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Philippine Property Outlook for 2013

Based on what I have gathered from news and analyses over the internet as of this writing, the outlook for Philippine real estate this 2013 is very positive. I have gathered the important news regarding the Philippines and real estate in one piece so there’s no need to go through the internet clutter – just follow the links to read the sources.

No one has a crystal ball, and there will always be naysayers, but we can base our outlook on facts as will be discussed below.

Philippine performance in general

We are fortunate that the country’s leaders today are very capable and competent in steering the Philippines to its current status as an international rising star. The world has recognized the able leadership of our Secretary of Finance Mr. Cesar V. Purisima, who was given the honor of being Finance Minister of the Year by Euromoney. Likewise, Bangko Sentral ng Pilipinas (BSP) Governor Mr. Amando Tetangco was named as one of the world’s best central bankers in 2012 by Global Finance Magazine.

To date, the Philippines is just a half-step below investment grade. An article in dated Dec. 20, 2012 cited that Standard & Poor’s, an international credit rating agency, raised the outlook on the nation’s debt to positive, on the back of improved governance and public finances. S&P may even grant the Philippines’ first investment grade rating in 2013. Note that Moody’s, another international credit rating agency, just raised its rating for the Philippines at the end of October 2012.

What does it mean to be investment grade exactly, and why does the Philippines aspire to get it? Investment grade basically refers to the likelihood that a country will default on its debts. The higher the investment grade, the higher the level of investor confidence (whether local or foreign) in the Philippines. Furthermore, interest rates on the country’s outstanding debts may be lower due to an investment grade rating, and the corresponding decrease in interest would translate to significant savings which may be used for various projects.

On another note, according to an article, International Monetary Fund (IMF) managing director Christine Lagarde, who visited the Philippines just this November 2012, stated that the Philippines is the only country in the world for which the IMF has upgraded its economic growth forecast for 2012. Isn’t that amazing?

Recently, too, the government cut its outstanding foreign debt by $1.5B. Last June 2012, the Philippines lent $1B to the IMF. In December 2006, the Philippines has already fully paid its debt to the IMF. Remittances remain strong and seen to hit $24B by year-end 2012 according to another article.

In an article in, dated December 2012, Ruchir Sharma, the head of emerging-market equities and global macro at Morgan Stanley Investment Management, said that the Philippines is one of the breakout nations to watch. The Philippines was also tagged as Asia’s Greatest Hope in an article by Ila Halai of Inspiratia – this article enumerated the Public-Private Partnership (PPP) projects in the pipeline, as well as the local and foreign investors and transaction advisors interested in them. Global giant HSBC already forecasted as early as January 2012 that by 2050, the Philippines will leapfrog to be the 16th largest economy by 2050. Third quarter 2012 Gross Domestic Product (GDP) growth reached a record 7.1%, as discussed in a Financial Times blog dated November 28, 2012.

Improvements in different areas are too many to mention one by one. And they’re all happening in hyper speed – just this December 2012, the Reproductive Health (RH) Bill was passed, as well as the Sin Tax Bill, to name two. Eight PPP projects, mostly on infrastructure, have been rolled out. And so on. The BIR even posted the implementing rules and regulations for the Sin Tax law, Revenue Regulations (RR) No. 17-2012 today, Dec. 28, 2012. A copy of the Sin Tax Law, Republic Act (R.A.) No. 10353, can be accessed here.

I can feel that people in government now are really working hard and the positive effects are now starting to be felt. Some may argue, though, that the Philippines’ growth does not include the ordinary Filipino. You know what, the National Economic Development Authority has been studying this and efforts are being done to make the growth “inclusive,” ensuring that the ordinary Filipino will feel the benefits.

What are the real estate trends? Is there a real estate bubble forming? wrote about the sunrise sectors of 2013, and as expected, one of them is the real estate and construction sectors.

But what about the dreaded real estate bubble? Mr. Ramon C.F. Cuervo III, a respected real estate consultant, discussed it excellently in his post at, with insights culled from the talks at the University of Asia and the Pacific last October 23, 2012 entitled “Is a bubble in the Philippine Real Estate Sector Developing?”. Mr. Cuervo is my idol in real estate – I really learn a lot from his posts so I strongly urge everyone to read his blog from the latest post moving backwards (I am serious).

As discussed by Mr. Cuervo in his post, the discussion of Dr. Winston Padojinog, an economist from the University of Asia & the Pacific (UA&P), suggested that a bubble is indeed forming in the higher-end residential market segment. The basis was his research team’s study on housing supply and demand as discussed in an article in the website of renowned economist Dr. Bernardo Villegas. According to the statistics cited in the said article, the low-cost, economic and socialized housing segments experience shortages in most years from 2001 to 2011, while the high-end and mid-income market have some surplus units.  It is good to be aware of these statistics when making your investments.

Mr. Cuervo also discussed in his blog the talk of Mr. David Leechiu, Regional Director and Country Manager of Jones Lang LaSalle. It is projected that the Business Process Outsourcing (BPO) industry will continue to grow until 2015 and this will support office space demand averaging about 400,000 square meters per year, and this demand will be met by the current and pipeline supply. CB Richard Ellis also has its own forecast. Definitely, one of the drivers of Philippine growth is the BPO industry so these figures are well-supported.

Renowned economist Dr. Bernardo Villegas also wrote about the perceived real estate bubble in his website. Here is a portion of his article which I feel is very important:

“…let me just summarize my current views about residential housing in the National Capital region, especially in Makati, Mandaluyong, Ortigas, Quezon City and other suburbs of Metro Manila.  After studying the findings of some of my colleagues at the University of Asia  and the Pacific concerning the five segments of residential housing, i.e. socialized housing, economic housing, low-cost housing, mid-level housing and high-end housing, the probability of an oversupply three or five years down the road is high only in the last segment, high-end housing in which the majority of  the buyers are purchasing units for investments or speculation and are not the ones occupying the units when they are built.  This is not the case with the other segments, especially the units selling from one to five million pesos.  The ones buying are those actually occupying the units once built, especially among the families of OFWs, the BPO workers or middle-income families with children studying in the universities in the urban centers of Metro Manila. In contrast, the units that cost P15 million or above are usually for rent.  But  there are just not enough rich Filipinos or expats who can afford to rent these units in the next three to five years.” (emphasis mine)

It is worth noting that property giant Ayala Land has set up subsidiaries to serve the low-end real estate market, namely Amaia and Bella Vita. Low-cost and socialized housing have tax incentives and are included in the Philippines’ 2012 Investment Priorities Plan. Both the government and the private sector are continuously improving and using as bases the findings culled from different studies.

Of interest to me too in particular are the projections of Mr. J. J. Reyes of American Institutes in Hawaii that a growth area in real estate is that catering to Continuing Care Retirement Communities (CCRCs) (also known as retirement villages). Mr. Cuervo and Mr. Raphael Torralba also have an insightful article on the retirement real estate sector, culled from talks at the Retirement and Healthcare Summit held last June 26, 2012. You can actually download the pdf copies of the talks here, just follow the tabs (Pre-Event and Sessions 1 to 4). With the Philippines’ excellent medical professionals, medical tourism and retirement villages are indeed bright prospects. I like the suggestion of having long-term leases instead of selling the properties outright to the retirees – I think this is a win-win situation for both the investor and the retiree. If a developer would be developing a retirement village near a good medical facility and offer it to investors condotel-style, I think it would be a very good investment.

Real estate bubble from the point of view of Fil-Americans

Joe Salcedo, a Fil-American, has written about a looming crisis in Philippine real estate in and also co-wrote, with Ian Mariano, another Fil-American, an Open Letter to the Philippine President on this matter. I emailed Ian personally and ascertained that their intentions in publishing these articles are sincere, and that the issues they raised are legitimate concerns – probably at the back of the minds of Filipinos both here and abroad. You may want to follow the links, read their position, and leave your comments below.  Let’s have a healthy discussion. I know we have a lot of readers who can give their inputs on this very hot topic  which is the real estate bubble.

Personally, I feel that there is no need to “sound an alarm” and sow fear and anxiety.  I am not a government official but I actually felt insulted that they implied that government officials are not aware of what happened in the past and in other countries, and that the Philippines is not prepared or preparing for a  downturn. We have highly intelligent and competent people in government and I have full faith that they are doing their job and have the Philippines’ best interests at heart. I am very happy with the performance of our leaders and of our country – they deserve appreciation and more encouragement to keep up their good work.

That said, I have to emphasize – yes, real estate is cyclical. There will be ups and downs – this is a given. Is there anybody here who doesn’t believe this is so?

Yes, there are issues that may lead to the popping of an asset bubble – and without anybody telling them, government officials have addressed and are continually addressing them.

Let’s discuss the issues that could cause a real estate bubble as raised in the Open Letter one by one and my position on each issue, so we would have a balanced view:

Possible causes of a real estate bubble in the Philippines

(based on the Open Letter)

What the Philippines is doing(based on my research)
The government cannot save the banks like how the U.S. managed to do so, pouring hundreds of billions of dollars  in bail outs. The Philippines is not like the US. As early as 2008, the BSP released Circular No. 600 Series of 2008 which states that real estate-related loans should not exceed 20% of banks’ loan portfolio.The BSP issued Memorandum No. M-2012-046 dated Sept. 21, 2012 requiring banks to submit an Expanded Report on Real Estate Exposures  to monitor banks’ compliance with BSP regulations. The BSP later issued Memorandum No. M-2012-046 dated December 18, 2012 providing for Guidelines on the Electronic Submission of the Expanded Report on Real Estate Exposures for easier compliance and monitoring.
“Lending is loose ”American banks stopped doing their due diligence and just lent money to almost everyone who was willing to lie on their income. Philippine banks have credit checking and other mechanisms in place before lending. Perhaps Joe and Ian have not yet obtained a loan from Philippine banks. I actually don’t get the reference link they provided as this does not support their argument at all. Philippine banks generally don’t give NINJA loans (No income, no job, no assets) like what happened in the US.

As a guide to those using contract to sell financing, the BSP issued on November 27, 2012, Industry Reference Practices on Sound Contract to Sell Financing Circular Letter No. CL-2012-084.

People earned higher incomes but they are also saving less for the rainy days. This is not true. In a articledated Dec. 27, 2012, it was said that

“Data from the BSP showed that Filipino household’s savings increased by 6.3% to P909.8 billion, making it the prime savings driver in the economy.

Overall domestic savings increased by 6.8% to P1.85 trillion this year. This includes savings made by households, government, non-financial corporations, and financial corporations.”

The Philippines’ growth is not sustainable, as there is no “total factor productivity” First of all, the article they are citing is dated April 2012, not November 2012. The said study was probably used as basis to convene concerned sectors in the Inception Workshop on the Formulation of the Manufacturing Industry Roadmap on October 19, 2012, convened by The Philippine Institute for Development Studies (PIDS) and the Department of Trade Industry Board of Investments (DTI-BOI). Thus, measures are being done to address this issue.The National Economic and Development Authority has prepared the Philippine Development Plan 2011-2016 outlining what need to be done for sustained growth. A short video can be found below:

“Hot money” is flowing now into developing Asian countries like the Philippines, a bulk of which is invested on real estate. First of all, I do not know the basis for their assertion that a bulk of the “hot money” is invested in real estate.  By the nature of “hot money”, it may be pulled out easily, so I cannot see how this may be true in the case of real estate unless they are invested in listed property firms. Even then, the property firm should be aware that such hot money may be pulled out anytime.

Just today, Dec. 28, 2012, a article stated that the BSP has released a cap on capital inflows that would minimize speculative flow but not curtail real investments.  I am not competent, though to discuss this at length as I am not an economist.  These only show that the BSP is very much aware of this issue and, after studying the different options available to manage it, has acted swiftly.

Donald Trump has put his name on Trump Tower,  with units worth up to $1.86 million each(implying that condos are overpriced) Only someone who is not from the Philippines would treat the Trump Tower as representative of Philippine condominium sales. This is very misleading.
The Philippines might suffer the same fate as Spain I will quote again from the article of renowned economist Dr. Bernardo Villegas dated November 15, 2012:

“Having said that, I do not expect a bubble as Japan witnessed in the 1990s, Thailand in the financial crisis of 1997, and the U.S. and Spain during the Great Recession.  The buyers of the expensive units are not highly leveraged.  In fact, there was a recent report that bank lending to real estate is still below the maximum limit.  What we will see is a slow down three years from now (call it a bust) as developers realize that they have overbuilt and postpone further expansion projects, especially in the Metro Manila area.  I don’t see a similar bust in such urban areas as Cebu and Davao.  Developers are just beginning their feverish construction activities in these secondary cities.” (emphasis mine)

I  also read the article they quoted which discusses the case of Spain and I cannot see how it the same as the case of the Philippines.


The underlying reasons for the collapse of other countries’ markets are not on all fours with what’s happening in the Philippines. In my opinion, it’s like comparing apples and oranges – they are simply not the same. Just because another country’s real estate market collapsed, or just because the same country’s real estate market collapsed in the past, doesn’t mean that it will happen again, specially if the reasons for the previous collapse are not present anymore.

On another note, in the future, when the normal downturn comes around (and probably for reasons other than what the naysayers have trumpeted), I don’t ever want to hear people proudly say: “I predicted that X years ago! See, I was right!”. Yes, let’s be prudent and cautious, but let’s not stop ourselves from being happy about what is really happening and is good for the country.

At the end of the day, we should all be aware of the risks in real estate investing. Like the stock market, real estate has cycles too. All types of investing are subject to risk – the only answer to this is risk management. I am confident that government officials are doing their best to push this country forward and minimize and manage the concomitant risks to real estate investing.

Whatever happened to Philippine REIT?

Republic Act (R.A.) No. 9856 or the Real Estate Investment Trust (REIT) was made into law in 2010 but it was only in 2011 when the Bureau of Internal Revenue (BIR) released its implementing rules and regulations – Revenue Regulations (RR) No. 13-2011 dated July 25, 2011. Nothing has happened since then. The deadlock is mainly due to the percentage made available to the public – the private sector wants to make it lower so they can have control over the company, while the BIR wants its higher so that there will be more public participation. The BIR also forecasts lower tax collection and this is not something they are willing to approve. Many are pushing for REITs as they say they are very much alive in other countries. I don’t think that the BIR or the private sector would budge, though, so I believe that this deadlock will remain indefinitely.

Infrastructure development

The Public-Private Partnership Center’s website and facebook page (which is more updated) are excellent sources of up-to-date information on PPP projects. The following are the PPP projects to date:

  • $46.6 million Daang Hari-SLEX Link Road project was awarded to Ayala Corp. last year.
  • $389 million School Infrastructure Project Phase I, which was awarded to the consortiums of Citicore Holdings Investment Inc.-Megawide Construction Corp. Inc. and BF Corp.-Riverbanks Development Corporation.
  • $377.6 million NAIA Expressway Phase II Project,
  • $1.25 billion LRT Line 1 Cavite Extension and Operations and Maintenance Project
  • $135.5 million Modernization of the Philippine Orthopedic Center
  • PhP 1.72 billion Single Ticketing System for LRT-1, LRT-2, MRT-3
  • PhP 1.155 billion Hydro-electric power project involving the rehabilitation, operation and maintenance (ROM) of the MWSS-owned auxiliary turbines 4 and 5 installed in the Angat Hydro-electric Power Plant (AHEPP) Complex in San Lorenzo, Norzagaray, Bulacan.
  • $504.8 million Mactan-Cebu International Airport

Infrastructure development has far-reaching positive consequences on Philippine development.


Construction projects in the country are seen to rise more than three times next year from this year amid improving investment and economic climate, consultancy firm BCI Asia said in an article in


Tourism is on the upswing and hotels will be benefiting from this. Flights to Palawan are more than 20 per day since the Underground River was held as one of the natural wonders of the word. Cebu, Boracay, Bohol, Camarines Sur, and others are also improving – hotel and resort occupancy rates are rising. Just today, Dec. 28, 2012, a article said that the tourism sector should prepare for a boom in tourist arrivals since Senate Bill 3343, which seeks to scrap the 2.5 percent Gross Philippine Billings Tax (GPBT), and the three percent common carriers’ tax (CCT) for airlines with countries of origin that will agree to give a similar tax exemption to Philippine carriers, has been passed already on third and final reading. Add to this the fact that Philippine Airlines will be building a new international airport, and several airports are being renovated or improved, then we can really foresee a reasonable boost in tourism.


Real estate services related to gaming are likewise improving with the establishment of Resorts World Manila and Aseana City at Macapagal Ave. There is a Comprehensive Land Use Plan (CLUP) specifically for Aseana City and it’s true that there are big plans to develop that area as a major gaming center. Just today, Dec. 28, 2012, the headline in the print edition of the Philippine Star screams “Casino Boom in Manila”. You can access the digital edition at They are set to grow the casino business a la Macau.


Here is a great report by Asst. Secretary Edilberto M. de Luna of the Department of Agriculture (DA) on The Role of Agriculture in Sustainable Development, presented last July 5, 2012. It outlines the problems, proposed solutions, and results as monitored by the DA.

Areas under development

I have previously written about developments in Mindanao, Cavite, Taguig, and Quezon City. Several parts of the country are undergoing development as well.


Based on the foregoing, for 2013, all signs point to real estate continuing to be on the rise. With good economic fundamentals and controls from the BSP, the outlook is indeed rosy. Thank you to all our hardworking government officials who serve our country with all their hearts.

Please note too that notwithstanding the forecasts, it is always prudent to invest wisely based on current market values and what you can afford, as opposed to investing based on speculation and hoped-for future appreciation. Real estate, like the stock market, is subject to cycles, so be sure to be ready to ride out any possible downturn.  So for 2013, we remain optimistic and pray continually for more blessings for the Philippines.


Cherry Vi M. Saldua-Castillo

Real Estate Broker, Lawyer, and CPA
PRC Real Estate Broker License No. 3187
PRC CPA License No. 0102054
Roll of Attorneys No. 55239

Text by Jay Castillo and Cherry Castillo. Copyright © 2008 – 2012 All rights reserved.

Full disclosure: Nothing to disclose.

Image courtesy: of FrameAngel / FreeDigitalPhotos

Photo of author
About Atty. Cherry Vi Saldua Castillo
Atty. Cherry Vi Saldua Castillo is a Lawyer (Roll of Attorneys No. 55239), CPA (PRC CPA License No. 0102054), Real Estate Broker (PRC REB License No. 3187), and Real Estate Appraiser (PRC REA License No. 6918). She was also the 2013 Internal Education Head of REBAP-LMP and 2015 REBAP National Legal Counsel. She's the 2021-2022 chapter president of REBAP-LMP.
Avoid losing money, wasted time and effort caused by buying foreclosed properties that have too many problems, with our free 60-item Property Due Diligence Checklist. Grab your free copy now.

Leave a Comment

29 thoughts on “Philippine Property Outlook for 2013”

  1. Pingback: What is the US Fed Tapering And How Will It Affect Philippine Real Estate in 2014?
  2. I don’t believe that there’s a real estate bubble in the offing. There’s not just enough signals out there. If this does happen though I also believe as with the author that “We have highly intelligent and competent people in government…” that will mitigate this problem if encountered.

    Thanks for this comprehensive and insightful post.

  3. Pingback: Philippine Property Outlook Q2 2013 -
  4. The writer of this article is either naive or self-serving. If you want to put complete trust on the government’s competence, go ahead. Don’t string other people alone.

  5. Cherry,

    I sent you a personal email with a list of facts. It doesn’t help anyone to post it here. But people can check for themselves: average price condos, unemployment rate, average wage, Federal direct investments, etc. And if you study past housing bubbles in other countries (and in ours), one of the biggest common denominators is outside money fueling speculation. This is what’s happening in the Philippines right now, specifically in Metro Manila.

    Regarding the Banko Sentral’s post….first of all, this doesn’t “ensure” any bubbles from forming. And second, implementation of the law— Look around you, is this really being followed by all lenders? I just talked to two Fil-Ams who bought multiple condos there. And both proudly tell me that they had almost less than 20% downpayment (significantly less). Now that’s a small sample size but more and more i’ve been hearing loose lending standards (my father is still active in real estate sector there, a few of my relatives and friends are agents). Let people reading this be the judge–what do you see out there? Not official statements like that. Again, the Banko sentral means well. That’s a great law. And let’s say the laws are ALL followed, in any bubbles any meaningful law and its implementation only happens when a asset bubble has already formed–if that.

    But all due respect Cherry, I think your problem is two-fold: you’re still asking “if” there is a bubble and second, your looking for your answers in the wrong places. As I’ve said before, Government is not to be blamed, but what you have brewing there is a “perfect storm” that I don’t blame to any single entity. Foreign investors are fueling the housing market, it cannot be sustained by locals. And what worries me deeply me is you guys trust this foreign money as if it’s going to stay for a long time. And these people/investors, in any sign of instability, whether real or otherwise, will run to exit doors faster than 4pm.

    Now is not the time to invest in any condo esp. in Manila. Call me a doom and gloomer if you must, I’m talking to the half-convinced who already feel something is not quite right, but is being “peer-pressured” by friend and relatives moving up the social ladder. Rent if you must…but do not buy esp. condominiums.

    Wait…..wait… may take a few years but I can almost guarantee you, you will be in a much better position.

    • Ian,

      I would agree that a significant part of the condominium sales here is fueled by foreign money – specifically OFWs, natural-born Filipinos living abroad and foreigners with local spouses. The good thing is this is not all from one country but spread out all over the globe.

      I don’t think it’s enough though to cause a “perfect storm.” For a perfect storm to brew, there must be significant pressure and not a lot of room to grow. The housing bubble that you experienced in the US was not fueled just by the subprime mortgages but by pressure from different areas – out-of-control debt, risky mortgages bundled as investment products, weak currency, etc…

      Contrast the Philippines which is enjoying good economic fundamentals that do not come from gov’t pronouncements but from foreign entities like HSBC, IMF, Standard & Poor’s and Moody’s to name a few.

      While many local experts have pointed out the bubble formation in the high-end residential market, there is still a backlog in the below Php2M price point.

      The next wave of developments will be on this price point which I believe will be supported by locally via the BPO industry. The country is no longer singularly dependent on foreign OFW remittances.

      Add to that the expected growth of the tourism sector and you actually have a perfect storm for progress.

      If there’s anyone who should be worried about the housing bubble here, it would be Century Properties who has a huge inventory of high-end condos. 🙂

      But does this mean it’s a good time to invest in condos? Personally, I don’t think so either. I’m from the cashflow school of thought. Don’t invest just on appreciation. It’s just the icing on the real estate cake. There are other opportunities to investigate which Cherry enumerated.

      Should we be concerned if there’s bubble? Again, I don’t think so unless you are a big real estate developer. It’s a normal part of the cycle. And we’re not policy-makers. Let’s just cross the bridge when we get there. We ought to focus on making sound personal investments which is Cherry’s conclusion in the end. Bubble or no bubble, rosy outlook or not, everyone should still be prudent in investing.

  6. Thanks for this awesome post, Cherry! Props for all the passion you put into this into this and I’m sure this will be discussed more thoroughly in the days and months to come.
    As an investor, it’s important for me to look at the big picture to get a feel for the direction of the market. This handy summary is already in my bookmarks.
    Personally, I wouldn’t go deeper if a bubble is forming or what the government is doing about it. My take, I have to make sure I can survive if a bubble forms and I can profit if there’s a crash.
    Not that I don’t care, but more of I’m not qualified to contribute to the discussion. 🙂
    Again, thanks and hope to see more posts like this!

    • Thank you for your kind words Ronald. This summary is really not only for me but for everybody interested in Philippine real estate.

      It’s good that you are taking steps to ensure that you will not get hurt in case of a crash. Good to be ready to profit too in case of a crash.

      For me, the reason I try to go deeper is again not just for myself but for everyone’s benefit. Now that I have been doing my research, I am learning about new things and am slowly able to connect the dots between the different government agencies. For example, did you know that some government agencies buy the receivables of developers, thereby taking away their risk and putting it on the government? I had a vague idea of this based on the names of the gov’t agencies like Home Guaranty Corporation or National Home Mortgage and Finance Corporation, but to really understand what they do, I have not yet read any article about the different roles they play and how they affect the Philippine real estate market. This is very time-consuming, and takes away time that may be better used on analyzing deals for example, but I feel that someone has to do it.

      Best regards,

      • I did not know that although I remember something like that was mentioned by Robert Kiyosaki in one of his books but talking about the US market. In the US, they give incentives to developers to encourage them to invest in housing developments. Reason is the government can’t do it themselves and so they encourage the private sector to do it by giving incentives.

        I imagine it’s the same thing here, I just don’t know the specifics. That would explain why Ayala would pour Php40B in the low-profit margin markets of low-cost and economic housing projects. It may be low-profit but it’s also low-risk for them so it would still make business sense.

  7. Hi Cherry and Jay, Thank you for a very informative article. Makes you pause and rethink your outlook for the Philippines. Truly a must read for all investors and RESP’s.

  8. Happy New Year to you Cherry.

    Maybe it’s not too late to lessen the impact of the bubble. I really hope we can still lessen its impact. But I wanted my article to have an immediate urgency in preparing for this crisis ASAP. As of the exact date of the collapse, we can only guess. I think it’s in 2-4 years, but that’s a hopeful scenario. And I didn’t want to be too hopeful and miss the opportunity to prepare before the collapse.

    You said, “If you are driving a car and you see that you are going to hit a wall, will you not steer you car away (last clear chance doctrine)? — Oh I certainly would, Cherry. But this is not a car, this is freight train being driven by business owners with big egos searching for more profits to add to their already heavy cargo; and instead of seeing a wall, they see cash signs — and they will only make it go faster until it’s too late. And they will not listen. They don’t have any incentive to.

    We are discussing this on your site and mine, we’ll be both lucky to have .001% of the target readers that need to know about this — business people, investors, plain folks and lawmakers. If you think I’m just a cynical, “half empty” glass kind of person, hmmm…i’d like to think of myself as a realist.

    But I did what I can: I wrote the Open Letter, guest wrote in a few websites, sent 500+ emails, personally wrote to dozens of newspapers (NY times, Inquirer, etc.,), I wanted to start conversations — but I honestly don’t know what else to do. I knew in my gut, for almost a year, I had to do that. I didn’t want to, I didn’t have time — I am already delayed by a few months with my work load because of the article and spreading it.

    Nevertheless, it’s the best Christmas gift I could have given myself…it will be very painful if the markets crashed, people starved, small business owners lost, couples divorced due to financial troubles, all the while knowing what I know, but I chose not to do my part. Last night, while talking to my aunt from the Philippines, she said that the article made her feel better, I told her that’s weird. She said that it encouraged her to not go with the crowd and continue to save, and maybe she can buy her dream condo when it becomes affordable again. I was talking about her when I said, “As in any bubble markets, there’s a tremendous opportunity awaiting after the dust settles”.

    It is not right to take advantage of other people’s mis-fortunes — when they still have a chance in saving it.

    Cherry, I can try to agree with you to harmonize our positions. Whatever helps. You also say I base what I say on feelings and not facts. This is not true. The fact is housing values (specially condos) in the Philippines have gone up to a point where the only way to sustain it is to hope that this historically high growth rate will continue, if not go higher. And outside money (foreign investors, OFW’s) continue to flood the Philippines with cash — making it possible to, as Inquirer puts it, “spend like a first world country.” I want to say this respectfully, but Local filipinos and their wages simply cannot buy or rent these mass of properties if not for the capital inflow. And OFW’s cannot buy all the inventory (I think OFW’s are responsible to about 30% of properties sold, not sure though).

    Dr. Padojinog said :

    “According to Dr. Padojinog, who already declared many times that there is really a real estate bubble in theupper and middle income housing markets, the four factors to determine the presence of real estate bubbles are highly liquid financial system, loosening of banks’ lending standards, prevailing market value not supportive of fundamental value of asset, and supply exceeds housing demand.”

    How many times have I said, I am so happy for the Filipino people about this new prosperity and amazing government. What I am against is to think we are more prosperous than we really are. There’s a big difference. Let’s not get carried away. What needs to be done is to save and be smart about the flow of money and use this temporary surge to invest in making our country more prosperous permanently through manufacturing, education, etc.,. (Aquino is already doing this.)

    But this should be for the everyday Filipinos as well, esp. the middle class…stop buying things, cars and houses you don’t need — don’t feel jealous that the others are all seem to be getting wealthy because of their new SUV or high rise condo. Use your money wisely, Save, Save, Save. Now is NOT the time to invest (when everybody and their aunts are investors). Don’t follow our path here in the U.S. and in Europe when people became careless and trust too much on the good times to last.

    There is hope and opportunities. And maybe just maybe, the bubble, as Cherry puts it, can be averted.

    As Dr. Padojinog states that the “key is to release the pressure and deflate the bubble”.

    But prepare as is if it’s too late.

    • Hi Ian,

      Here’s a new article quoting BSP Deputy Governor Diwa Gunigundo which you may find interesting:

      “Guinigundo added that so-called macro prudential measures such as the 20-percent ceiling on bank lending to real estate, the reduced loan-to-value ratio of 85 percent and even the single borrower’s limit of 25 percent that the banks must observe at all times should be enough deterrent for lenders to engage in any inordinate amount of loans to the real-estate sector.

      These existing measures, he said, will help ensure that “we avoid asset bubbles from forming in the real-estate sector.”

      The reason I say you base your position on feelings and not facts is that you only say that prices are high in general terms, whereas the BSP has access to statistics. For me, without statistics backing up your claim, they are merely feelings or opinions.

      Anyway, as promised, I posted your Open Letter and likewise my Philippine Property Outlook for 2013 on Sec. Purisima’s FB wall but it seems he’s too busy to read it (hehe). Yesterday, I finished reading The Automatic Millionaire Homeowner by Richard Bach, and I made notes and researched about the Philippine counterparts of the US government agencies that contributed to the housing bubble there (HGC, NHMFC, BSP, Pag-Ibig etc.). I was making a mental diagram of how they interact with regard to Philippine real estate, and it occurred to me that the best person to contact is Vice-President Jejomar Binay, the country’s housing czar. He has already declared his intention of running for President in 2016 and I don’t think he will let a real estate meltdown occur during his watch, as this will adversely affect his Presidential ambition (just being practical here). This is his website: and this is his FB page: I emailed and requesting for data on whether there is a real estate bubble forming in the Philippines and what the Philippine housing agencies are doing to prevent it. I hope a member of his staff will reply. Should this not work, I will post on the FB group of UP Law alumni and hope that someone who knows him personally would be willing to help me. So don’t lose heart.

