commercial Land Is Not the Same as Commercial Capacity

A basic weakness in evaluating urban growth exclusively through land-area allocation is that land area doesn’t directly measure economic capacity. Commercial development capacity depends on permissible floor-area ratios, building heights, infrastructure availability, accessibility, development costs, land values, and market demand. A relatively small commercial district developed at higher intensity can accommodate more office, retail, hospitality, and service activity than a much larger low-density one.

Consider an illustrative scenario: if 50 hectares of land within an existing urban district could be redeveloped at an achievable floor-area ratio of 3.0, the resulting gross floor area would be approximately 1.5 million square meters. This is purely a theoretical illustration, not an estimate of Colon’s actual redevelopment capacity — existing floor area, roads, public spaces, noncommercial uses, development restrictions, and financial feasibility would all have to be factored in. But it shows why commercial land requirements shouldn’t be determined by hectares alone.

The relevant planning calculation is:

Additional commercial floor-space demand minus feasible unused capacity within existing commercial districts equals the residual requirement for additional commercial development land.

Without that assessment, it’s difficult to say whether the proposed expansion of commercial zoning is economically necessary at all.

The Economic Cost of Outward Commercial Expansion

Allocating additional land for commercial development isn’t costless. New commercial districts may require roads, drainage, water supply, sewerage, electricity, public transport services, and other infrastructure. Where development extends toward environmentally constrained areas, additional costs can arise from slope stabilization, flood mitigation, watershed protection, and other engineering or environmental measures — costs that aren’t always fully reflected in the private market price of land, and that may ultimately fall on local government, utility providers, surrounding communities, or the wider public.

From the standpoint of land economics, the decision to expand commercial land allocation should weigh the total social cost of development, not just the potential increase in private property values. That’s especially important in Cebu City, where redevelopment opportunity in established urban districts coexists with real pressure for development in upland and environmentally sensitive locations. The question isn’t whether outward development should be prohibited outright — it’s whether the economic benefits of expansion exceed the costs, measured against feasible redevelopment alternatives.

When Commercial Zoning Becomes an Instrument of Speculation

There’s another dimension worth examining: the relationship between commercial zoning and land speculation. A change from agricultural or low-intensity use to commercial zoning can raise the anticipated development potential of land, and because market participants price property partly on its expected future use, the prospect of commercial reclassification can show up in land prices before any actual development occurs. That’s the capitalization of anticipated development rights into land value.

This capitalization isn’t inherently improper — land markets routinely respond to changes in permitted uses, accessibility, infrastructure, and economic expectations. But where substantial commercial land is allocated without corresponding evidence of effective demand or feasible development, zoning may be creating speculative opportunity rather than responding to demonstrated economic need. Land can be acquired, held, or traded in anticipation of future price appreciation even when immediate commercial development is unlikely.

This is the same distinction between development opportunity and development capacity that ran through the first part of this series, applied here to commercial rather than residential or watershed land: zoning creates a legal opportunity to develop, but it doesn’t by itself supply the infrastructure, environmental suitability, financial feasibility, or market demand that makes development actually viable. The gap matters most where proposed commercial allocations sit in areas where transport accessibility, public utilities, environmental conditions, or actual commercial demand remain uncertain.

A defensible investigation here would examine historical land transactions, ownership changes, advertised and completed sale prices, building permits, actual construction, and infrastructure investment. The existence of speculative activity can’t be inferred from the commercial land increase alone — but the absence of a credible land-demand analysis would make the justification for that expansion a fair subject of further scrutiny.

What Earlier Planning Studies Tell Us

Cebu City’s commercial expansion deserves to be read in its historical context, and earlier planning studies reinforce that. The Metro Cebu Land Use and Transportation Study, begun in the late 1970s, recognized the importance of coordinating land development with transportation and metropolitan economic growth. JICA’s Roadmap Study for Sustainable Urban Development in Metro Cebu (2015) examined urban structure, existing land use, infrastructure, and development suitability. The World Bank’s Philippines Urbanization Review (2017) identified problems with outdated land-use planning and fragmented urban development.

These studies are important historical and institutional references. They don’t by themselves establish that the current CLUP is defective or that any particular commercial designation is unlawful — but they do reinforce the need to evaluate land allocation as part of a broader urban economic and environmental system. They also raise a legitimate question: how were their findings, development strategies, and spatial assessments actually incorporated into the current CLUP?

The Missing Comparison: Redevelopment Versus Expansion

Before Cebu City commits to a substantial increase in commercial land allocation, its planning framework should demonstrate that the redevelopment capacity of existing business districts has been evaluated. At a minimum, that assessment should cover:

  1. Colon–Carbon–Downtown: potential for commercial rehabilitation, adaptive reuse, land assembly, urban renewal, and increased development intensity.
  2. Waterfront–Port–North Reclamation: potential for port modernization, logistics redevelopment, commercial renewal, and improved integration with downtown.
  3. Cebu Business Park and Cebu IT Park: remaining permissible floor area, redevelopment opportunities, and existing commercial capacity.
  4. South Road Properties: undeveloped commercial parcels, committed projects, infrastructure capacity, and anticipated market absorption.
  5. Other established commercial corridors: vacant and underutilized properties that may accommodate future growth.

That study should then compare the additional floor-space capacity of these locations against projected employment growth, retail demand, office demand, hospitality demand, and other commercial requirements — and evaluate infrastructure costs, development feasibility, transport accessibility, environmental effects, and potential displacement alongside it. Only after that analysis can the residual need for new commercial land be estimated with any real confidence.

