The Impact of Employment and FTAs on Real Estate

By: Brianna Yparraguirre

Free trade agreements (FTAs), employment trends, and the real estate industry are closely related. This dynamic interaction is vital for businesses such as Crown Asia as they navigate the Philippine housing market. While FTAs have the power to boost economic growth and change market dynamics, employment rates, job stability, and the nature of work all play a significant role in shaping housing wants. This combination of variables highlights a crucial link in which trade agreements and employment trends interact to affect investment strategies, property tastes, and market resilience. Understanding and adjusting to these symbiotic dynamics is crucial for Crown Asia and similar companies as they navigate the always-changing real estate Philippine market.

Philippine Unemployment Rate experienced a downward trend

October 2023 was the lowest unemployment rate in 18 years in the Philippines, demonstrating the robustness of the labor market in that nation.

According to the Philippine Statistics Authority (PSA) on Thursday, the unemployment rate was 4.2%, the lowest since April 2005 and the same as in November last year.

Additionally, the employment rate increased to 95.8%, the highest level in 18 years, which aligns with the ongoing labor demand that is the driving force behind the economy’s recovery.

The definition of “unemployed” was revised by the statistics agency in April 2005 to include those 15 years of age and older who are either jobless or actively looking for work, depending on whether they have a legitimate basis for doing so.

According to preliminary Labor Force Survey (LFS) data from PSA, the 4.2% unemployment rate in October translated to 2.09 million unemployed Filipinos, which is 150,000 fewer than the 2.24 million unemployed Filipinos in the same month the previous year.

The jobless rate decreased from 4.5% in September 2022 to 3.5% in October 2022. But in October, the National Capital Region had the highest unemployment rate—5.4%—while the Davao Region had the lowest—2.9%.

According to Arsenio M. Balisacan, secretary of the National Economic and Development Authority, the government’s initiatives to increase trade and investment in the nation should lead to additional improvements in the labor market. In his remarks, Mr. Balisacab stated that greater investments—especially those that provide cutting-edge technology—can help expand the job market’s inclusivity. The Philippines must increase and improve educational possibilities to guarantee that we are preparing Filipinos for careers in the future.

As of now, the unemployment rate is 4.6%, which is lower than the 5.3%–6.4% target set by the Philippine Development Plan for 2023. Benjamin E. Diokno, the finance secretary, stated that the president’s goal of having the Philippines’ unemployment rate drop to 4-5% by 2028 is now more likely than ever.

How does Employment impact the Real Estate Industry

The real estate industry is undoubtedly greatly impacted by employment trends, and analyzing this relationship through the eyes of a business like Crown Asia illuminates the complex interactions between employment possibilities and the housing market.

The construction industry’s activity, the demand for real estate, and the general health of the market are all influenced by changes in employment rates. The housing market and job prospects are symbiotically correlated, with each factor influencing and molding the other through a cyclical dance.

Crown Asia, one of the major forces in the Philippine real estate market, functions in this dynamic environment and is highly sensitive to how changes in employment patterns affect the need for housing. People are looking for stability and comfort in homeownership as job prospects increase, which is driving up demand for residential spaces provided by businesses such as Crown Asia.

The Significance of Employment Development for Real Estate Investing

When choosing where to invest in real estate, job growth is important since it affects demand, demographic shifts, and the state of the economy. Making wise investment selections requires investigating the relationship between job growth and interest rates, as well as the impact of employment levels on housing markets.

Employment levels and interest rates significantly impact housing markets. A flourishing labor market drives increased demand for housing, with stable jobs and higher incomes allowing for higher property values and rental rates. Conversely, slow job growth or economic downturns can lead to decreased property values and lower occupancy rates. Interest rates also play a role in determining affordability of real estate investments. Rising interest rates due to strong job growth increase borrowing costs, while falling rates due to weak job growth or economic factors decrease them.

Understanding these factors is crucial for evaluating potential real estate investments. Millennials, who have delayed homeownership due to student loan debt and urban living preferences, are expected to increase demand for rental properties.

