‘Price bubble’ unlikely as real demand supports boom
By Paolo G. Montecillo
Philippine Daily Inquirer
12:58 am | Wednesday, July 3rd, 2013
The boom in the country’s real estate sector continues to be supported by real demand from consumers, the Bangko Sentral ng Pilipinas (BSP) said, playing down concerns of a possible price “bubble” that could harm the economy if left unchecked.
The BSP said it saw no need to restrict lending to fund the purchase or construction of new homes, noting that demand for property across all income levels remained robust.
“If you look at the socialized and low-cost segments, there is huge demand. There is a significant backlog there of close to four million units,” BSP Governor Amando M. Tetangco Jr. said late Monday.
Tetangco said that while demand for mid- to high-end housing was not as broad, homes were still being sold to real consumers, not property market speculators who bet on prices climbing and make a profit before an eventual crash.
“According to real estate developers, there is still fundamental support in the growth of this sector coming from real demand,” he said.
He noted the new trend being reported by home builders of more people wanting to buy homes in the middle of the country’s central business districts to avoid having to go back to their homes in the outskirts of the metropolis.
This is further supported by rising income levels among workers in the business process outsourcing (BPO) companies. He said many BPO workers were buying condos on their own and taking four or five other colleagues as roommates to help shoulder amortization costs.
“They buy condos and use them for the week, then they go back to their houses during weekends,” Tetangco said. “Developers have actually calculated how much money people in this segment are willing to spend and use that as a basis for their prices.”
Given the strong demand, Tetangco said there was no need for any changes in lending policies to either restrict or relax rules on the exposure of local banks to the real estate sector. Banks are allowed to lend no more than 20 percent of their total portfolio to the real estate sector.
Last week, Tetangco likewise said that the country’s financial markets were spared from the risk of price bubbles, thanks to the recent crash in asset values that were caused by jitters among foreign investors.
The local stock market fell into bear territory late last June while the peso hit its lowest point against the dollar in more than a year. This came amid signals by the US Federal Reserve of the end of its easy monetary policies, prompting investors to pull out of emerging market to ready a comeback to traditional safe havens like the United States.
“If prices always increase, you can reach bubble-like conditions. Fortunately, we had that correction,” Tetangco said.
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Tags: Business , housing demand , property loans , real estate sector
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