Analyst: Cebu a natural magnet for development

CEBU, Philippines – Despite always being at the tail end of the government’s priorities for infrastructure projects, the geographical location of Cebu has somehow made the province a natural magnet for development, a property analyst said.

Real estate expert Nicolas Pimentel said even with the influx of property developers in the province, Cebu is still far-fetched from being saturated.

"Cebu's real estate industry is amazingly following a unique growth path, and is not taking the same cyclic pattern we observed in developed cities," said Pimentel.

Pimentel said that the resiliency of Cebuanos may have influenced the industry’s growth trail because despite the seemingly limited land area in the island province, it still has a lot to offer for real estate growth.

If Cebu was caught up in the traditional real estate growth cycle, it could be nearing a bubble that could blow up anytime, however, Pimentel said even outside observers are surprised of how Cebu was able to sustain the property growth strength up until now, with rosy projections still profound.

"There are still opportunities for entrepreneurs who may want to enter the real estate development industry in Cebu," said Pimentel explaining that due to infrastructure constraints, such as traffic congestion, Cebu will see the creation of more integrated developments within the communities, wherein everything is already provided for, so people are encouraged to be contained in one place, rather than going to business districts and struggle with the worsening traffic situation.

While developmental opportunities are also going outside of the metropolis, the Metro Cebu area on the other hand will continue to see more   integrated development projects including pocket residential subdivisions, with commercial, leisure and health/fitness amenities.

"Every corner in Cebu has potential [for development]," said Pimentel, who is now doing consultancy services to real estate developers.

Metaphysically, Pimentel believes that the geographical location of Cebu, being in the center of the Philippines, somehow creates the magnet pull that everything passes through the island province.

Pimentel's sheer analysis of the Cebu real estate sector, also echoed the earlier assessment of economist Bernardo M. Villegas, of the University of Asia and the Pacific (UA&P), who dismissed the impressions that the Philippine real estate sector in general is on the brink of a bubble.

Villegas said the real estate industry had been following the higher growth rate in the past couple of years and is still expected to continue at least in the medium term, before it slows down.

Unlike other countries whose economies had been badly affected by real estate burst, the Philippines’ real estate growth has a unique "pathway" and a bubble is still unlikely to hit the sector even in the long term.

There's no risk of bubble because credit is very limited, he said. Bangko Sentral mg Pilipinas (BSP) is tight in their policies. Over-supply of high-end units on the other hand will not cause a bubble because buyers are the same families who mostly use cash for their property purchases.

What is happening now in the Philippines rather is that it is now in the state of real estate "correction."

A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It can be identified through rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline.