What bubble? Real estate stays strong, experts say

The Metro Manila property scene has been buzzing with reports of a significant amount of unsold residential units as well as high vacancy rates in the office market.

- CATHERINE TALAVERA

One can't help but wonder: is a real estate bubble happening or forming? Property experts beg to differ.

"Around 70,000 unsold residential inventory, mostly condominium units, in Metro Manila can really scare people and can fan the flames of a possible residential real estate bubble. Computationally, this will take around six years to sell," Lobien Realty Group Inc. CEO Sheila Lobien told The STAR.

"However, the country's residential real estate fundamentals are strong enough to ward off any talk of a residential real estate bubble in Metro Manila. Lobien Realty Group sees there is no or very nil possibility of a residential real estate bubble in Metro Manila," she added.

What is a housing bubble?

A housing bubble refers to a temporary period where housing prices are over-valued and where there is rampant speculation.

Santos Knight Frank director of consultancy Lovelle Taleon explained that a housing bubble typically forms when there is an abundant supply of pre-selling units, leading to market oversaturation where supply significantly exceeds demand.

“This scenario is often exacerbated when investors begin exiting the Philippine market, divesting their assets and liquidating properties. High interest rates also contribute to this issue, as they make loans and funding more difficult to secure, further dampening demand,” Taleon told The STAR.

She added that declining rental yields – where property prices outpace income growth – and a rise in non-performing loans, which indicates borrowers struggling to meet repayments, are clear warning signs of a bubble in the making.

“When a bubble is about to burst, the most significant indicator is a rapid increase in property values followed by a sudden sharp decline,” Taleon said.

No en masse sale of properties