The Bangko Sentral ng Pilipinas (BSP) said that it does not see signs of bubble formation despite the continued demand for real property assets.
“We do not yet see asset bubbles forming. But developments bear watching,” BSP Governor Amando Tetangco Jr. said in the recently concluded Foreign Correspondents Association of the Philippines Media Forum. According to Tetangco, the central bank’s assessments showed that demand for real property assets continues to be based on fundamentals, that there is “real demand” from overseas Filipino workers, expatriates and the business process outsourcing sector.
“The demand is also indicative of the increase in the incomes of these sectors, as well as the growing young professional segment of the economy,” he stated.
The central bank governor also noted that the changing lifestyle of these workers has led to an increase in requirements for housing near the workplace during the week, as they go home to the provinces on weekends. Furthermore, Tetangco said that the BSP has been “criticized” for fueling a credit and asset bubble through low interest rates.
“I would say, this view is rather narrow. The BSP has reduced its policy rates to support growth to the extent the inflation outlook has allowed it to,” he said.
Tetangco explained that the macroprudential measures have been deployed during the early stages of strong capital inflows and even earlier to help tighten regulatory screws—which include concentration limits on real estate lending, limits on open foreign exchange positions, and higher risk weight for nondeliverable forwards transactions.
“BSP is mindful that there are many moving parts to the economic equation, and we will always consider the financial stability implications of our policy actions,” he said.