Reconsidering Cebu City’s Commercial Land Allocation

The proposed increase from 983.16 hectares to 2,038.63 hectares shouldn’t be read as a simple comparison of two numbers. The existing figure represents actual land use; the proposed figure reflects future allocation. Some land already designated commercial may not yet be developed, and special economic zones and mixed-use districts may be treated differently across planning documents — a proper spatial analysis has to distinguish existing commercial activity, legally designated commercial land, unused commercial development rights, and newly proposed commercial areas from one another.

This distinction matters because an earlier Cebu City planning framework already contemplated substantial commercial allocations, so the current proposal may represent a continuation or reorganization of earlier planning directions rather than an entirely new expansion strategy. Even so, the central economic question remains unresolved:

Has Cebu City demonstrated that its established commercial districts cannot accommodate the projected increase in commercial activity before proposing substantially more land for commercial development?

If that answer isn’t supported by credible technical evidence, the commercial allocation deserves further examination.

Conclusion: Redevelop First, Expand Where Justified

Cebu City’s economic future shouldn’t be measured by the number of hectares it designates for commercial development. A more meaningful measure is how productively, efficiently, inclusively, and sustainably its urban land is actually used.

Colon and downtown Cebu represent the city’s historical commercial foundation. The waterfront and port district remain important economic assets. Cebu Business Park, Cebu IT Park, and SRP demonstrate three different approaches to commercial development — through redevelopment, planned estates, and reclamation. Together, these districts embody substantial accumulated investment in land, infrastructure, and urban economic activity, and their remaining development capacity should be carefully assessed before additional commercial expansion is justified.

The policy principle is straightforward:

Redevelop existing urban land where economically feasible, intensify established commercial centers where infrastructure permits, and expand commercial land only where demonstrated demand, accessibility, infrastructure capacity, and environmental suitability justify doing so.

This isn’t an argument against urbanization or commercial growth. It’s an argument for better economic allocation of land. Cebu City doesn’t necessarily need to create more commercial land to create more economic opportunity — it may first need to recover the development potential of the urban land it already has. The test of a comprehensive land-use plan, in the end, isn’t how much land it opens for development, but whether its allocations produce genuine economic value while protecting the environmental systems, public resources, and communities the city’s future depends on.

references

  1. World Bank. (2017). Philippines Urbanization Review: Fostering Competitive, Sustainable and Inclusive Cities. World Bank report.
  2. Japan International Cooperation Agency. (2015). Roadmap Study for Sustainable Urban Development in Metro Cebu. JICA report.
  3. Urban Expansion Through Land Reclamation: The Case of Cebu City. PIDS research repository.
  4. Cebu City Government. Comprehensive Land Use Plan 2023–2032, existing and proposed land-use allocation tables.
  5. Cebu City Government. Ordinance No. 1656, 1996 Revised Zoning Ordinance, and Ordinance No. 2784, 2025 Revised Zoning Ordinance.

Editorial note: The comparative hectare figures are drawn from the working CLUP figures previously discussed and should be checked against the authenticated official tables before publication. The precise redevelopment boundaries and unused development capacity of Colon–Carbon–Downtown and Waterfront–Port–North Reclamation have not yet been quantified.

Metro Cebu’s Urbanization Crisis — Part 2: Cebu City’s ₱170.83-Billion Housing Challenge

Cebu City is proposing a ₱15-billion annual budget for 2027. At the same time, the city faces a substantial housing challenge that, which require approximately ₱170.83 billion in housing investment.

The contrast raises an important question: how can Cebu City address its housing requirements when the estimated investment is more than eleven times its proposed annual budget?

The answer cannot be found in government appropriations alone, and it cannot be found simply by designating more land for residential development. It requires a closer look at population growth, housing demand, household affordability, residential land capacity, infrastructure investment, and the financial resources available to implement the city’s Comprehensive Land Use Plan (CLUP). This is where urban planning must be understood not merely as the physical allocation of land, but as an economic allocation problem — the same argument that opened this series, now applied to a specific, quantified case.

Cebu City’s Population Growth Is Slowing

Cebu City’s population increased from 718,821 in 2000 to 964,169 in 2020 — an increase of approximately 245,348 persons over two decades. The latest census, however, presents a different picture: the 2024 count recorded 965,332 residents, an increase of only 1,163 persons from 2020.

Cebu City’s population growth has evidently slowed considerably. That matters because population projections are among the foundational assumptions behind a CLUP — they drive estimates of future housing requirements, transportation demand, infrastructure capacity, and land needed for urban expansion. If actual growth is running well below earlier projections, the assumptions about additional residential land demand built into the plan need to be reassessed accordingly.

Slower population growth, though, doesn’t mean the city has no housing problem. Housing demand is shaped not only by new residents but by household formation, overcrowding, informal settlement, deteriorating housing stock, displacement, and affordability. A city can have a nearly flat population and still face a serious shortage of adequate, affordable housing.

The planning question, then, isn’t simply how fast the population is growing — it’s how many households require housing, what type, and where those homes can be delivered economically and sustainably.

Estimating the Housing Requirement Through 2032

To illustrate the scale of the challenge, consider an accelerated population-growth scenario of 1.5% annually from 2024 to 2032. Using the 2024 population of 965,332 as the baseline, this assumption would produce approximately 122,201 additional residents by 2032. At an assumed average household size of four persons, that’s roughly 30,550 additional households.

A regional planning estimate has separately identified a housing need of 64,353 units for Cebu City. Combined, these figures produce the following illustrative calculation:

Housing componentEstimated housing units
Reported housing need64,353
Additional households, 2024–203230,550
Combined illustrative housing requirement94,903

This figure needs to be read with care on two counts. First, the 1.5% annual growth assumption is an analytical input, not a forecast drawn from the latest census — it runs considerably higher than Cebu City’s recently observed rate. Second, the reference period and definition behind the reported 64,353-unit figure still need verification; if that number already folds in future household formation, adding the 30,550 households separately would double-count.