      I want to get to the bottom of this and confirm whether or not a real estate bubble is forming in the Philippines. I have read the position of the BSP, so data from the HGC and NHMFC and other agencies (and if possible, from developers) would complete the picture.

      At the end of the day, people will invest or not based on their own personal decision, possibly after weighing the pros and cons including your prediction of a real estate bubble. You have done your part.

      Best regards,


  9. Wow! A very comprehensive article! Good job! I never felt so positive for the economy this 2013, not until I read your post here. Thank you guys for this one! This really helped a lot of people save time researching, like me.. Happy new year! =)

  10. Firstly on the subject of in house financing.

    A while ago i noticed that DMCI had raised P10 Billion through a corporate bond issue and due to the fact that the issue was corporate they are not required to make public the conditions (interest rate etc) of the 7 years bond, it surprised me that all the reported (9) corporations taking up the bonds were Filipino Corporations, all the big banks.

    DMCI said the money was to be used to expanded its real estate activity’s, now DMCI have a very active in house financing program, so this Bond issue looks like a round about way for the banks to increase their real estate exposure without going over the 20% mortgage limit…the way the story is worded it looks like the P10 Billion is going straight into housing.

    Perhaps a worrying indicator.


    On the subject of REIT’s

    The investors of the world like REIT’s, they like the Trust structure and generally the tax treatment that REIT’s receive, The REIT concept was launched in Australia in 1971 and we now have 49 ASX Listed REIT’s with a combined market capitalization of over 65B AUD (2838P Billion) these REIT’s own Property all over the world in every segment imaginable, they provide global investors with low risk regular returns via distributions typically of over 85% of EPS, paid in Australian Dollars.

    REIT’s are a very important part of almost all global stock markets and provide construction financing and thus jobs in design, construction, surveying, compliance, project management, accounting and financing…The current hold up with Filipino REIT’s is a disgrace, government agency’s are there to implement government policy…simple as that.

    • Hi Darren,

      Happy New Year!

      I read the BSP Guidelines on the 20% Real Estate Exposure and it includes purchase of debt securities from real estate developers so still ok. To be fair to DMCI (I am an accredited broker for both SMDC and DMCI), the market of DMCI is really the end-user, not for investment only. They do have an in-house financing program, looks like there are not many who are unable to pay on time as “reopened” units are few and far between, and those who want to “take over” actually have to join a “raffle” as there are many who are willing to take over.

      Re: REIT, it does look very good based on what you shared. Perhaps they are still studying it further. I will try to ask if there will be any changes on the position of the DOF and BIR on REIT this year.

      Best regards,


  11. Mrs. Castillo,

    I would continue to read further comments but I think I’ve said everything I have to say. When we wrote the article, our goal was to start a dialogue, and I believe we’ve achieved that. I’ve explained everything that I could. I don’t want to sound like a broken record. All the points you raised can be answered through my comment and Open Letter.

    Thanks, and may God bless you and our beautiful country.


    • Hi Ian,

      Let me greet you first a Happy New Year!

      I had to re-read your comment as it seemed to me that I missed something, and I did! I honestly thought we were on the same page, that the “preparation” is to lessen the probability or impact of a real estate meltdown. All the while, your position is that there is nothing we can do about it. Government can “only do so much”, it is “almost impossible” to prevent a bubble bursting, “almost always” laws to prevent bubbles are made “after” the bubble has already burst. We are obviously not on the same page (I can’t believe it was not so obvious to me).

      If you are driving a car and you see that you are going to hit a wall, will you not steer you car away (last clear chance doctrine)? That said, it is still good to prepare for the worst case scenario. I hope to win you over to our side, though, that there is still hope and we CAN do something to prevent a bubble or at least lessen its impact.

      Is it not better to help the country and its people prevent the bubble rather than wait like a vulture for those who may become victims? This statement leaves a bad taste in the mouth doesn’t it? – “As in any bubble markets, there’s a tremendous opportunity awaiting after the dust settles”.

      It’s just like being in a ship where you found a hole (or holes) – will you not plug the holes first and fix them completely? I see you now as the person who shouts for everyone to get the inflatable boat and lifesavers ready for when the ship sinks (without being in the boat to begin with). Of course that is important too. I would rather, though, rally everyone in the ship (and even those outside) to focus on fixing the holes (First things first!) while also preparing the “safety nets”. Let us not be distracted by the worst-case scenario (or distract others doing their best to prevent this worst-case scenario), as this may keep us from reaching the best-case scenario. I feel that this is the best way we can harmonize our positions on this issue, and I hope you will agree.

      I apologize for trying to “squeeze” something from you, your position and its value just recently dawned on me after much reflection. I was really thinking about it a lot (I wasn’t able to fall asleep easily because of it), for how could someone who claims to care for the Philippines but who is not helping to solve our problems here, try to influence others all over the world to doubt the Philippines’ progress and proclaim doom and gloom, basing such position only on feelings and not facts? In the beginning it really made me mad, it really did. But now that I have been able to reconcile and harmonize our positions, I feel better.

      In any case, it’s good to discuss these matters – it makes us all better informed. I was actually inspired to write another article on how to bubble-proof your investment as I just finished reading The Automatic Millionaire Homeowner by David Bach.

      God bless you too, and most specially our beloved Philippines. Again, Happy new year!

      Best regards,


  12. Mr. and Mrs. Castillo,

    Before I lay out my response to your concerns I want to mention that this article is a very well written summary of the Property outlook for the Philippines.

    I want to start with your perception to our plea as somehow sowing fear and anxiety to people and potential investors, and that you felt insulted that we don’t think our leaders (specifically Sec. Purisima & President Benigno Aquino III) are not aware or inadequately preparing for a potential asset bubble.

    To be clear, I am 100% in agreement with you in your admiration & appreciation of our leaders — both are doing a tremendous job. And as I mentioned in our article:”I also admire the intentions of Philippine Finance Secretary Cesar V. Purisima when he said that he is closely watching this economic boom to prevent another asset bubble from happening.”

