Posted on September 07, 2014 10:11:00
PM [ BusinessWorld Online ]
THERE is no reason to worry about a
property bubble, because the appreciation of land prices, especially in central
business districts, is well supported by demand and economic fundamentals,
industry officials said.
“There are some signs that a property
bubble might form but there’s no cause for alarm or panic at this point. I
think these are just signs of a booming property market and the concerns are
overrated,” Jacqueline van den Ende, managing director of online property
portal Lamudi Philippines, told BusinessWorld in an interview on Sunday at the
World Trade Center.
Ms. Van Den Ende said the average
mortgage interest rate of 7.5% is appropriate and rates in the country’s
business districts are still lower than their counterparts in Asia.
“The rising prices are still explained
by underlying fundamentals. Manila has very strong demand and I don’t think
there’s oversupply or much speculation,” she said,.
Data from the portal showed that the
largest number of real estate transactions represent leases in central business
districts.
With banks and regulators more
cautious after the 1997 Asian Financial Crisis, Ms. Van Den Ende said developers
have tended to ensure a “good match” between supply and demand, providing
incentives to ensure higher takeup of their projects, diversifying their
developments and venturing into the office segment where there is strong demand
and also into the affordable sector where there is a huge backlog.
“Developers should exercise prudence
in giving out loans and ensure that only qualified buyers are able to avail of
them, as well as spread out their developments and explore areas outside Metro
Manila such as Iloilo, Cebu and Davao,” she said.
Property developers have also
expressed optimism on the country’s real estate sector and ruled out the
possibility of a bubble in the near term.
“We don’t believe there will be a
price bubble. Supply-demand imbalances may happen down the line in certain
locations or certain price points, but we believe we still have a few more
years before that happens, and if it will, it will be gradual,” Ayala Land,
Inc. Chief Finance Officer Jaime E. Ysmael told BusinessWorld in a recent
interview.
He noted that aside from strong takeup
across all segments, interest rates continue to be “quite favorable” and
supportive of continued growth.
“We believe it’s a totally different
residential market nowadays compared to what it was back in the 1970 when
speculative activity was the one driving property prices and demand, plus the
fact that developers now have more discipline and have stronger balance sheets
to weather any of these imbalances. We also believe that [in the event of a
rise] in mortgage rates, a small increase will not really make a big dent with
respect to demand,” Mr. Ysmael said.
Joan Patricia Dial, Division Head of
Vista Land & Lifescapes, Inc.’s Brittany unit, meanwhile said: “We’re very
optimistic of the property sector together with the economic growth we’re
experiencing now. We believe that there could probably [be a bubble] in the
condominium segment, but not for the horizontal segment -- and that is the core
business of our company.” -- Daphne J. Magturo
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