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