Property expert says no real estate bubble in Phl

CEBU, Philippines - Minor, insignificant fizzes are eyed in selected areas in Metro Manila, but the property scenario here in Cebu and the country as a whole is not exhibiting signs of a bubble yet as economic fundamentals remain strong.

This according to property industry icon, writer and columnist Enrique Soriano III during an economic briefing on the state of Philippine property market, held Monday evening at the Cebu City Marriott Hotel.

A real estate or property bubble, more commonly termed a housing bubble for residential markets, is a type of economic bubble that occurs periodically in local or global real estate markets.

It is characterized by rapid increases in valuations of real property, such as housing, until they reach unsustainable levels and then decline.

Soriano, who has been working in the industry for 24 years now, said the boom is mainly driven by positive economic growth, rising affluence and investment appetite that fuels property sales.

The growing asset management and development opportunity for recurring income in budget hotel and service apartments and community retail format industries also contributed to these positive trends, he added.

He said that 80 percent of the market is controlled by experienced players, a reason why property business somehow remains to be relatively getting better, away from potential economic downturns posed by industry greenhorns.

Favorable outlook

With the economy forecasted to grow steady at a 6 percent rate and remittances from overseas Filipino workers, who comprise a big chunk of the total real estate demand, projected to reach $24 billion this year, the industry is expected to be more promising in 2013.

Meanwhile, consumer sentiment improved in quarter 4 (Q4) of 2012 as the overall confidence index climbed to -10.4 percent from -13.3 percent in Q3. This was the second highest reading since the first nationwide survey was fielded in Q1 of 2007.

According to Soriano, this means that the number of households with an optimistic outlook increased but they continued to be outnumbered by those who think otherwise.

Respondents attributed the higher confidence to better governance by the current administration, increased investment inflows and more jobs as a result of more working family members.

Challenges

A big chunk of Cebu’s real estate market, however, fairly stays untapped until now.

“Cebu is not heated as what it seems it is, unlike in Manila where there is street fighting in the property market,” he stressed.

He presented data that showed around 550,000 sq. meters of usable office stock in the Cebu area alone, particularly in Cebu Business and I.T. Parks, still remain idle.

An overall 2.83 percent average office vacancy was noted in Cebu for the year ending 2012 with Cebu Business Park hitting a vacancy rate of 3.13; Cebu I.T. Park, 1.44; and uptown Cebu area, 5.87.

Soriano also warned that several factors such as exposure to debt, unchecked high prices and a slide in our gross domestic product exacerbated by a worsening global gloom affecting OFWs may result to a worst case scenario for the property industry.

“But I don’t see this as a threat. We’re positive that if such case occurs, corrective measures come handy and we’re optimistic this could not lead to a bubble, if any, bursting.”

He said that the lack of real support from the global economy and less inclusive growth inflows in 2012 should encourage government and private sectors to engage more in infrastructural and manufacturing ventures. /JOB (FREEMAN)