As the country’s property sector reaches unprecedented highs, speculation surrounding a potential bubble is rife. In an article recently published by Business World, Corporate and Property Turnaround Advisor Enrique M. Soriano explained that a real еstatе bubble similar to what happened from 2007 to 2010 is unlikely to happen in the near future.
Soriano said that he is working with financial institutions to track the performances of 18 to 22 projects developed by small to mid-size companies to avert bank loan defaults and foreclosures. “We are monitoring their performances almost every week in collaboration with banks. I always tell them to make sure that they do it right this time, make sure their lending policies are very strict.”
Soriano enumerates the factors that ensure the stability of the property industry at present.
- Banks have established and maintained tightened credit standards, having learned from the 2007-2010 crisis.
- The country’s economic fundamentals and business confidence sustained by the current administration. With a 2012 GDP growth 6.6%, surpassing forecasts and backed by foreign direct investments reaching a 16-year high, inflation and bank lending rates are said to be on a downtrend.
- 80% of the industry’s share is controlled by the Philippine’s top 10 developers and that demand remains high, supported by the purchasing power of OFWs and the steady rise of the BPO sector.
- The demand for real еstatе is attributed to a housing backlog 3.9 million units, as well unexplored markets neighboring Metro Manila and the region. Cebu City, which is swiftly rising as a commercial business and residential district, only had 7,000 units under construction as of last year compared to Metro Manila’s 50,000 for medium-rise and high-rise developments.
Source: “Property Projects tracked to avert crisis”, Marites S. Villamor, Business World, March 21, 2013