    Sec. Purisma and Pres. Aquino III have shown time and again that they are strong leaders willing to make tough decisions for the good of the country. My family and I have made it a tradition to listen in earnest to all of Pres. Aquino’s past SONAs (State of the Nation Address). We couldn’t be prouder that he is the Phil.’s Commander in Chief.

    I also dis-agree with Darren Noway, who left a comment on this article, when he said: “the stalled REIT industry is a great example of why you can never trust that the Government and its agency’s are doing their best to push this country forward and minimize and manage the concomitant risks to real estate investing”

    If he is somehow implying that the current Philippine Gov’t is not doing their best to push this country forward, then I think Mr. Noway is mistaken.

    You mentioned: “Yes, there are issues that may lead to the popping of an asset bubble – and without anybody telling them, government officials have addressed and are continually addressing them.”

    One of our main goals for the the article is to plead to the Philippine Government to simply heighten their urgency of a pending crisis (which I wrote to come in 2-4 years, possibly less): “But the attitude towards this new bubble is still ‘if’ there is a bubble. This letter is a plea to elevate ‘if’ to ‘when’ the bubble occurs.We can never over-prepare for a crisis like this.”

    I went so far to say: “prepare as if a great typhoon is headed our way — a financial Ondoy.” I do not mean to put the blame on a future crisis on the country’s leaders, quite the contrary, they will be the key to helping our people recover. But we must prepare as if this is already headed our way.

    What happened the last 5 years of good economic times is something like a “perfect storm” — so much money flowed into the Philippines due to U.S. and Euro’s recession and we were one of the big beneficiaries of tremendous boost in investor confidence due to the new leadership under Aquino.

    And like any country that experienced great boost in their economy, whether Europe or United States or Greece; I felt like the Philippines is putting too much faith on the financial boom, underestimating the unintended consequences of this unsustainable growth — specifically in the housing market : “Prosperity can put a veil on our eyes from seeping problems. This is not an Asian problem as much as it is in people’s nature. People forget.”

    This is where I begin to disagree with you when you said: “…yes, real estate is cyclical. There will be ups and downs – this is a given. Is there anybody here who doesn’t believe this is so?”

    No. People know about the ups and downs of the market. But I think you are underestimating the impact of this “down” — you see it as a normal cycle of another “down” market. In the Philippine’s current housing market, I think it’s hard to argue how property values and sales have skyrocketed — it is probable that we are falling from a 10-story floor, this is not a few steps.

    Also, I think you are putting too much faith on how the Philippine Gov’t can prevent a housing bubble from happening. They can only do so much. They’re doing their best, no question, but it is almost impossible to contain an enormous housing crisis such as this because laws and legislation that CAN stop a bubble will almost always be reactionary after a a bubble has already developed. As I mentioned in our article: “You can never overestimate the ripple effect of uncertainty.” That’s why I reasoned that the economic crisis that could hit the Philippines will likely start in the housing market and later spread.

    On to the availability of home mortgage loans.

    I didn’t intent to mirror the highly irresponsible loans issued in the U.S., (“subprime”, based on “Stated Income”) to the loans now being issued in the Philippines. My point was that housing bubbles are usually fueled by loose lending to borrowers.

    Home loans issued here in the U.S that fueled the housing bubble in early 2000 are much lower quality, to say the least ( “Ninja Loans” poured all over the U.S.).

    The Philippines are doing a much better job monitoring the local bank’s portfolio not to get imbalanced and over leveraged: “requiring banks to submit an Expanded Report on Real Estate Exposures .”

    But I think it’s hard to argue that home loans are now much easier to get in the Philippines than in past years. Banks are asking for less money as down payment and are being too creative in lowering filipino’s mortgage payments for a few years (followed usually by a balloon payment after the 5th or 7th year) than in years past. Not to mention, interest rates are at an all time low.

    About the savings rate of Filipinos, based on your numbers that take in account “overall domestic savings” it is too broad of a data to see the real impact of the increase on Filipino family’s savings. Yes, overall the Philippine household has increased by 6.8% this year, but can this be attributed simply to higher income due good financial times? In the past, good financial environments account for this co-called increase in “domestic savings”. How are expenses factored in? One thing we know is Filipinos are saving much less than our Asian counterparts. As Inquirer puts it: “Neda reports place the savings rate in the Philippines at between 12 and 16 percent. Following the 70-30 rule on spending and savings, there’s not much promise for our nation. It is unfortunate that many Filipinos have embraced a First World consumerism lifestyle but have a Third World income. We simply do not save enough.”

    About the Total Factor Productivity: I changed the typo from “April 2012” to “Nov 2012”

    It’s true the Philippines is working to address this issue and invest in education and human capital and technological innovation. This is testament to the leadership of Pres. Aquino. But the fact is the previous administrations have not done a great job on this. and Pres. Aquino can only do so much as this takes time to mature.

    Reality is, we are still far behind other developed countries when it comes to total factor productivity as the report summarizes it: “Various studies showed that total factor productivity (TFP) has not been a source of growth in the Philippines. It seems that factor accumulation, which is not a sustainable source of growth, has underpinned Philippine economic growth.”

    When I mentioned the bulk of “Hot Money” is invested in real estate, i meant this to include residential and commercial real estate — including casino developments, retail space, and residential housing. Admittedly, it is harder to find exact data to show how Philippine builders utilize foreign investor’s money to build and sell residential housing. But as I have observed the last few months, there is a significant amount of foreign money going to real estate:

    — business.inquirer(dot)net/86586/sm-raises-500m-from-offshore-bond-foray

    — business.inquirer(dot)net/85300/sm-investment-corp-eyes-offshore-bond-offering

    (That’s just for SM land raising capital, I wonder how the other builders are doing it.)

    “Philippines Targets $10 Billion of Annual Foreign Investments”

    I see Trump Tower NOT as a representation of the general condominium market in the Philippines, but as one of the signs that the party could be nearing its end.

    “The probability of an oversupply three or five years down the road is high only in the last segment, high-end housing in which the majority of the buyers are purchasing units for investments or speculation and are not the ones occupying the units when they are built. This is not the case with the other segments, especially the units selling from one to five million pesos.”

