Vol. XXII, No. 25-A [ BusinessWorld Online ]
Saturday, August 30, 2008 | MANILA, PHILIPPINES
THE BOOM DAYS of the property market, which recovered from a contagion that hit Asia a decade ago, won’t have to end with another crisis sparked by a meltdown in the US subprime mortgage market, a local credit rating firm yesterday said.
Buoyant demand mainly from Filipinos working abroad and the baby-boomer generation entering retirement, as well as from the flourishing business process outsourcing industry, should keep the domestic property market afloat, said Danilo A. Antonio, managing director of Credit Rating and Investors Services Philippines, Inc.
"In general, we’re about to experience a slowdown, but we’re still pretty much in the boom situation," he told a forum of investors and analysts gathered at the Philippine Stock Exchange yesterday. The continued volatility in the global and domestic financial markets has so far failed to douse fears of a US-led crisis spilling over to emerging Asia, including the Philippines. The region has been battered 10 years ago by massive capital flight, that had constrained lending activities of banks heavy with foreclosed assets.
Banks have since disposed of soured loans, thanks to so-called special purpose vehicles that enjoyed tax perks from the government. Real estate developers won’t have then problems in terms of sourcing funding, Mr. Antonio said.
"Yes, [the US crisis] will continue. But it seems for now that there’s no direct impact as far as local markets are concerned," said capital markets expert Gamaliel C. Pascual, Jr., senior advisor at Regina Capital Development Corp.
Besides, the Philippine capital market’s funding mechanism is "primitive," having yet to explore the full benefits of the four-year old securitization law to issue the more complex mortgage-backed securities.
If at all, the US’ housing bubble impact on the Philippine housing sector could be felt in the weakening of the second home and luxury home market — mostly vacation homes and residential resorts, Mr. Antonio noted.
This kind of housing mainly catered to the Filipino-American market, whose preference has now shifted to cheaper housing products in the US mainland, he said.
Residential units, including low-cost housing and subdivision units whose prices are within a P1- to P2.5-million range, as well as similarly-priced condominiums and buildings designed for business process outsurcing, are hot items in this prevailing environment, Mr. Antonio said. Apart from vacation houses, farm lots, golf communities and industrial estates, have become unattractive, he added. — Maria Eloisa I. Calderon
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