The combined 94,903 units is best read as a planning scenario, not a verified official housing backlog — useful precisely because it lets us examine how housing demand, land requirements, and investment capacity relate to one another, independent of whether the exact number holds up.

The PhP170.83-Billion Housing Investment Requirement

Assume each housing unit costs ₱1.8 million. Under DHSUD–DEPDev Joint Memorandum Circular No. 2025-001, issued December 1, 2025, the updated socialized housing price ceilings. The estimated aggregate investment:

94,903 housing units × ₱1,800,000 = ₱170,825,400,000 (≈₱170.83 billion)

Set against Cebu City’s proposed annual budget, the figure is substantial — but it’s worth separating the total economic value of housing development from what local government alone would need to finance. Housing delivery typically draws on national government programs, private developers, financial institutions, household equity, mortgage financing, and public subsidies, so the two numbers aren’t directly comparable obligations.

The ₱1.8 million figure is also only the unit cost. Depending on the development arrangement, land acquisition, roads, drainage, water supply, electricity, sewerage, and financing costs may sit on top of it — meaning the full resource requirement for a complete housing program could run higher than the housing units alone suggest. This matters most where housing is proposed in peripheral locations with limited or absent infrastructure networks.

Cebu City’s Proposed ₱15-Billion Budget for 2027

According to a Cebu Daily News report published in October 2026, Mayor Nestor Archival proposed a ₱15-billion budget for Cebu City in 2027 — a useful fiscal benchmark for scaling the housing challenge:

IndicatorAmount
Housing requirement94,903 units
Assumed cost per housing unit₱1.8 million
Estimated total housing investment₱170.83 billion
Proposed Cebu City budget for 2027₱15.00 billion
Housing investment relative to annual budget11.39 times

The estimated housing investment runs roughly 11.4 times the proposed annual city budget. That doesn’t mean Cebu City would need to spend its entire budget on housing for over a decade — the city carries plenty of other obligations (health, education support, infrastructure, social welfare, disaster preparedness, environmental management, administration), and a proposed budget is itself not the same as actual revenue or realized spending. But the comparison does reveal the scale of the gap.

Run the arithmetic the other way: even a hypothetical 10% allocation of the ₱15-billion budget to housing (₱1.5 billion) would finance only about 833 units a year at ₱1.8 million each. At that pace, 94,903 units would take roughly 114 years — not a prediction of how long the housing problem will actually take to solve, but a clear illustration that direct city financing alone cannot carry it.

A realistic strategy has to combine public land policy, private development, national housing programs, long-term financing, targeted subsidies, and infrastructure investment. The city’s proposed budget reportedly includes housing-related priorities — land acquisition, participation in national housing initiatives — but their effectiveness has to be measured against actual appropriations, completed units, beneficiary affordability, and project location, not the announcement itself.

Budget announcements, housing targets, and completed housing units are three different measures of public performance.

Is ₱1.8 Million Really Affordable?

A unit priced at ₱1.8 million may be marketed as affordable housing, but its real affordability depends on the purchasing household’s income and financing capacity.

Take a household buying a ₱1.8 million unit with a 10% down payment. The remaining ₱1.62 million loan, at an illustrative 6% annual rate over 30 years, carries a monthly amortization of approximately ₱9,713. At the common 30%-of-gross-income benchmark for housing payments, that requires roughly ₱32,400 in monthly household income — before maintenance, association dues, insurance, transportation, or other living costs, and assuming the household qualifies for financing and can cover the down payment in the first place.

For lower-income households, those conditions are often difficult to meet without subsidy or more favorable financing terms — which raises a basic issue for socialized housing policy:

Providing a housing unit at a designated price does not automatically make that unit affordable to its intended beneficiary.

Housing programs, then, have to be evaluated not only by units constructed but by households’ actual capacity to acquire, occupy, and maintain them. A project that remains financially out of reach for its intended beneficiaries isn’t a complete solution to the housing problem, whatever its unit count.

How Much Residential Land Does Cebu City Actually Need?

Land requirements depend heavily on density. For the illustrative 94,903-unit requirement:

Gross housing densityResidential land requirement
50 units per hectare1,898 hectares
100 units per hectare949 hectares
150 units per hectare633 hectares
200 units per hectare475 hectares
300 units per hectare316 hectares
400 units per hectare237 hectares

At 200 units per hectare, roughly 475 hectares would be needed; at 300 units per hectare, about 316 hectares. None of this means Cebu City has to acquire or rezone that much additional land outright — redevelopment, infill, and replacement of inadequate housing on land already designated residential can absorb part of the need, and not every parcel zoned residential is vacant, available, or physically suited to higher density.

The CLUP’s land-use figures show approximately 4,105.80 hectares of general residential land and 318.65 hectares of socialized residential land — a combined 4,424.45 hectares. The question isn’t the total area classified as residential; it’s how much of that land is already occupied, how much remains developable, what density it can realistically carry, and whether the necessary infrastructure and financing exist to support it. Without a proper land-capacity assessment, a housing backlog on its own doesn’t justify expanding residential zoning further.

Socialized Housing and the Question of Land Capacity

The CLUP’s roughly 318.65 hectares of socialized residential land deserve particular scrutiny. At a hypothetical 200 units per hectare, that allocation could in theory accommodate about 63,729 units — a theoretical capacity, not a commitment that those units will be built. Land classified for socialized housing can still face real limits on ownership, acquisition cost, terrain, hazard exposure, infrastructure access, and financial feasibility, and not every unit in the 94,903-unit scenario necessarily corresponds to a household eligible for socialized housing in the first place — that proportion needs to come from household income data, housing-condition surveys, program eligibility rules, and the city’s own sectoral assessment.

