There may be a glut in the supply of high-end residential products in the country in the next three to five years but this trend won’t threaten the real estate industry.
Economist Bernardo Villegas gave this forecast on the real estate industry during last Monday’s economic briefing.
Villegas, a professor at the University of Asia and the Pacific, said that the real estate industry remains to be among the key industries of the country that will continue to see growth and investments.
Villegas said there were some foreign real estate analysts who wrote reports that the Philippine property market is on the brink of a bubble similar to what happened in the United States and Japan, which in his opinion is a case of wrong analysis.
“I would say the high-end products are likely to have an oversupply in three to five years but the demand for other products in the lower market segment will continue to grow,” he said.
The reason for this projected oversupply is that the market is very limited with the same families or groups buying the products based on speculation.
“Soon they will realize that there is an oversupply and they will start selling these units again,” he said.
These units are those pegged at the P20 million to P30 million price range.
The reason why Villegas said a bubble is not likely to happen in Cebu is that credit is limited in the country with the Bangko Sentral ng Pilipinas being very tight with their credit policies.
“Unlike in America where people have easy access to credit and buy properties through loans so when the economy slowed down, most of these loans were not paid and properties end up idle and unsold,” he said.
An oversupply in the high-end market is likely because the buyers usually pay in cash.
Villegas said the real estate market has been consistently growing in the past couple of years and is expected to continue to grow further for a couple more years before it slows down.
He said the real estate boom is a result of the improving economy especially in key growth areas in the country like Cebu.
The expansion of the middle class and economic growth in Cebu is fueling demand for real estate properties especially those within the P1 million to P5 million range.