Real estate returns, a hedge against inflation: A study of both office and condominium properties in Metro-Manila, Philippines between 2002-2009

• Main Authors: Co, Hannah Stephanie L., Go, Katherine Xina N., Lorenzo, Katherine Grace L., Sy, Jensine Daphne E.
• Format: text
• Language: English
• Published: Animo Repository 2013
• Subjects: Real estate business > Philippines; Condominiums > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/9888
• Institution: De La Salle University

At the present time, more individuals are becoming interested in investing in real estate properties since the Philippine real estate market is starting to develop. Because of this, the paper will examine the ability of Philippine real estate properties to hedge against inflation, which includes commercial (office) and residential (condominiums) properties in specific areas like Makati CBD, Fort Bonifacio, Ortigas Center, and Eastwood City. In order to do this, the property returns will be tested independently against both expected and unexpected inflation using the Fama and Schwert (1977) model which is the ordinary least square (OLS) method. This study will also use Johansen test in order to identify whether there is a cointegration equation between the variables. Also, error correction models such as the vector error-correction model and Preis Winsten and Cochrane Orcutt model will be used in order to correct autocorrelation if it is present. The autocorrelation will be known after accomplishing the OLS, Durbin Watson test, and Breusch Godfrey test. In residential properties, the end result shows that there is a partial hedge against expected inflation in Makati CBD and showed a partial hedge against unexpected inflation. On the other hand, the results for the commercial properties states that only Ortigas Center has a partial hedge against expected inflation and none for the unexpected inflation. As a whole, even if residential and commercial properties offer a partial hedge against both expected and unexpected inflation, it is not statistically significant.