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5. Financial Transparency
5.1 Market Stability
5.2 Independent Asset Valuers
5.3 Data Standards
In-Country Assessment Information

5. Financial Transparency

A costly and time-consuming insolvency process (38 percent of the estate value with proceedings taking 5.7 years, according to World Bank’s Doing Business) severely affects property market efficiency. The market is also hampered by the incomplete implementation of reforms meant to professionalize real estate services.

The Real Estate Service Act, or RESA, was passed in 2008 to regulate the practice of real estate in the Philippines. However, it is still too early to judge the impact of the Act. The development of the real estate profession is also limited by weak data standards, as accurate property information is not made available electronically in formats that are consistent with international standards. For instance, there is no standard system for interface among brokers and agents where they can share contracted listings of properties for sale.

At the same time, some improvements in the quality of valuation are on the horizon. International Valuation Standards are in use by valuers connected to international firms and are part of pending legislation dealing with the valuation profession.

 

Goal – A well developed and transparent financial system that includes strong supporting institutions and highly trained and ethical professionals that contribute to effective financial intermediation and deep and broad access to capital and financial services

5.1 Market Stability

Core Question: Are market risks sufficiently transparent and diversified so that efficient capital allocation can occur? No – Weak, although capital standards and oversight have improved.

Financial Reporting
5.1.1 What is the strength of the country’s auditing and reporting standards? Strong – 62nd out of 142; Score 4.77 out of 7

Financial Services
5.1.2 Does the financial sector provide a wide variety of financial services to businesses? Yes – Strong – 50th out of 142; Score 4.89 out of 7

Source: The Global Competitiveness Report 2011-2012, World Economic Forum
www.weforum.org/issues/global-competitiveness

Insolvency Process
Very Weak – Ranking – 163rd out of 183 Trend ↓

5.1.3 What is the average time to complete bankruptcy proceedings? 5.7 years

5.1.4 What is the cost of bankruptcy proceedings as a percentage of the estate? 38%

5.1.5 What is the recovery rate of bankruptcy proceedings? 4.7 cents on the dollar

Source:Doing Business 2012 – Closing a Business

www. doingbusiness.org/data/exploreeconomies/philippines

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5.2 Independent Asset Valuers

Core Question: Do trained, independent and ethical asset valuers exist for all types of assets? Yes – Strong, the Central Bank is committed to reliable and transparent real estate valuations. Moreover, Congress recently passed the Real Estate Service Act (RA 9646), which created a professional regulatory board for the real estate industry.

Survey Questions
Standards
SQ 17: How easy is it to find a valuer who implements International Valuation Standards (IVS)? Very Strong – IVS are being adopted as the national standards. However, not all property valuers have adopted these national standards; it is usually the international firms that do so.Training

SQ 18: What is the level of training of valuers? Strong – Advanced programs are available. However, under the Real Estate Service Act (RESA), the government has yet to release implementing rules and regulations regarding the training standards to be followed.Civil Society Resource: Appraisal Institute www.appraisalinstitute.org Ethics

SQ 19: Are opinions offered by valuers free of influence from parties to the transaction? Strong, as members of IVSC, valuers are expected to follow the IVS Code of Conduct.

Civil Society Resource: International Valuation
Standards Council www.ivsc.org

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5.3 Data Standards

Core Question: Is accurate property information available electronically in formats that are consistent with international standards? No – Weak, although more and more information is becoming available, Philippine markets are rated as semi-transparent by Jones Lang LaSalle.

Survey Questions
Sales & Operating Data
SQ 20: A multiple listing service is an electronic exchange system where brokers and agents can widely share contracted real estate listings of properties that are for sale. Do multiple listing type services exist? Yes – Weak, MLS services exist but are not standardized.

Civil Society Resource: International Consortium of Real Estate Associations www.worldproperties.com

SQ 21: Do resources exist for obtaining building income and expense estimates? No – Very Weak

Civil Society Resource: Institute of Real Estate Management www.irem.org

Interchange Formats

SQ 22: Do electronic data interchange formats conform to international standards (ebXML – electronic business using extensive markup language)? Yes – Weak, Electronic Commerce Act of 2000 provides for the use of ebXML, but it is not used for real estate transactions.

Source: Electronic Commerce Act www.chanrobles.com/republicactno8792.htm

Civil Society Resource: Open Standards Consortium for Real Estate International www.oscre.org

Technical Standards
SQ 23: Do building codes and office building measurement standards (ANSI/BOMA Z65.1) conform to international standards? Yes – Strong, Philippine Association of Building Administrators (PABA) is affiliated with Building Owners and Managers Association International (BOMA).

Source: The National Building Code of the Philippines www.chanrobles.com/republicactno6541.htm

Civil Society Resource: Philippine Association of Building Administrators http://paba.org.ph/about.html

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In-Country Assessment

Valuation Profession
FQ25: How many independent valuers exist in the market? Can small businesses obtain fair valuations for property they want to buy or sell?

From interviewing a few appraisers, there are plenty of independent valuers; however, many are not licensed or trained according to acceptable standards.

FQ26: What are the valuation standards and do they conform to international and regional standards?

International Valuation Standards are in use and are part of pending legislation dealing with the valuation profession. The standards for appraisers are in the RESA examination components for becoming a real estate valuer. These include: fundamentals of real estate principles and practices; standards and ethics; theories and principles in appraisal; human and physical geography; methodology of appraisal approaches; valuation procedures and research; appraisal of machinery and equipment; practical appraisal mathematics; appraisal report writing; real estate finance and economics; case studies; land management system and real property laws; and any other related subjects as may be determined by the Board (Sec. 13, Scope of Examination).

Source: The RESA law www.lawphil.net/statutes/repacts/ra2009/ra_9646_2009.html

FQ27: What valuation methods and techniques are used in the market?

Generally Accepted Valuation Principles as defined by the IVSC are used. During expropriation, land is valued at the zonal value (based on the Bureau of Internal Revenue’s maps) and the value of the property on the land is added.Data Availability

FQ28: How available is information for commercial properties that are for sale or that have sold?

Knowledge about commercial properties for sale usually spreads through word of mouth, advertisement (flyers / signboards / classified ads in newspapers) and the databases of real estate brokers. Sold properties have deeds of sale, and are issued new titles. These titles are available with the Register of Deeds and the City Assessor’s Office. After foreclosures, properties are subject to public bidding/auction if they are below 250 sqm. The property, in this case, is published in newspapers with national circulation.Source: Research and interviews conducted by the Institute for Solidarity in Asia in June and July 2011 in Manila and San Fernando, Pampanga.