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Its in bad taste to revel in one’s success just
when your neighbor is down in the dumps.
But in the case of the
Philippines’ newfound property boom, the party simply cannot wait.
After all, it took the country nearly a decade to shake off the
debris from a financial crisis that left many real estate projects
unfinished and sent huge amounts of capital down the drain.
So while we should keep an eye on
the United States’ sub prime market debacle, we shouldn’t lose
sight of the potential of the local property sector. Those living
abroad sure aren’t taking their time and watching the boom from a
distance. In fact, a growing number of Filipinos living outside the
country, including overseas contract workers, are plowing their
savings into the local housing industry.
A look into the books of
blue-chip property firms like Megaworld would indicate that the bulk
of their growth is due to real estate sales, and only to a smaller
extent on the business process outsourcing craze.
This is why a number of property
developers have set up marketing units abroad, to benefit from the
renewed interest in the Philippine real estate sector. This interest
is only partly due to risk aversion, as investors shy away from the
troubled US market and seek safe havens abroad.
A greater part of the attraction
of the local property sector is the country’s sound economic
fundamentals. This is economese for low interest rates, easing
inflation, a strong currency, and improving government finances. The
Philippine real estate sector in particular is reaping the benefits
of a low interest-rate regime, thanks largely to easing inflation.
Before the government’s
bungling of its first-half fiscal position, benchmark rates as
measured by the yields on risk-free government bills and bonds, had
sunk to historic lows. This was after consumer prices rose to their
slowest in years, with inflation back in the low single-digits.
Combine that with strong
remittance inflows and you have the makings of a strong domestic
economy supported by robust consumer spending.
Dollar inflows boost the
country’s foreign-exchange hoard, which in turn helps bring down
inflation and with it interest rates.
Property companies are the first
to benefit from sliding interest rates, as this makes bank borrowing
cheaper. Indeed, a growing number of lenders are offering long-term
housing loans with fixed interest rates. State housing agencies
likewise plan to cut their loan charges.
It is a good time to buy a house
or condo, or refinance an existing loan, using other people’s
money.
This is why the Bangko Sentral ng
Pilipinas’ recent reduction in its overnight borrowing rate is
welcome news. In so far as it discourages banks from leaving their
excess funds with the BSP, the monetary loosening prods them to
increase lending to the public.
With easier access to bank
lending, which is still the main source of credit in this country,
the pace of economic activity quickens, creating more jobs, and
hopefully better-paying ones. Moreover, Filipinos, especially those
benefiting from remittances, can leverage on these flows and borrow
money for consumption or income-generating activities.
Having said the above, the recent
retreat in the US stock market, which has reverberated across Asia,
should be viewed with concern not because of any direct impact it
has on the Philippine economy and its job- and income-generating
capacity. But because an erosion of consumer confidence in the
world’s largest economy would take its toll in terms of spending
on all things the US imports, including the
Philippines’ digital signal
processors, wiring harnesses, garments, and electronics components
among other items that find their way on the shelves of Wal-Marts
and Sears stores across America.
Of course, a feeling that they
are worse off than before would cause Americans, including Fil-Americans,
to cut back on non-essential expenditures, which include that nice
vacation lodge along the Batangas coastline or on a hilltop in
scenic Tagaytay.
Its not just about sustaining
confidence in the Philippines, but also keeping foreigners’ and
overseas Filipinos’ confidence in their future economic condition.
And that is one important reason why we should prevent the revelry
from deluding us into complacency. Our neighbor’s woes may yet
befall us.
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