CEBU, Philippines – An oversupply of high-end residential products may happen in the Philippine market in the next three to five years, however an economist said such development will not make a dent on the stability of property demand in the country.
Economist Bernardo M. Villegas downplayed forecasts of foreign real estate analysts who have said that the Philippine property market is on the brink of a bubble, like United States and Japan, among other countries.
Villegas said the real estate market is on a consistent growth track in the past couple of years and in fact is expected to grow further a couple more years before it slows down. Unlike the other countries that have been badly affected by a real estate burst, the Philippines’ real estate growth has a unique "pathway" and a bubble is still unlikely.
Villegas, who was in Cebu yesterday as one of the guest speakers of the economic briefing hosted by the Cebu Business Club, said that for the middle class market alone, the demand rate proves no glut is going to happen anytime soon.
Obviously, oversupply of residential units will happen shortly in the next three to five years, but this will not at all affect the entire health of the real estate industry in the Philippines.
The P20 million to P30 million residential units supply may suffer from limited demand, but this will not be a cause of alarm, as this is only just a fraction of the entire market.
"Some ignorant American [real estate] analysts are saying that the Philippines is facing threats, they don't know what they are talking about," Villegas said.
There's no risk of bubble because credit is very limited, he said. Bangko Sentral mg Pilipinas is tight with their policies. Over-supply in the high-end units on the other hand will not cause a bubble because buyers are the same families that do not use credit to purchase the units, but cash.
What is happening now in the Philippines is that it is now in the state of real estate "correction."
"Those that are focusing on the P1 million to P5 million market will continue to grow as there are two million units shortage for this market," Villegas said.
A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It can be identified through rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline.