posted
October 21, 2015 at 11:50 pm by Julito
G. Rada [ manilastandardtoday.com]
Bangko
Sentral ng Pilipinas Governor Amando Tetangco Jr. said there is no asset bubble
happening in the real estate sector despite the increase in property prices.
“There is no
asset bubble [in the real estate sector]. The increase in property prices are
actually demand driven,” Tetangco said during a panel discussion at the
Philippine International Convention Center in Pasay City.
Amando
Tetangco Jr.
Tetangco
said property builders and developers were wiser and now more aware of the
risks associated with the property business.
“Before,
most developers build, let’s say four towers first, before selling it to
potential buyers. But now, they see to it that almost 80 percent of the first
tower is sold before building another tower,” Tetangco said.
Asset
bubbles are characterized by an upshot in asset prices, such as those in the
real estate sector, that they no longer reflect real market rates due to
perceived demand. Such is seen as detrimental to the economy.
Global debt
watcher Fitch Ratings earlier said in a report that there was a limited clarity
over macro-prudential risks stemming from the country’s real estate market.
Fitch said
the lack of data on property prices and affordability indicators made it
difficult for the rating agency to assess the effect of credit growth on the
real estate market.
Bangko
Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the macro-prudential
measures employed by the banking regulator made the risks of asset price
inflation manageable.
“The risks
of asset price inflation appear manageable and have in fact been addressed by a
number of macroprudential measures,” Guinigundo said in an earlier statement.
Guinigundo
said a significant runup in real estate prices in Makati and elsewhere could be
true but at best anecdotal. He said there should be a residential real estate
price index to make a general characterization of the real estate sector and
the likely path of property prices.
“It is also
useful to produce a decomposition into residential and commercial property
prices which are driven by different dynamics. For housing, we continue to have
a large backlog while the capacity of the clients has increased due to overseas
remittances, higher employment and business process outsourcing,” Guinigundo
said.
He said for
commercial establishments, the robust economic tempo had generated great
interest among investors and their corresponding demand for commercial space
was shooting up.
“But again,
the various macro-prudential measures and careful monetary stance of the BSP
have helped support the sustainability of this segment. We also believe that
our key property builders and developers are now more risk-conscious and
therefore have conducted themselves responsibly,” Guinigundo said.
Fitch cited
a data published by Colliers International showing that average land values in
the Makati central business district had risen by more than 50 percent since
the end of 2012, although relatively low vacancy rates and strong growth in
rents suggested some fundamental support for current price levels.
Fitch said
while private sector credit growth moderated from 19.9 percent year-on-year at
end-2014 to 14.1 percent in June 2015, it was still growing at a brisk pace.
Fitch said
the proactive supervision and regulation of the Bangko Sentral, particularly on
the introduction of real estate stress tests and caps on mortgage loan values
relative to collateral, might help to contain risks.
Bangko
Sentral plans to release a residential real estate price index later this year.
Guinigundo
said banks engaged in real estate were advised to ensure their capital base was
not unduly challenged by their exposure in real estate.
________________________________________________________________
