Central Bank: No sign of property price bubble | Inquirer News

Central Bank: No sign of property price bubble

/ 07:42 AM December 27, 2011

MANILA—Although condominiums have mushroomed throughout the metropolis amid rising demand for residential property, the danger of an asset price bubble forming is remote, the Bangko Sentral ng Pilipinas (BSP) said.

According to BSP Governor Amando Tetangco Jr., there is an actual, not speculative, demand for property. He explained that bubbles would usually arise from too much speculation.

“There is still no sign of a property bubble,” Tetangco told reporters.

Article continues after this advertisement

He noted that current prices of residential property are actually much lower in real terms compared with the prices just before the Asian financial crisis struck in the late 1990s.

FEATURED STORIES

Prior to that crisis, demand for real estate soared, boosted partly by speculators who wanted to take advantage of projections that asset prices would continue to increase. The speculators were buying assets, thereby increasing prices, with the intention of selling once prices are actually higher.

But when prices became too high, demand steeply declined, leading to huge losses even for banks that were financing the purchase of property. As a result, the banking sector underwent a crisis. This phenomenon affected several economies throughout Southeast Asia.

Article continues after this advertisement

But Tetangco said that the situation today was far from that observed in the late 1990s.

Article continues after this advertisement

Apart from the fact that there is actual demand for housing, current real estate loan portfolio of banks is within manageable levels, Tetangco explained. Banks are not overly exposed to the real property sector.

Article continues after this advertisement

Data from the BSP showed that outstanding residential real estate loans from banks amounted to P198.4 billion as of end-June this year, up by 14 percent from P173.7 billion reported in the same period last year.

Although growth stood at a double-digit pace, the central bank said loans that supported residential property purchases account for a manageable 6 percent of banks’ total loan portfolio.

Article continues after this advertisement

Data also show that current land values in Metro Manila are still over 30 percent lower in real terms than those seen in the late 1990s.

Still, the BSP is strictly monitoring home prices as well as exposure of banks in the real property sector, Tetangco said.

Strict monitoring is necessary to avert a crisis similar to that which affected the United States in 2007. The world’s largest economy fell into a recession in 2009 due to subprime concerns.

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

“We are monitoring that to make sure liquidity and prices are just in the right levels,” Tetangco said. /INQUIRER.NET

TAGS: central bank, Property, real estate

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our newsletter!

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

© Copyright 1997-2024 INQUIRER.net | All Rights Reserved

This is an information message

We use cookies to enhance your experience. By continuing, you agree to our use of cookies. Learn more here.