Real estate experts have found no signs of a property market bubble in the Philippines following a recent gathering of industry players in Manila.
The Bangko Sentral ng Pilipinas meeting discussed major price changes in the real estate sector and equities market. A panel of experts debated whether the continued growth of the Philippine economy, which is expected to lead to increased values and returns, could cause a bubble in the Philippine property market and if signs were already emerging.
Claro Cordero Jr., Head of Research, Consulting and Valuation Advisory for Jones Lang LaSalle in the Philippines, was recently a member of the expert panel taking part in the Philippine Central Bank’s Environmental Scanning Exercise.
He said: “The detection of a real estate bubble is as controversial as the topic itself. A review of recent literature covering the topic revealed that detection is as challenging as halting the impact of a burst bubble.”
Without large price increases, the fundamental factors that caused the upward expectation or estimate of future property values have to be examined. Often, prices increase when there is too much positive expectation by investors in the market and economy, he explained.
“From 2009 to the first half of 2013, the Compound Annual Growth Rate (CAGR) of inflation-adjusted selling prices of preselling luxury residential condominium developments was estimated at around 8 percent, while the CAGR of capital values of existing high-mid/luxury residential condominium developments was estimated at around 3 percent within Metro Manila.”
The steady growth of cash payments sent home from Filipinos working abroad along with phenomenal growth of the offshoring and outsourcing industry has led to a growing demand for residential accommodation.
“As in the case for other markets, the detection of property bubbles in the Philippine property market remains a challenge for both the regulators and the market players themselves,” he concluded.
“As the economy gears up for sustained growth in the medium-term, the bigger challenge is to simulate an environment where market participants are guided by the right policy mix that will aid in the prevention of any looming property bubble and at the same time promote the long-term growth of the property market.”
This story was first published by OPP Connect and is reproduced as part of an editorial partnership between OPP Connect and PropertyGuru Group.
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