Published on December 24, 2013, Inquirer.net:
Written by Michelle V. Remo
The National Economic and Development Authority (Neda) has maintained that the Philippines, which has become one of the fastest growing Asian economies, is not facing threats of an asset price bubble.
Economic Planning Secretary Arsenio Balisacan, who is also director general of Neda, said the demand for real properties remained huge relative to the supply of office spaces and residential units.
“We are not seeing any bubble. In fact, there is still a significant housing backlog,” Balisacan said during the Neda’s yearend press briefing.
According to estimates, about 4 million housing units have yet to be established in order to fully meet the country’s need for shelter.
Balisacan acknowledged that construction has been one of the drivers of economic growth this year as evidenced by the construction of condominium units, residential villages and commercial buildings.
He said, however, that growth in construction was not reaching levels that could cause a bubble in asset prices.
Victor Abola, an economist at the University of Asia and the Pacific, supported the Neda’s view, saying property prices rose by about 5 percent this year, a pace he described as modest.
“Prices could have been going up substantially if there was a bubble,” Abola said in a press briefing Tuesday.
Earlier, the Bangko Sentral ng Pilipinas also denied that the Philippines was facing threats of an asset price bubble.
The BSP said growing sales of real properties was being boosted by actual demand for space rather than speculative demand.
The BSP said residential properties were being bought mostly by families and individuals who actually were residing in the units they bought rather than by people who were into the business of buying and selling properties.
Central bank officials said that immediately prior to the Asian financial crisis of 1997, when real properties were said to have manifested price bubbles, purchases of properties were boosted largely by speculative rather than actual demand.
Concerns that the Philippines could be facing an asset price bubble were anchored not only on the spike in construction activities but also on the country’s economic growth rate.
The Philippines grew by 6.8 percent last year and by 7.4 percent in the first three quarters of this year, becoming one of the fastest-growing economies in Asia. The country, however, has one of the highest poverty rates in the region at 25.2 percent as of 2012.