MANILA, Philippines—The Bangko Sentral ng Pilipinas seeks to engage other regulatory bodies in addressing potential risks of a price bubble in the real estate sector, acknowledging that threats of excessive credit extension could be posed not only by banks but also by property developers.
BSP Deputy Governor Nestor Espenilla Jr. said the central bank was set to bring up the issue of risks of an asset price bubble to the Financial Sector Forum (FSF), which is composed of various government agencies that regulate members of the financial sector.
He said better coordination among members of the FSF—composed of the BSP, the Department of Finance and the Securities and Exchange Commission—would help plug any regulatory loopholes to prevent prevent a price bubble in the property sector.
“The BSP can use inter-regulator coordination arrangements through the FSF,” Espenilla told the Inquirer.
Concerns of an asset price bubble in the real estate sector were raised amid the perceived rise in “shadow banking” activities in the country.
Shadow banking involves financial activities, mainly lending, undertaken by nonbanks and entities not regulated by the BSP.
As far as addressing risks of an asset price bubble is concerned, analysts said, the government should closely monitor not only credit activities by banks but also by nonbanks. They cited the growing lending activities by real estate developers that extend loans to individuals buying condominium units and other residential units from them.
The BSP said that based on preliminary assessment, risks of an asset price bubble in the country remained insignificant but it acknowledged the need for close monitoring of lending activities.
The BSP said that besides bank lending, shadow banking activities had to be given closer attention.
Rising household incomes, which are driven partly by remittances from the more than 10 million Filipinos working overseas and the rising employment in the business process outsourcing (BPO) sector, was credited for boosting demand for real properties over the last few years.
Economists, however, suspected that the growing demand for real properties in the Philippines could also be driven by foreign investments in housing. They noted that real estate regulations in neighboring countries have significantly tightened, making the Philippines vulnerable to inflows of speculative real estate investments.—Michelle V. Remo