Growth in Employment’s Effect on Housing Demand

Strong employment markets frequently result in higher spending power, which boosts consumer confidence and creates an ideal atmosphere for real estate investment. A chain reaction occurs when employment rates rise, increasing demand for homes for both purchase and rental use. This increased demand has an impact on the residential communities, apartments, and condominiums where Crown Asia is present in the real estate market.

Furthermore, the kind and caliber of employment also matter greatly. As the labor force gravitates toward steady jobs with good compensation, expectations for better living conditions frequently follow pace. Crown Asia’s portfolio, which appeals to a range of social classes, satisfies these desires by providing a variety of home options that suit changing lifestyle tastes.

Workplace Location and Housing Options

Choices for housing are strongly influenced by the location of employment areas. Real estate development tends to concentrate in areas with expanding job markets. Crown Asia places sites close to bustling business centers and employment hubs in order to carefully connect its projects with these dynamics. They satisfy the increasing demand from those looking for easy access to their places of employment by doing this.

Reevaluating residential options is also necessary because of the recent shift in preferences brought about by the introduction of remote work and hybrid job models. Crown Asia offers homes that meet the requirements of remote workers and provide environments that support productivity and work-life balance in response to this changing environment.

Difficulties During Job Fluctuations

On the other hand, the real estate industry may face difficulties due to changes in the labor market. A decreased demand for real estate investments may result from economic downturns or job insecurity. In these times, businesses like Crown Asia changed course, emphasizing creative advertising techniques, providing adjustable payment plans, and broadening their real estate holdings to draw in purchasers in the face of unstable economic conditions.

The Impact of Free Trade Agreements on Real Estate

Free trade agreements have long been pivotal in shaping the economic landscape of nations, catalyzing multifaceted impacts across various sectors. In the context of the Philippines, the influence of free trade agreements on the real estate sector is a compelling narrative. These agreements, fostering open markets and facilitating international trade, have wielded a transformative force on the dynamics, trends, and investment landscapes within the Philippine real estate realm. Exploring the intricate connections between these trade pacts and the real estate sector unveils a tapestry of opportunities, challenges, and evolving paradigms that delineate the shifting contours of this vital industry in the archipelago.

The People’s Republic of China (PRC) has become a significant player in the global economy, relying heavily on free trade agreements (FTAs) for its export industries. A survey of 232 Chinese firms revealed that 45% were using FTAs to some extent, with 78% using or planning to use them. However, the coverage of export value by FTAs is variable. Chinese firms view FTAs as a way to increase their access to partner markets, with a preference towards the United States and other traditional markets. As growth rebalances, there may be a shift in market orientation towards ASEAN and regional markets, intensifying FTA use. The study suggests several proposals to increase FTA use, including expanding support services, promoting larger regional FTAs, and creating more opportunities for collaboration between the government and the private sector. The main barriers to FTA use include lack of information, small margin of preferences, confidentiality of information, and time delays in preparing applications for certificates of origin.

Firms are considering adjusting their business strategies in response to Free Trade Agreements (FTAs), but are still uninformed about the details of provisions. Only 10 firms have a thorough knowledge of FTAs, while 72 have some knowledge. Only 6% of firms consider multiple Rules of Origin (ROOs) to be costly to business. Most exporting firms consider multiple ROOs to be problematic, but nearly 12% of FTA users impose costs. Firms prefer an ROO scheme that allows self-certification, and they hope government agencies improve their information services and ROO certification processes. Many firms remain unaware of FTA-related services provided by government agencies or non-government agencies, suggesting outreach programs could be more effective in informing the business sector.

Policy Recommendation

The PRC’s FTAs significantly impact the global trading system and should adhere to World Trade Organization rules. As domestic firms grow and become multinational corporations, the PRC should consider comprehensive package agreements. To address firms’ concerns, special programs and institutions should be developed to provide FTA-related information, training, and consulting services. The Ministry of Commerce and the Chamber of Commerce should conduct surveys on FTA impacts, build an electronic information exchange mechanism, and encourage market-based service firms.

