A leading U.K. organisation has said a bubble may be forming in the Philippines property market, although while the fast-increasing rate of household lending has raised alarms in both Thailand and Malaysia, it does not necessarily think it is problematic in the latter two countries.
The Centre for Economics and Business Research (CEBR) said in its quarterly report commissioned by the Institute of Chartered Accountants in England and Wales (ICAEW) titled Economic Insight: Southeast Asia, said: “Strong growth underpinned by low interest rates in the Philippines is stoking fears of a property bubble in Manila.
“Inflation is relatively low and economic policymakers are keen to maintain rapid growth; however, property prices in Manila’s financial district, already at a record high, are projected to rise 8 percent this year.”
CEBR also cited an International Monetary Fund (IMF) warning of a domestic asset price bubble, which includes real estate.
The think tank also noted how Southeast Asian countries have showed rising consumption, and over the past four years, the largest economies “have shown a clear trend of putting aside less as they spend more”.
Rising consumption, the report stated, highlights the risks of promoting lending.
It also noted a “striking similarity” in the present situation in Southeast Asia with what transpired during the 1997 Asian Financial Crisis.
In particular, it spotlighted on how investors have again been turning emerging markets, such as those in Southeast Asia, in search for higher yields, with interest rates in the region still better than those in advanced economies.
“A property bubble is often linked to a rise in household debt as it expands the collateral of would-be borrowers, a pattern evident in the U.S. and U.K. property markets in the run-up to the global financial crisis,” the report said.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg