Price asset bubbles does not exists in the Philippines at this point, because real demand from expatriates, overseas Filipinos and the business process outsourcing industry is driving both property
demand and sales, Bangko Sentral ng Pilipinas Gov. Amando Tetangco Jr. said Friday.
The demand for property assets reflects higher incomes among BPO workers, Filipinos abroad and the growing numbers of young professionals on the home from, the central bank chief told a forum organized by the Foreign Correspondents Association of the Philippines.
“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 province only on weekends,” Tetangco noted.
With real demand driving sales, the dangers of prices going on a free fall remains a remote possibility, according to the the central bank official.
“We do not yet see asset bubbles forming,” Tetangco said.
“But developments bear watching. Our assessments show that demand for real property assets continues to be based on fundamentals... there is real demand from OFWs, expatriates, and the BPO sector,” he added.
The central bank chief then went off to defend the policy stance in place as adopted by monetary authorities, saying the thought that Bangko Sentral is driving credit and asset bubble under a low interest rate rate regime is “narrow.”
Bangko Sentral continues to keep policy rates at record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending and 2 percent for special deposit accounts.
“The BSP has been criticized as fueling a credit and asset bubble through low interest rates... I would say, this view is rather narrow,” Tetangco noted.
“The BSP has reduced its policy rates to support growth to the extent the inflation outlook has allowed it to.
“In addition, we have deployed macroprudential measures during the early stages of strong capital inflows and even earlier to help tighten regulatory screws,” he added.
Other macroprudential measures in place are limits on real estate lending, caps on open foreign exchange positions, and higher risk weight for foreign exchange futures transactions.
“The 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. – VS, GMA News