The real policy objective isn’t reserving enough land on a zoning map. It’s identifying land that is developable, accessible, environmentally suitable, and financially feasible for the households that actually need assistance. A city can have substantial acreage designated for socialized housing and still lack the financial and institutional capacity to deliver it.

Housing Location Is an Economic Decision

Land prices often drive where housing gets sited — peripheral land is cheaper, which makes it attractive for large-scale development. But lower acquisition cost doesn’t translate automatically into lower total development cost. A peripheral site may need new access roads, drainage, water systems, electricity distribution, schools, and public transit, with those costs falling on some mix of developers, households, utility providers, and government.

There are recurring costs too: households farther from employment centers spend more on transport and lose productive hours to commuting, which can offset the apparent savings of cheaper housing. Housing location, in other words, has to be evaluated on the combined cost of land, development, infrastructure, transportation, and environmental impact — not land price alone.

This is especially relevant for Cebu City given the pressure toward upland expansion, where steep terrain, watershed sensitivity, geotechnical conditions, and limited infrastructure access can substantially raise both the economic and environmental cost of development. Land being available, or zoning permitting its use, isn’t by itself a justification for residential development there. The real question is whether the location represents an efficient, sustainable allocation of scarce land and public resources.

The Missing Link Between the CLUP and Public Finance

The proposed ₱15-billion budget brings into focus a dimension of land-use planning that’s easy to overlook: the government’s actual capacity to finance the infrastructure its development policies require.

A CLUP can designate large areas for residential, commercial, institutional, and other urban uses, but each allocation carries infrastructure and service obligations that extend well past the plan’s adoption — access roads, drainage, water, sanitation, electricity, waste collection, schools, health facilities, transit connections. A plan’s credibility shouldn’t rest on the completeness of its maps or the formality of its zoning adoption alone; it should be weighed against realistic development demand, infrastructure capacity, implementation cost, and the fiscal resources actually available to support it.

Population and household projections → housing requirements → land capacity → infrastructure requirements → investment costs → financing and implementation.

Each stage in that chain needs its own evidence. A CLUP that identifies development opportunity without pricing out the corresponding infrastructure and financing can end up encouraging development patterns that are expensive or difficult to sustain — a risk that grows sharper wherever urban expansion is proposed into areas where public infrastructure is still thin. Planning permission is not development capacity: a parcel can be legally residential while remaining physically unsuitable, financially infeasible, or economically inefficient for that use.

Reconciling Housing Demand, Land Allocation, and Fiscal Capacity

Cebu City’s housing challenge calls for a more integrated approach. First, the city needs a reliable housing-needs estimate that separates existing deficiency from future household formation. Second, it needs to determine how much of that demand is genuinely socialized housing versus what households can otherwise afford. Third, it needs to assess the capacity of existing residential areas — redevelopment, infill, higher-density development where suitable. Fourth, it needs to cost out the infrastructure and public-service implications of alternative housing locations. Finally, it needs credible financing arrangements and implementation schedules to carry the plan through.

That kind of analysis lets policymakers weigh real trade-offs: compact development within already-serviced urban areas may cost more in land acquisition but less in new infrastructure; peripheral expansion may offer cheaper land but higher infrastructure, transportation, and environmental costs. The choice between them should rest on comprehensive economic evaluation — not on land price or zoning classification taken in isolation.

Beyond Zoning: What Makes a City Livable?

The discussion returns, in the end, to a basic question about Cebu City’s development. Is livability the amount of land classified for residential use? The number of housing units announced under a government program? Or is it the actual ability of households to secure adequate housing near jobs, services, and reliable infrastructure, at a cost they can afford?

A livable city isn’t created by expanding urban boundaries. It comes from the efficient allocation of land, the responsible provision of infrastructure, and the capacity of households and institutions to sustain development over time. The illustrative ₱170.83-billion housing requirement, set against the proposed ₱15-billion annual budget, shows why housing can’t be treated as a zoning exercise alone — the problem is one of investment, affordability, infrastructure, location, and institutional capacity together, and the CLUP has to be read as an economic and fiscal proposition, not only a spatial one.

As argued in the first part of this series: urbanization, by itself, is not the problem. The more fundamental issue is how land is allocated, developed, and regulated under competing economic, social, and environmental demands.

For Cebu City, the challenge isn’t simply providing more land for housing. It’s ensuring that the land already available — and any land proposed for future development — can support housing that is economically feasible, environmentally appropriate, financially accessible, and connected to the opportunities of urban life.

The real measure of Cebu City’s housing policy is not how many hectares it zones or how many billions it proposes to spend, but how many households can ultimately obtain decent, affordable, and well-located homes.

That is the standard against which the city’s land-use planning, housing programs, and public investment decisions should be evaluated.

References and methodological notes

Principal references

  • Philippine Statistics Authority, 2000, 2010, 2020, and 2024 population census data for Cebu City.
  • Cebu City Comprehensive Land Use Plan, 2023–2032, residential and socialized residential land-use allocations examined in the planning analysis.
  • Central Visayas regional planning documents reporting Cebu City’s housing need of 64,353 units; reference year and coverage require confirmation.
  • Cebu Daily News, October 2026, Archival proposes ₱15-billion Cebu City budget for 2027.
  • Republic Act No. 7279, Urban Development and Housing Act of 1992, as amended.

From Measuring Property to Understanding Value: The Economics Every Appraiser Should See

I once had a conversation with a colleague who remarked that appraisers should know how to measure property. I agree completely — measurement is fundamental to appraisal practice. We measure land, frontage, road width, floor area, improvements, setbacks, distances. It’s probably why appraisers so often feature their measuring wheels and laser meters when documenting an inspection.

There’s nothing wrong with that. An appraiser should understand the property being valued, and accurate physical data is part of that job.

