[Editor's note: Tim Staermose is filling in for Simon today who is en route to Africa.]
I came across an interesting real estate deal the other day here in Manila. It was for a tiny, one bedroom condo of 45 square meters (just under 500 square feet). The building is under construction and isn’t -scheduled- for completion until late 2012 or early 2013. Asking price? Approximately $117,000 USD.
Now… depending on where you live, you may find this shockingly cheap. But at $2,600 per square meter for pre-construction pricing, I find this shockingly expensive, at least for the Philippines. This is the kind of place where you can still live on $10/day and buy some beachfront property in the boonies for a song.
The issue here is that interest rates here are at all time lows. Mortgage rates are as low as 5.5% (versus the historical average in the mid-teens). 3-month Philippine government bonds were yielding well under 1 percent last week. It’s a joke.
This is literally thousands of units set to house many more thousands of people, all within just a small space in Manila. There are similar construction booms all over town. So has the population of Manila really spiked such that the underlying demographics support all the new housing supply? No.
Moreover, has the population of ‘wealthy’ people increased to the point that tens of thousands of Filipinos can now afford to live in prime Manila property? Definitely not. This is still a poor country.