Banks and real estate developers are now more careful in funding and setting up new projects, with players from both industries well aware of the potential damage excessive risk-taking may cause.
Macroprudential measures imposed by financial regulators also help keep banks and home and office builders cautious, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo told reporters.
“They claim that they build towers one at a time, increased the equity shares of clients, and started to rely on internal funds for their operations,” Guinigundo said of local property developers.
“For commercial establishments, the robust economic tempo has generated great interest from investors and their corresponding demand for commercial space has been reportedly shooting up,” he said.
His statements come amid warnings by credit rater Fitch on possible risks from the property sector. Private sector credit growth has moderated from 19.9 percent at the end of 2014 to 14.1 percent in June 2015, but still growing at a brisk pace, Fitch said.
The firm added the lack of data on property prices and affordability indicators make it difficult to assess the effect of credit growth on the real estate market.
At the moment, the central bank itself relies mainly on data from private sector consultants. Data published by Colliers International show average land values in the Makati Central Business District have risen by more than 50 percent since the end of 2012.
Fitch, however, admitted real demand for homes and offices remained strong. “Low vacancy rates and strong growth in rents suggest some fundamental support for current price levels.”
To address this lack of reliable data, the BSP earlier this year started collecting information from construction material sellers, home builders and banks for the creation of a Residential Real Estate Price Index (RREPI).
RREPI would be the first attempt by any government agency to measure on a wide scale property prices in the Philippines.
Amid efforts to keep a closer watch on the property sector, Guinigundo said the BSP still sees current risks as limited. “The risks of asset price inflation appear manageable and have in fact been addressed by a number of macroprudential measures,” he said.
“Builders and developers have pitched their development projects on the demands of the new evolving urban lifestyle of maintaining condo units in the central business areas during the week and going back to their home base on weekends due to traffic congestion and workplace pressure,” he added.