But the conversation led me to a more fundamental question: after we’ve measured the property, do we already understand its value?

A measuring wheel can tell us the length of a road. A laser meter can give us the dimensions of a building. A survey can establish the boundaries and area of land. But none of these instruments can explain why one square meter is worth more than another. That question takes us beyond measurement and into economics.

The appraiser has to see property in two dimensions at once: as a physical asset that can be identified and measured, and as an economic asset whose value comes from utility, scarcity, rights, location, market demand, cost, time, and risk. What follows are several angles on that same idea — some familiar terrain (frontage, location, zoning), some less obvious (a 455-square-meter access parcel with an outsized economic role).

Property Has Both a Physical and an Economic Dimension

Consider two parcels, each exactly 10,000 square meters. By measurement, they contain the same quantity of land. But suppose one is remote with difficult access, while the other fronts a major highway near an expanding commercial district. The physical quantity is identical. The economic possibilities are not — better accessibility, greater exposure, lower transport costs, a larger addressable market.

Measurement tells us how much property exists. Economics tells us what that property can do. Recording physical characteristics is only the starting point; the real task is working out the economic consequences of those characteristics.

Measurement Is Essential, but It Is Only the Beginning

Suppose an appraiser establishes that a parcel contains exactly 10,000 square meters. That’s an important physical fact. But consider four properties, each containing exactly 10,000 square meters. One is agricultural land with limited road access. Another fronts a major commercial highway. A third lies within an area designated for tourism development. A fourth sits inside an emerging industrial corridor.

Their land areas are identical. Their economic characteristics are not. The market may see entirely different opportunities, limitations, costs, risks, and potential benefits in each one.

Figure 1. Four illustrative 10,000-square-meter parcels demonstrating how identical physical land areas may possess different economic characteristics because of differences in accessibility, surrounding development, land-use context, market opportunities, and potential utility.

Measurement establishes the physical quantity of property. Valuation has to explain its economic significance. So the appraiser’s work can’t end with area, frontage, shape, topography, floor area, or construction characteristics — those physical facts still need to be connected to their effects on utility, marketability, development potential, income, cost, risk, and market behavior.

From Physical Characteristics to Economic Consequences

Take frontage. An appraiser can establish that a parcel has 100 meters of road frontage — that’s a physical measurement. But the valuation question goes further: Does the frontage provide better visibility? Does it allow multiple access points? Does it facilitate subdivision? Does it improve commercial exposure? Does it reduce the cost of internal circulation? And, ultimately, does the market actually recognize and pay for those advantages?

The same reasoning applies to topography. A steeply sloping property may require substantial site-development expenditure and yield less usable area — a real economic disadvantage. But in another market, that same elevation might provide views that make a resort or residential development more attractive, not less. The physical characteristic is identical in kind (a slope); its economic consequence depends entirely on context.

Physical Characteristic → Economic Consequence → Market Response → Value

This is where economics starts giving meaning to physical property.

Location Is an Economic Relationship

“Location, location, location” gets repeated so often it’s easy to forget what actually makes location valuable. Location isn’t a coordinate on a map — its value comes from relationships: proximity to employment centers, a nearby port, a highway, a tourism corridor, a hospital, a population center.

What we call a “location advantage” is really a bundle of underlying benefits — lower transport costs, accessibility, access to larger markets, proximity to jobs, agglomeration effects, development opportunity. So the appraiser’s question isn’t just where is the property — it’s what relationships does this location create, and how do they affect utility and market behavior?

Access as Economic Infrastructure

Figure 2. Vicinity map illustrating the relationship between the subject property, the surrounding road network, and established areas of development. Source: appraisal working file.

A vicinity map looks like a purely physical document — it shows where the site sits relative to roads and surrounding development. But it raises economic questions, not just locational ones. Does the road connect the property to markets or population centers? Does it lower transport costs, enable development, provide commercial exposure? Is its capacity adequate? Are there alternative routes, and at what cost?

At first glance, the map is simply a physical representation of location. It identifies the subject site and shows its relationship to surrounding roads and nearby developed areas. For valuation purposes, however, it contains more than locational information — it raises economic questions.

The appraiser shouldn’t stop at measuring the property’s distance from a road or the width of an access route. The more important inquiry is what that access means to the property’s economic utility. The map may prompt the appraiser to investigate whether the property has direct, legally available access; the quality and capacity of the connecting road; its relationship to established population or commercial centers; the cost of improving access; alternative routes; travel time; and whether existing access is sufficient to support the property’s highest and best use.

A road isn’t significant merely because it has a measurable width and length. Its valuation significance comes from what it enables — improved accessibility, lower transportation costs, development feasibility, connection to markets and population centers, or turning an otherwise underutilized property into an economically viable one.

Physical Access → Connectivity → Economic Utility → Development Feasibility → Market Response → Value

This distinction matters even more when access depends on a relatively small parcel of land. If that parcel is the practical connection between a much larger property and the existing road network, its economic significance can’t necessarily be understood by simply multiplying its area by the prevailing price per square meter. The appraiser has to investigate its function within the larger property system — not just its size.

That said, this doesn’t mean the access parcel automatically captures the entire value it helps create in the larger property. Alternative routes, legal rights of access, development costs, road standards, planning requirements, and market evidence still need to be examined on their own terms.

The point stands either way: measurement identifies the physical characteristic; valuation investigates its economic consequence.

When a Small Parcel Has a Larger Economic Function

This becomes especially clear when a small parcel provides the practical connection to a much larger property. Suppose an access parcel is only 455 square meters, but it controls access to a 13,000-square-meter property behind it.

