by Roderick T. dela Cruz
[ manilastandardtoday.com ] February 6, 2012
The Bangko Sentral has not detected signs of asset price bubbles yet, but is closely watching the housing market, which could become a source of concern.
“There have been limited signs of asset price bubbles thus far, although some segments of the residential property sector could be at risk of an oversupply,” the Bangko Sentral said in its latest quarterly inflation report.
Asset price bubbles refer to the excessive increase and sudden drop in prices of assets such as real estate properties, equities and commodities because of excess demand from investors and consumers who are attracted by a low interest rate regime in a particular economy.
Some economists have expressed concern over the the robust lending growth of more than 20 percent last year, led by strong demand for new housing developments.
The Bangko Sentral noted that residential vacancy rates inched up to 10.4 percent in the fourth quarter of 2011 compared to the previous quarters.
“Vacancy rates in the residential buildings rose further, driven by the higher vacancy rates for Grades A and B residential buildings,” it said.
The Bangko Sentral, citing a report from property research firm Colliers, said the increase in vacancy rates in the Makati commercial business district was expected to continue due to potential rise in supply over the next 12 months.
The high-rise residential segment also continued to post strong growth in the number of licenses to sell issued by the Housing and Land Use Regulatory Board because of the newly approved high-rise projects in the previous quarters.
“These factors point to a risk of an oversupply in the residential property market going forward,” said the Bangko Sentral.
Bangko Sentral Deputy Governor Diwa Guinigundo, however, assured that macroprudential measures were in place to avoid a possible housing bubble.
Macro prudential tools are administrative measures such as reduction of loan to property value ratio or exposure of banks portfolio to the property sector to handle pockets of asset bubbles.
Existing macro prudential measures limit banks’ loans to the real estate sector to a maximum of 20 percent.
“The Bangko Sentral is monitoring the loan portfolio of the banks to make sure that the ceiling is in force. The loan to value will also provide some kind of a break on how much of the funds can be generated,” said Guinigundo.
Banks are also required to extend loans not exceeding 80 percent of the value of real estate properties or vehicles.
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