Real demand, not speculation, fuels property boom - April 28, 2007
Inquirer Money / Top Stories
http://business.inquirer.net/money/t…ticle_id=62959
Central banks allays fears of a repeat of ’97 crisis
Real demand, not speculation, fuels property boom
By Michelle Remo
Inquirer
Posted date: April 28, 2007
MANILA, Philippines — The central bank, Bangko Sentral ng Pilipinas (BSP), is allaying fears that the current real estate boom could be a prelude to another financial crisis similar to that experienced in 1997 by Southeast Asian countries, including the Philippines.
BSP Governor Amando Tetangco Jr. told reporters: “If one looks at the real property market now, the increase in lending to the sector is driven by actual demand. It is different from what happened in 1997, when the increase in property prices was due to speculative activities.”
Tetangco said that in 1997 many people were driven into buying real estate to make profits, on speculation that prices would go up.
The late-1990s drop in real estate prices led to losses by banks with heavy exposure in the property sector. The resulting weak demand for real estate left banks with large non-performing assets.
In today’s case, Tetangco said, the increase in demand for real estate is largely due to demand among families of overseas Filipino workers (OFWs).
“Their first priority is education of their children, and then investment in properties,” he noted. “The OFW market is now a major market as far as developers are concerned.”
The BSP earlier reported that the thrift banking industry’s investment and loan exposure in the real estate sector grew 26 percent to P76.06 billion at end-December 2006 from a year earlier.
Bankers say low interest rates encourage individuals and corporations alike to buy real estate for personal use or business expansion.
Corporations that have waited on the sidelines for the right time to expand have started pursuing their plans to take advantage of the record-low interest rates, bankers say. With INQUIRER.net