If the analysis stays purely physical, it collapses into:

455 sqm × unit value per sqm = indicated value

That’s mathematically simple — and economically incomplete. The real question isn’t “what are 455 square meters worth,” it’s “what economic opportunity does access through these 455 square meters create or facilitate?” The smaller parcel can shape accessibility, development efficiency, marketability, and ultimately the productivity of the much larger property behind it.

That doesn’t mean the access parcel automatically captures all the value it enables — that would require its own separate analysis of alternative routes, legal access rights, development costs, and market behavior. But it illustrates a broader principle: the economic significance of land isn’t necessarily proportional to its physical size. A small parcel can perform an outsized economic function. The measuring wheel gives you its dimensions; economics explains its contribution.

Zoning and the Economic Opportunity Set

Suppose agricultural land becomes eligible for tourism development. Physically, nothing changes — same area, same boundaries, same topography. But something economically significant has shifted: the range of legally permissible uses. Buyers might now consider accommodation, recreation, agritourism, restaurants, resorts, events.

Property Rights → Permissible Uses → Economic Opportunities → Expected Benefits → Market Expectations → Value

One important qualification must be made. Legal permission does not automatically translate into economic value. However, a change from an agricultural classification to one that permits tourism development can materially expand the range of economic opportunities available to the property.

If the land were required to remain agricultural, its economic utilization would generally be constrained by the uses permitted under that classification. A tourism-development classification, by contrast, may open the property to alternative uses such as resorts, accommodation facilities, recreation, agritourism, restaurants, events, and related activities. The physical land may remain unchanged, but its opportunity set has expanded.

From an economic perspective, this expanded opportunity itself is significant because the property is no longer evaluated solely on the basis of its existing or historical agricultural use. Market participants may also consider the benefits that could reasonably be derived from the additional legally permissible uses.

Highest and Best Use Is Fundamentally Economic

This brings us to highest and best use, with its familiar four tests: physically possible, legally permissible, financially feasible, maximally productive. But underneath those tests is an economic question — among the alternative uses available to this scarce resource, which one is most productive given the applicable constraints and market conditions?

This is opportunity cost at work. A warehouse site can’t simultaneously be a residential subdivision. Agricultural land may have a tourism alternative. A residential lot on a commercial corner may have a more productive use waiting. The market evaluates not just what a property is, but what it can economically become — which is why highest and best use is one of the clearest intersections of appraisal and economics.

Utility, Scarcity, and Demand

Land is scarce, but scarcity alone doesn’t create value. An asset can be scarce and still worth relatively little if demand for its attributes is weak. Demand alone doesn’t explain value either, without considering the supply of substitutes. A highly accessible commercial corner in a growing area commands a premium because good alternatives are limited and demand is strong. A remote parcel is also physically unique — there’s only one property at its exact coordinates — but uniqueness alone doesn’t guarantee value if nobody wants what it offers.

Scarcity becomes economically meaningful only in relation to utility, demand, and available substitutes.

Buildings Should Be Understood Economically Too

The same logic applies to improvements. Two commercial buildings, each 10,000 square meters — identical by measurement. But one might have an efficient layout, good ceiling heights, modern systems, and strong tenant appeal, while the other has the same floor area with outdated systems and poor configuration. Equal physical quantity, unequal economic utility.

This is why depreciation isn’t just physical deterioration. Functional obsolescence is about diminished utility from the improvement’s own characteristics; external obsolescence comes from influences outside the property. A building can remain structurally sound while becoming economically less productive — which is also why physical life and economic life aren’t the same thing.

Cost Does Not Automatically Become Value

Suppose a developer spends ₱100 million on construction. That expenditure doesn’t guarantee the market will recognize ₱100 million of value. If the improvement meets market demand and generates real utility, the investment likely does contribute to value. But if it’s overbuilt, poorly designed, or wrong for its location, part of that cost may simply not be recognized by buyers.

The relevant question isn’t “how much was spent” — it’s “what economic utility did that spending actually create?” This matters directly in the Cost Approach: replacement or reproduction cost is only part of the analysis. The appraiser still has to determine how much of that cost continues to contribute economically to the property.

Time Is an Economic Component of Value

A development capable of producing ₱100 million today isn’t economically equivalent to one expected to produce the same amount ten years from now. Development takes time, infrastructure takes time, properties take time to sell, income properties take time to stabilize. Capital committed today has an opportunity cost; future benefits carry uncertainty.

So the real question isn’t “what benefits can this property eventually produce” — it’s “what are those future benefits worth today, given the cost, time, and uncertainty involved in realizing them?” That’s the economic foundation of present-value analysis, and one reason discounted cash flow techniques matter in the right assignments.

Risk Is Embedded in Value

Time and risk can’t be separated. Two properties might appear capable of producing similar future income but have very different values because the probability of actually realizing those benefits differs. One might have established tenants and predictable cash flow; another might depend on future approvals, major infrastructure spending, or years of market absorption. The expected benefits look similar — the risk profiles don’t. Market participants price that difference in, and so must the appraiser.

Expected Economic Benefits → adjusted for Costs, Time, and Risk → Present Economic Value

Risk isn’t an afterthought tacked onto the analysis — it’s one of the core mechanisms by which markets convert expectations about the future into present value.

Property Exists Within an Economic Environment

A new highway can improve accessibility. A port can stimulate industrial demand. A university can drive housing demand. Conversely, congestion, flooding, pollution, or declining economic activity can drag surrounding property down. In every case, the property itself hasn’t physically changed — its economic environment has. This is why inspecting the property alone can never fully explain its value; the appraiser also has to understand the economic system the property sits inside.

What This Means for the Professional Appraiser

Technical competence still matters — inspecting, measuring, understanding plans, construction, property rights, land-use controls. But professional competence also means thinking economically: What creates demand for this property? What limits its supply? What substitutes exist? What alternative uses compete for the site? What investment is needed to realize its opportunities? How long will that take, and what risk comes with it? How might infrastructure, regulation, population, or financing conditions change those expectations?

