DURING the Marcos regime, the Philippine Tourism Authority (PTA) was created and one of its functions then was to monitor the availability of hotel rooms, to prevent an oversupply. Part of the PTA’s role was to regulate the operation and licensing of the hotel business, thus preventing financial distress for investors.
However, after Martial Law was lifted in 1986, the real estate market returned to normal, where the balance of economic, political and social forces that influence supply and demand was no longer regulated. Today, the hotel business has become highly competitive because of the entry players. There also seems to be a bandwagon mentality among investors eager to get involved in the real estate market, specifically in residential and commercial properties.
Fixed real estate locations prevent the equalization of supply and demand on a regional or national level. Durability of real estate causes maladjustments in supply and demand on a local level. Land itself is nearly indestructible. Improvements, too, if properly maintained, will last a hundred years or more. Thus, when demand suddenly falls for any reason, inability to adjust (withdraw) supply will cause real estate to be a “drag” on the market. An oversupply of real estate create a buyer’s market, which results in lower purchase price offerings and keen competitive trade practices. But will Cebu’s building industry be able to withstand an oversupply of real estate players in the development of residential subdivisions and condominiums?
Unfortunately, there is so much wrong data and so much unknown information to determine the forces influencing real estate supply and demand. To illustrate, Cebu has always been a community of traders. The entrepreneurial talents of these traders go beyond the neighboring islands and as far as Northern Mindanao. These traders help create the balance of economic, political and social forces that influence the supply and demand of real estate. In more recent years, overseas Filipino workers and foreign nationals with Filipina wives or lovers have contributed to the demand for real estate.
But there is a lack of reliable data on the stability of income and personal savings of such groups. Neither is data on the underground economy available for study.
Big business necessitates business forecasting, for the developer today must stock up to meet the anticipated demand tomorrow. It is understandable, therefore, that developers in general take a keen interest in scientific methods that may foreshadow the course of future events.
Today, most of the larger developers rely on the services of skilled analysts trained in economics.
As a result, statistical services are made available commercially by many specialized consulting realty firms. Since the causes of yesterday or yesteryear may result in the effects anticipated tomorrow, a study of past business events is generally accepted as basic forecasting of business trends.
The regularity of periodic business swings from boom to bust has led to the belief in the existence of a business cycle which, subject to minor changes and disturbances, will inevitably repeat its swings. In retrospect, the pendulum-like movements of business activity, from optimism to over-optimism, to caution, pessimism and even panic, appear in a logical sequence and are traceable to violations of economic laws of supply and demand and, in some years, the lack of political stability.
Analysts argue that an oversupply of residential subdivisions and condominiums could harm the real estate industry in Cebu, and that it is only a question of time that an oversupply of condos will happen.
The realty rental business is now encountering vacancy problems. The expat market is dwindling due to lingering effects of economic crisis in many economies abroad. Rental income from high-end residences has competitively been absorbed by the entry of condo ownership.
In recent years, the application of economic checks and balances under the National Government has counteracted cyclical economic behavior. There is now some doubt whether, under continued maintenance of such controls, economic history will repeat itself.