    I disagree with Mr. Bernardo Villegas, the same way I disagree with the general points you made in this article. I believe he is underestimating the impact of excess supply and miscalculating the number of investors & flippers for the units in the 1-5 million pesos market. Even at this price range there is ample room for prices to go lower on the event of a housing downturn.

    He went on to say: “The buyers of the expensive units are not highly leveraged.” In any housing crisis, many will be surprised to know the extent of just how stretched you are when a crisis start to unfold and “accidental expenses”, that wasn’t forseen in the good times, start compounding. “You only know who is swimming naked when the tide goes out.”

    Same is true with Spain, I used Spain merely as an example of a great country experiencing an economic boom brought in large part by a housing asset bubble then got blindsided by a housing crash that sent the country into a freefall. (Spain has a budget surplus on the eve of the crash!) To be clear, Spain and the Philippines are not the same. But we can still learn a lot from what is still currently ailing this great country. After all, It started with a housing bubble then had a domino-like effect to its banks and later on, its people.

    At the end of it all, I still hope that I an wrong on all of this. God bless and guide the Filipino people.

    • Hi Ian,

      Thank you for your comment. Indeed, I really took the time to research and cite the cold, hard facts (direct from government agencies) on which I based my post. I want to be a responsible writer, so I make sure readers are able to verify the truth of what I write independently, and they will be able to formulate their own positions on the matter.

      As your comment is very long, let me reply to you in two comments (or more).

      My main point is, yes, there are risks to real estate investing, as in any other mode of investing – we only need to manage the risk. Assuming, for the sake of argument, that your assertion that a real estate meltdown will occur in 2-4 years is true (I will tackle that assertion later in a separate comment), is there nothing we can do in those 2-4 years to prevent it or lessen its probability?

      The meat of your Open Letter, since you say that it is to help the Philippines, is really the “suggestion” portion. I have been trained all my life to identify and define a problem first, then look for solutions. Here is your “suggestion”:

      “I suggest a combination of prevention and preparation. Perhaps we need to cease lending to other countries, and put more focus on Banko Sentral’s campaign to increase our foreign currency stockpile. We need strategic plans for the rapid rise of unemployment, an early and abundant funding for food programs, allocation of future funds to lend to small and mid size businesses to help create new jobs, and preventive measures to ease excessive real estate development.”

      I have written all about what the government has been doing and all of the suggestions you said have already been done (except for lending, which is justified and you can read it here:

      Are the efforts of the government officials not enough? Pray tell, what exactly do you really want to happen? I put my faith in our government officials, specially our seasoned economists. I am not an economist so I do not pretend to be better than them.

      Best regards,


  13. Thanks for this very Informative article Ma’am! On my point of view, real estate bubble could be avoided if most developers could focus more on economic housing rather than high-end projects. Most economic projects today are fast selling and we are still short supplying the demand for broad affordable market segment.

    • Thank you Jerome. Ayala Land has already heeded the call. I am not aware of the plans of other developers but I think they may be cooking something up for 2013 along those lines. The tax incentives are really good. I remember one of the partners in the firm I worked for before discussed one project they did where they got all the incentives and the tax benefits were really tremendous.

      Best regards,


  14. Great work Cherry, a very interesting read with interesting links.

    While i don’t think there is a bubble at the moment i can see some potential for a bubble developing, a bubble needs easy access to cheap finance and that is certainly not the case in the RP and a bubble needs to build over a significant time with rampant construction and “pass the parcel” style reselling in the later stages, a vibrant, growing economy is also needed so that the middle class can afford to buy and rent.

    The situation with the stalled REIT industry is a great example of why you can never trust that the Government and its agency’s are “doing their best to push this country forward and minimize and manage the concomitant risks to real estate investing” The US Government and its agency’s allowed a trillion dollars to evaporate and brought the world to the brink.

    A while ago i viewed a great documentary on the bursting of the investment and real estate bubble in Ireland, i remember vividly what one of the investors who lost everything said…he said that Ireland had never had a bubble before so they didn’t know what one was, we certainly didn’t think there was a bubble and we really wouldn’t know what a bubble was like if there was one.

    I think the vast majority of Filipinos would also have no bubble experience and not know a bubble if they were in one, its easy to get caught up in the good times and just trust that the people running the system know what they are doing, history has shown us that they often don’t have a clue.

    I’am very surprised to read that ” real estate-related loans should not exceed 20% of banks’ loan portfolio.” i know in Australia that our big banks have close to 70% domestic real estate exposure, our real estate bubble hasn’t burst yet and doesn’t look like it will…i would imagine that having a 20% limit would handicap the Filipino real estate industry, hard to see how there could ever be a bubble with that limit.

    • Thank you Darren.

      Credit is not that cheap indeed, and not easy to secure from banks. The danger really comes from the low downpayment stretched over many months scheme which was discussed excellently by our friend Mr. Jun Sanchez in his blogpost: As I mentioned in my post, the BSP issued a Circular on sound Contract to Sell financing. I know SMDC is not offering in-house financing and all buyers are required to pay either in cash or through bank financing once the downpayment period is over, and buyers are made aware of the possible amortization payments should they get financing from banks. I have no data though from developers which show the percentage of buyers who are not able to finish their payments. This data would be very useful in our analysis. In any case, big developers like SM can afford to finish their buildings and hold on to their inventory in case demand falls because of their size and cash reserves.

      Re: REIT, can you tell us more about how REIT has benefited your country? As this has not yet been done before here, perhaps your sharing can be very educational for us.

      Re: documentary on bubble in Ireland, can you post the link please so we can view it? I think I (and our readers) may learn a thing or two from it. I do trust our government officials, specially Sec. Purisima. He was the Chairman and Managing Partner of the firm I used to work for, E&Y Philippines, and you don’t get to that position without being very, very good. He is also the husband of my friend. So when I say I trust him, it is not only because of the news I read but because I know him and his background.

      Re: 20% limit on bank real estate exposure, I agree that it is very conservative. I am glad that this rule is in place.

      Best regards,


  15. Fantastic article, Cherry!

    Seldom can one find a blog about real estate (actually, it’s about the whole Philippine economy) that is as compelling as yours. I can only imagine the amount of blood, sweat and tears that went into its writing.

    More power to the Superman and Wonder Woman of the Philippine real estate blogosphere, Jay and Cherry.


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