Is There a Real Estate Bubble in the Philippines?

Editor's Note:  This update reflects the true Real Estate & Construction Loans to GDP ratio published last June 25, 2012.  The previous figures were published in error.

Is there a real estate bubble in the Philippines?  Several people, including Finance Secretary Cesar Purisima and high profile businessman Andrew Masigan have asked this question earlier this year.  Both have come to the conclusion that there is no real estate bubble - yet.

But does the data bear this out?  Based on the data available from the banking system, if we are in a real estate bubble, we are only in the beginnings of one. Given the growth in our country's GDP since 1999, Real Estate Loans, on an absolute basis, have picked up noticeably since 2008, but construction loans have not.

On a relative basis, Real Estate and Construction Loans as a percentage of GDP have dropped considerably since 1999, from a high of 7.56% of GDP in June 1999 to a low of 4.43% of GDP as of March 2007.  Today, that ratio has gone up considerably, and now stands at 6.46% as of September 2011.  So Real Estate and Construction Loans relative to GDP have bottomed out but not have approached near peak levels of 7.56% of GDP.  It is important to note that the availability of banking data available on www.bsp.gov.ph goes back only to March 1999.  The previous peak levels could have been much higher.

Philippine Banking System Real Estate & Construction Loans vs. GDP March 1999 to September 2011 In Peso Billions Quarter/Year Real Estate Loans Construction Loans Real Estate & Construction Loans GDP (Current) March 1999 198 57 255 3,244 June 1999 222 56 278 3,244 September 1999 221 55 275 3,244 December 1999 190 54 243 3,244 March 2000 213 51 264 3,581 June 2000 220 49 269 3,581 September 2000 180 89 269 3,581 December 2000 224 47 271 3,581 March 2001 203 51 255 3,889 June 2001 205 43 248 3,889 September 2001 204 44 249 3,889 December 2001 204 42 246 3,889 March 2002 212 43 255 4,198 June 2002 207 40 247 4,198 September 2002 203 40 242 4,198 December 2002 204 36 239 4,198 March 2003 250 47 297 4,548 June 2003 250 46 296 4,548 September 2003 261 48 309 4,548 December 2003 262 47 310 4,548 March 2004 260 53 312 5,120 June 2004 257 37 294 5,120 September 2004 255 36 291 5,120 December 2004 262 36 297 5,120 March 2005 252 41 293 5,678 June 2005 253 35 289 5,678 September 2005 268 35 304 5,678 December 2005 258 34 293 5,678 March 2006 273 33 306 6,271 June 2006 288 33 321 6,271 September 2006 284 33 318 6,271 December 2006 291 34 325 6,271 March 2007 272 34 305 6,893 June 2007 287 37 324 6,893 September 2007 285 37 321 6,893 December 2007 290 36 326 6,893 March 2008 290 30 320 7,721 June 2008 339 34 373 7,721 September 2008 358 37 396 7,721 December 2008 400 41 441 7,721 March 2009 393 32 426 8,026 June 2009 418 31 449 8,026 September 2009 420 32 452 8,026 December 2009 448 33 481 8,026 March 2010 455 34 488 9,003 June 2010 465 35 500 9,003 September 2010 466 35 502 9,003 December 2010 497 36 534 9,003 March 2011 521 37 558 9,361 June 2011 542 40 581 9,361 September 2011 564 41 605 9,361 Source: www.bsp.gov.ph and www.nscbgov.ph