THE LOCAL housing price boom might end sooner than real estate developers expect, as the industry is weighed down by the global credit
crunch and rising consumer prices.
And while a hike in real estate prices normally signals a continuing boom, the recent hike in local prices was not due to rising demand but because of higher construction costs, online property research house Global Property Guide said.
"Theoretically, a developer increases the price of a unit because of demand. In our case, however, they increased the price because of [rising] construction material [costs]," Global Property Guide economist Prince R. Cruz said in an interview.
Although it is hard to say when the demand would start to slow down, Mr. Cruz said developers might start feeling the pinch once projects are completed.
He said residential condominiums are still in the building process, and buyers might stop paying their dues and instead take their investments back, which could result in oversupply.
"The disposable income of consumers has gone down because their expenses are no longer proportional to their income," Mr. Cruz said.
Earlier this month, Eton Properties Philippines, Inc. said it had hiked residential condominium rates by 5% to cover rising construction costs.
Homebuilder Vista Land and Lifescapes, Inc. have raised theirs by 3% to 5% in anticipation of the rising cost of building materials.
While property prices are unlikely to change in the coming months, Mr. Cruz noted that unless there is a drastic economic turnaround, developers could not really expect much from the market.
He added that remittances from Filipino workers overseas could only do so much since most of the money sent in go to basic goods.
The Global Property Guide said in its latest report that the global house price boom had ended, with markets weighed down by the credit crunch and high inflation.
Only 13 countries where dwelling price indices are regularly published saw prices rise in the first quarter, while 21 countries saw dwelling prices fall in real terms, after adjusting for inflation.
In nominal terms, 28 countries saw their housing prices rise in the first quarter, while only six saw prices fall.
"However, when property prices are adjusted for inflation, the picture looks entirely different. Skyrocketing oil, food and commodity prices have pushed inflation up around the world," the property research firm said.
In April, the Global Property Guide noted that while Asian markets were still unaffected by the credit crunch, households might already start postponing their decision to purchase a new house. Many Asian economies such as the Philippines are also under inflationary pressures.
But local developers said the demand for properties is still high especially coming from the upper and middle sector.
"In fact, there is a big surge among buyers of condominium units because of their accessibility and convenience," said Carlos V. Chikiamco, SM Investments Corp. (SMIC) vice-president for real property.
Corazon P. Guidote, SMIC vice-president for investor relations, said market weakness would be too serious to hurt developers.
Elizabeth V. Sison, Anchor Land Holdings, Inc. assistant vice-president for sales, said the demand would continue, but developers should make sure that the properties are being sold to clients who can pay.
She said some property firms have already had to deal with delinquent buyers unable to pay.
"A developer should be more conscious of his market and should not insist on alternative strategies such as stretch payments just to sell a unit because there is no assurance that the buyer would be able to pay," Ms. Sison said.
Property analyst Bernard C. Aviñante of brokerage Wealth Securities said it is too soon to say that property demand would be slowing down.
"When you see prices going up, it would take time before this will have an impact on consumer spending," he said.
