Monetary authorities see no pandemic-induced price bubble

MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno on Thursday discounted a pandemic-induced asset price bubble in the country.

In a virtual briefing, he said monetary authorities “do not expect any undue surges in asset prices.”

“In fact, property prices for both office and residential segments have come down recently,” he said.

Citing reports by market analysts, Diokno said property price and rent correction were registered last year “due to dampened demand brought about by the pandemic.”

“In addition, market analysts do not see a recovery in prices in the coming months as market sentiment takes time to recover and solidify. This lessens the risk of an asset bubble,” he said.

Even before the pandemic, Diokno said monetary authorities “have already put in place various macroprudential measures to help safeguard against property price bubbles.”

These measures include putting a cap on real estate loans and loan-to-value ratio and monitoring tools like the Real Estate Stress Test (REST) and the residential real estate price index.

Diokno said the REST and the expanded real estate exposure reporting “have helped to curb the real estate exposure of banks.”

He said the central bank’s liquidity management facilities like the term deposit facilities and the BSP securities are also seen to quickly absorb excess liquidity from the system if needed and are factors that “help us temper the risk of asset price inflation or imprudent risk-taking behavior.”

“While we expect asset price inflation to remain manageable, the BSP continues to closely monitor market conditions for signs of imbalances or the potential presence of asset bubbles,” he added.