As the Philippine property market continues to grow, the BSP continues to monitor the situation. I wonder where are they in developing a pricing index.
From BusinessWorld Philippines
April 27, 2014
BSP watchful of asset bubbles
MACTAN, CEBU — The Bangko Sentral ng Pilipinas (BSP) remains watchful of the formation of asset bubbles and is ready to take measures as needed, a senior official said.
“We’ve always said that there is no overstretching in asset prices and that there is no evidence that there is an imbalance in the financial system with respect to the real estate sector and that is still true,” central bank Deputy Governor Diwa C. Guinigundo told reporters late on Friday.
“But we should still continue monitoring that … Lending to the real estate sector bears closer monitoring,” he said.
Mr. Guinigundo noted that there were continuing upside risks due to the possibility of increases in food, oil and utility rates, as well as strong liquidity growth.
With interest rates continuing to be at record lows — albeit with “narrower’ room to keep these steady — robust demand has spurred growth in the property sector.
The growth pace of credit channeled to the real estate sector, Mr. Guinigundo noted, has steadily gone up, to around 12% in 2009 and 2010 and about 25% in 2011. As of 2013, he said, this has slowed slightly to 22%.
“Today, while there is no evidence of over stretching of asset prices as far as the real estate sector is concerned, if you will have over 20%, 30%, or 25% growth, it also comes to a point when it becomes risky,” he said.
“That’s why preemptive measures are supposed to be put in place, and we have put in place a number of these measures.”
Real estate credit as a percentage of the economy, added Mr. Guinigundo, has likewise crept up, hitting at 6.1% in 2013 from the 4% recorded in 2010, 4.6% in 2011, and 5.5% in 2012.
“This bears close watching and we are doing that … If the numbers suggest that further monetary policy action is necessary, we will not hesitate and we will adjust accordingly whether it’s the policy rate, the SDA (special deposit account) rate, or take macroprudential measures,” he said.
“If more and more investments are going to the real estate sector, then it is necessary that macroprudential measures have to be put in place,” Mr. Guinigundo noted, adding that such could include bringing down the maximum ceiling on banks’ real estate exposure. —Bettina Faye V. Roc
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