Koreans are once more the top tourists in the Philippines.

The Department of Tourism (DOT) reports that South Korean visitors to the Philippines are back at the top of the list. At the Mactan Cebu International Airport, 300 tourists from South Korea were welcomed by leis, a rondalla band, and Sinulog dancers. The recently arrived tourists are agents, sellers, and distributors for a South Korean direct selling organization; their trip to the Philippines was provided by Unicity, their employer, as a reward for top-performing staff members.

A Department of Tourism statement claims that the recently arrived tourists work as distributors, agents, and sellers for a South Korean direct selling organization.

According to the statement, their employer, Unicity, provided them with a trip to the Philippines as a reward for being high performers.

With 348,384 arrivals, South Koreans are the nation’s most popular tourists, according to DOT data as of March 27. Out of the entire 1,332,855 international travelers, this represents 26.14 percent.

Before the COVID-19 epidemic struck and travel restrictions were implemented, South Koreans made up the majority of foreign visitors to the Philippines in 2019—1,989,322, or 24.08 percent of all visitors—as well.

Advantage of getting South Korean tourists in the Philippine tourism

There are several benefits to welcoming South Korean visitors to the Philippines that go much beyond just the quantity of visitors. Travelers from South Korea have changed the tourism industry in the Philippines in a number of ways, including social, cultural, and economic.

Economic Boost

A sizable share of the Philippines’ tourism industry is made up of South Korean visitors. Their arrivals bring in a significant amount of foreign exchange and boost the nation’s tourism industry. A number of industries are stimulated by this purchasing power, including retail, entertainment, food, transportation, and hospitality. It boosts small and medium-sized businesses, generates jobs, and promotes economic development in nearby towns.

Different Tourism Landscape

South Korean tourists visit a wide range of Philippine places outside of the well-known ones, reflecting their different interests. This pattern of varied exploration fosters the growth of lesser-known sites, so advancing a more comprehensive tourism environment. In order to accommodate a wider range of visitor preferences, it promotes the development and protection of cultural and natural heritage sites.

Rich Cultural Exchange

The two countries benefit greatly from the presence of South Korean tourists. It fosters respect, admiration, and understanding of one another’s cultures, traditions, and lifestyles. In addition to strengthening cultural diplomacy, this exchange encourages cross-cultural partnerships in a range of industries, such as entertainment, food, and the arts.

Market Diversity and Stability

The Philippine tourism business is stable because it depends on a wide range of tourist demographics, including South Korean travelers. Reliance on a solitary market may present hazards amongst economic oscillations or geopolitical strains. Travelers from other nations and South Koreans diversify the market and lessen their susceptibility to shocks from the outside world.

Longer Stays and Higher Spending

Compared to some other visitor groups, South Korean tourists frequently choose to remain longer. They also frequently spend a lot of money on entertainment, dining, shopping, and lodging. Their prolonged stays support local companies and the tourism sector‘s bottom line by promoting development and growth that is sustainable.

The Philippine Senate’s Possible Ratification of FTA with South Korea

The Philippine Senate is expected to ratify the free trade agreement (FTA) with South Korea when Congress resumes session in January. The agreement, signed last September, aims to strengthen economic ties between the two countries. South Korea will remove tariffs on 94.8% of Philippine products, while the Philippines will remove tariffs on 96.5% of South Korean goods. The FTA will allow the Philippines to expand market access for its agricultural products and strengthen cultural and economic ties between the two countries. Tariffs on agricultural goods will go to zero over five years, while tariffs on processed pineapples will be removed in seven years. The FTA will attract more foreign direct investments from South Korean companies, as it will attract a wider export market and lower production costs. The Department of Trade and Industry will work with the Korea Institute for Advancement of Technology to develop an FTA utilization tracker.

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