These aren’t questions separate from valuation. They’re questions about how value gets formed in the first place.

Conclusion: Property Is Physical; Value Is Economic

There’s nothing wrong with an appraiser proudly carrying a measuring wheel. The problem is confusing an understanding of a property’s physical dimensions with an understanding of its economic value.

A small access parcel can shape how a much larger property gets used. A zoning change can alter land’s economic possibilities without adding a single square meter to it. A road matters not for its measured width but for the economic connections it enables. A building can stay physically sound while losing economic relevance as markets and preferences shift. And vacant land with no improvements at all can embody substantial economic opportunity.

Property is physical. Value is economic.

We measure property to understand what exists. We study rights and institutions to understand what can be done with it. We analyze location and access to understand how it connects to economic activity. We study markets to understand demand and substitutes. And we apply economics to understand how utility, scarcity, opportunity, cost, time, and risk get converted into value.

The growth of an appraiser shouldn’t stop at getting better with a measuring wheel or laser measure. It should progress toward something harder, and more important: understanding the economics of the property being measured.

When Comparable Sales Are Not Enough: Choosing the Appropriate Valuation Method

One of the most frequent challenge facing new appraisers isn’t the math — it’s the comparables. Textbooks and early training make it seem like a valuation simply can’t proceed without three or four clean, recent sales sitting neatly in a grid. So when a search turns up few comparables, or none that are truly similar to the subject property, it can feel like a dead end. The instinct is to worry: if I don’t have comparable sales, do I even have a valuation?

That instinct is understandable, but it’s based on a misunderstanding of what the Sales Comparison Approach actually is — one piece of evidence among several, not the only path to a credible opinion of value. This is also usually the moment a new appraiser gets asked:

“Why didn’t you use the Sales Comparison Approach?”

The question sounds simple. If market value reflects the behavior of buyers and sellers, actual sales would seem like the most direct evidence available. But valuation isn’t just a matter of finding properties that have sold, tabulating them, making adjustments, and averaging a price per square meter. The real question is whether the available transactions are comparable, reliable, and relevant enough to say something meaningful about the subject property — and if they aren’t, what other evidence and methods are available instead. A scarcity of comparables isn’t a dead end. It’s a signal to look elsewhere in the market — and that’s where professional judgment begins.Comparable Sales Are Evidence, Not the Valuation Itself

The Sales Comparison Approach matters because it looks at real transactions. When recent, arm’s-length sales of genuinely comparable properties exist, they’re strong evidence of value. But the presence of sales nearby doesn’t make them comparable. A property can differ materially in location, accessibility, size, zoning, permissible use, development potential, or highest and best use — and adjustments only stretch so far.

Suppose the subject is a large tract zoned for tourism development. Nearby transactions might involve agricultural, residential, or commercial land with very different zoning and development potential. The appraiser can try to adjust for those differences, but as the number and magnitude of adjustments grows, a harder question emerges: how much of the resulting value still comes from the actual transaction, and how much now comes from the appraiser’s own assumptions? As adjustments pile up, the transaction’s reliability as an indicator of the subject’s value tends to fall.

The goal isn’t to force a comparable into the analysis just because an appraisal is expected to include one.

Scarcity of Comparable Sales Is a Signal, Not a Dead End

I ran into this directly on an assignment involving tourism-development land. Market investigation turned up too few reliable transactions with sufficiently similar characteristics and development potential to support a credible Sales Comparison analysis.

That doesn’t mean the property has no market, and it doesn’t necessarily mean it’s a seller’s market. It means the available transaction evidence isn’t enough on its own — which is a signal to look further, not a stopping point.

Market evidence is broader than comparable sales. Transactions are one form of it. Depending on the property, other relevant evidence includes rents, occupancy rates, operating expenses, construction and development costs, absorption periods, finished-unit selling prices, capitalization and discount rates, and the returns investors require. For a tourism-development site, that might mean investigating demand, room rates, occupancy, development costs, and expected investor returns — the appraiser hasn’t left the market behind, just examined it through a different lens.

Approaches vs. Methods

New appraisers sometimes treat valuation as three fixed calculations: Sales Comparison, Cost, and Income. These are broad approaches. Within them, different methods and techniques apply depending on the property and the evidence available — among them the direct comparison method, capitalization, discounted cash flow, the residual method, subdivision or development analysis, land residual and extraction techniques, allocation, and depreciated replacement cost. Terminology varies across standards and literature; what matters is that the method fits the problem and is supported by reliable evidence — not just that the appraiser knows how to run the calculation, but why it’s the right one here.

The Residual Method

When directly comparable land sales are scarce, a development property’s value may be tied to what can legally, physically, and economically be built on it. The appraiser estimates the value of the completed development and deducts the costs required to get there:

Value of Completed Development
− Development and Construction Costs
− Other Necessary Costs and Allowances
− Developer’s Return/Risk Allowance
= Residual Value Attributable to the Land

Where development spans several years, cash flow timing needs to be reflected too. The method is powerful but demanding — its output is only as good as the assumptions behind revenues, costs, timing, and required returns, which need market support rather than a number chosen to hit a target.

The Subdivision or Development Method

The same logic applies to a large tract whose highest and best use is subdivision. If there are few sales of comparable raw parcels, there may still be solid data on finished-lot prices, lot yield, infrastructure and permitting costs, marketing expenses, absorption periods, financing costs, and developer’s profit. In that case, a subdivision/development analysis is more defensible than simply comparing the whole undeveloped tract to small individual lot sales.

