[ manilastandardtoday.com ]
Bangko Sentral Deputy Governor Diwa
Guinigundo offers insights on the latest phenomenon sweeping Metro Manila, the
property boom.
Guinigundo, in trying to make sense of
all the construction activities happening simultaneously in town, assures the
growth of the real estate sector is at a healthy pace, but cautions against the
risks of widening vacancy rates.
He says reports from Colliers
International Research point to increasing capital and rental values, driven by
demand for office space from the offshoring and outsourcing industry and
expatriate demand for luxury three-bedroom units amid limited supply,
particularly in the Makati central business district.
“On the other hand, the supply of
high-rise residential condominium units has continued to surge across Metro
Manila, but most of these are in the middle-income segment and are broadly
located outside the major business districts,” he says.
Guinigundo says that based on the
number of licenses to sell issued by the Housing and Land Use Regulatory Board
and the estimated demand for housing units for the period 2007-2010, the new
supply of housing units are still not enough to satisfy the estimated housing
demand in the country.
No asset price bubbles
“However, the rise in vacancy rates in
certain market segments in the real estate sector necessitates close
monitoring,” he warns.
The Bangko Sentral official in charge
of monetary stability sector says that despite the recent rise in capital and
rental values for office and luxury residential segments in Makati, “there
appears to be no clear signs of an asset price bubble as the general upward
shift in property sector indicators remained driven by fundamental factors such
as the continued expansion of the O&O industry which fuels demand for
office space and residential units.”
He notes that the capital and rental
values of office space and residential units in Makati CBD remain below the
peak levels reached in 2008. Meanwhile, the price-to-rent ratios for both the
office and luxury residential segments have fallen below trend of late as
rental values have grown faster than capital values, he adds.
“We note that there has been no
dramatic increase in the prices of both office spaces and luxury residential
units. However, rental values for the office segment went up due to continued
strong demand from the O&O industry amid limited office space, particularly
in the Makati CBD,” he says.
“Similarly, the upward trend of rental
values for the luxury residential segment was due to limited availability of
luxury three-bedroom units,” he adds.
Macroprudential measures
Guinigundo says Bangko Sentral has
existing macroprudential regulations in the Philippines to protect the
industry, such as the statutory limit of 20 percent on the share of real estate
loans to banks’ total loan portfolio, maximum loan-to-value ratios for real
estate collaterals, and statutory loan limits to single entities or large
borrowers.
These measures, he says, have helped
make the economy less prone to asset price escalations. The enforcement of the
rent control law also helped limit the undue increase in real estate prices
while the law on real estate investment trust has helped temper the boom in
real estate activity.
He says banks remain compliant with
the real estate loan exposure limit. “In spite of the continued strong growth
of real estate loans, the combined universal, commercial, and thrift banks’
exposure to real estate loans reached only 15.2 percent of their total loan
portfolio as of end-March 2012,” he says.
Contribution of real estate
“The BSP recognizes that the real
estate sector is a key contributor to the economy, with the sector accounting
for about 10.7 percent of the country’s real GDP in 2011. The sector, likewise,
plays an important role in the economy with its forward and backward linkages
with other sectors, particularly with the housing and construction sectors,”
says Guinigundo.
“For this reason, the BSP continues to
pay close attention to developments in the real estate sector, including price
trends as well as the growth of credit to the sector, since the overall
activity of the sector has broader implications for the banking system and the economy
as a whole,” he adds.
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