Expected sale proceeds aren’t just summed and called the land’s present value — development takes time, costs money, doesn’t convert 100% of gross area into saleable lots, requires infrastructure, and carries risk that investors expect to be compensated for. The analysis has to reflect all of that.

Income Methods and Discounted Cash Flow

For income-producing or development-oriented properties, capitalization works when income is relatively stable; a discounted cash flow (DCF) analysis fits better when revenues and expenses vary materially over time — through development, lease-up, or phased operations. Either way, the model is only as good as its inputs. A sophisticated spreadsheet doesn’t fix unsupported revenue, cost, occupancy, or discount-rate assumptions.

The Cost Approach

The Cost Approach looks at the current cost to replace or reproduce an improvement, net of appropriate depreciation. It’s particularly useful where improvements are new, specialized, rarely traded separately, or where construction-cost data is more reliable than comparable transaction data. No single approach is universally superior — different properties pose different problems.

Let the Evidence Choose the Method — Not the Other Way Around

A habit worth avoiding: deciding on the methodology before understanding the property. “I need three comparables, so I’ll find three sales” reverses the process. A more disciplined sequence:

Understand the property → determine the relevant property rights and valuation problem → analyze highest and best use → investigate the market → identify available, reliable evidence → determine which approaches apply → select the method(s) → develop the valuation → reconcile the indications of value.

The method should follow the evidence — not the reverse.

“But Isn’t an Actual Sale More Reliable Than an Estimate?”

A fair challenge, and the honest answer is: it depends. A genuinely comparable arm’s-length sale is powerful evidence. A transaction involving a materially different property may need so much adjustment that it says little about the subject. Likewise, an Income, Cost, Residual, or Development analysis is only as reliable as the evidence behind it.

The real comparison isn’t actual sale vs. estimate — it’s which evidence and methodology give the most credible read on how the market would value this specific property?

That said, declining to use Sales Comparison as the primary method doesn’t mean ignoring sales evidence entirely. Available transactions can still help establish a general value range, support specific assumptions, confirm market trends, sanity-check another valuation indication, or serve as a secondary check in reconciliation. A method can be insufficient as a primary basis and still be useful supporting evidence — valuation doesn’t require picking one evidence source and discarding the rest.

The Appraiser Interprets the Market — Doesn’t Just Report It

An appraiser doesn’t create value, and shouldn’t simply echo transaction prices without analyzing what they mean. The job is to interpret the economic evidence relevant to the property — its legal and physical characteristics, highest and best use, the relevant market, and the strengths and limits of the available data. That’s why professional judgment matters. But judgment isn’t the same as unsupported discretion; it has to be reasoned and evidence-backed.

A Practical Answer

When asked why the Sales Comparison Approach wasn’t used, a defensible response looks something like this:

“I considered its applicability. However, my market investigation didn’t identify sufficient reliable transactions involving properties comparable enough to the subject — in their relevant characteristics and development potential — to support a credible value indication through that approach. I therefore examined other available market evidence and applied the methods best suited to the property’s characteristics and highest and best use. The methodology ultimately used was the one most reliably supported by the available evidence.”

That’s not a criticism of Sales Comparison — it’s a demonstration that method selection is itself part of the analysis.

Some properties have abundant comparable sales. Others have very few, or sales so different that extensive adjustment would undermine their reliability. In those cases, don’t force the property into a familiar method — let its characteristics, highest and best use, and the quality of available evidence guide the selection. Sales Comparison, Income, Cost, Residual, Subdivision Development, DCF, and other recognized techniques aren’t competing formulas to choose between arbitrarily; they’re tools for reading different kinds of market evidence. Competence isn’t just knowing how to run each calculation — it’s knowing when one is appropriate, what supports it, where its limits are, and how its result relates to the market. And when comparable sales can’t be found, that’s not where the analysis ends. Often, it’s where the real analysis begins.

CASE NOTE #1-Easement of Right of Way

When the Valuation Premise Itself Must Be Tested

THE CHALLENGE

A property dispute involving an easement of right of way may initially appear to present a simple valuation question.

A proposed six-meter-wide right of way would affect approximately 655 square meters of a servient property while providing access to a 15,285-square-meter dominant estate. At first glance, the assignment appears straightforward: determine the value of the 655 square meters affected by the proposed easement.

But the area to be valued is itself based on assumptions that may materially affect the valuation result. Why this route? Why six meters? Would three or four meters adequately provide the required access? Are other feasible routes available? How would each alternative affect the servient and dominant estates?

The valuation problem therefore extends beyond assigning a unit value to the affected land. It requires determining the economic consequences of the proposed easement and its feasible alternatives.

THE AA+ CONSULTING APPROACH

AA+ does not begin by simply multiplying 655 square meters by a unit value. We first examine whether the assumptions defining the valuation problem should themselves be tested.

Alternative routes and widths are identified and evaluated as separate property scenarios. For each feasible configuration, the analysis considers the area burdened, the resulting effect on the use and development potential of the servient estate, and any corresponding diminution in its market value.

The analysis also examines the other side of the transaction. Access created over a relatively small portion of one property may materially affect the utility, development potential, highest and best use, marketability, and value of a much larger dominant estate. The economic effect of access must therefore be distinguished from the value of the land physically occupied by the easement.

AA+ does not determine which route or width the law ultimately requires. That determination belongs to the appropriate legal decision-maker. Our role is to transform the property and economic issues embedded in the dispute into independently supportable valuation evidence.

In Litigation Valuation & Consulting,  sometimes the difficult valuation question is not “What is the value?” but “What exactly should be valued, and why?”

Consulting identifies the valuation problem. Valuation measures its economic consequences. Expert evidence brings that analysis into the adjudicative process.

AA+ APPRAISAL & CONSULTANCY, INC.
Litigation Valuation & Consulting
When Property Value Becomes the Dispute