DAVAO CITY—A price bubble is seen emerging in real-estate transactions in the country’s booming cities. A local economist has warned this may develop into a heating of local economies leading to pocket economic crisis.
“Prices of lands and other real-estate properties are becoming runaway. Price bubbles are forming in this sector right now,” said Adrian Tamayo, formerly of the University of Mindanao’s research and survey unit, Institute of Popular Opinion, before he moved to the government’s socioeconomic planning unit for Mindanao, the Mindanao Development Authority.
He said the bubble could be as big as “100 percent,” or what he referred to as the price already at the level of speculation “that is several folds higher than the market price.”
“The negotiation price is much beyond the observed increase of land prices, which have ballooned to 50 percent or 75 percent than the publicly known rates,” he said.
“If you don’t control this one, skyrocketing prices are hurting the local economy,” Tamayo said.
His warning followed a previous revelation by business leader, Ma. Lourdes G. Monteverde, currently the president of the Chamber of Real Estate and Builders Association (Creba) Inc., who said prices of commercial lands in many cities and capital towns in Mindanao have inceased by 75 percent on the average, with prices much higher in the downtown districts of major cities.
The BusinessMirror found out that in the Island Garden City of Samal, where Mayor Sara Duterte announced she was pursuing a bridge project, what used to sell at P100,000 per 100 square meter (sq m) residential area was now P1 million, rising 1,000 percent. Along its beach side, the price was 70 percent to 80 percent higher.
In the Dahican Beach, the “Boracay” of Davao Oriental in Mati City, the lots now sell at P10,000 to P12,000 per sq m from P1,000 and P1,500 per sq m only three years ago. Prices also rose by about 1,000 percent. In some towns, however, the increase was only about 20 percent to 50 percent.
Along the main street going to the city hall in Koronadal City, the capital of South Cotabato, the lots used to sell at P5,000 per sq m in 2017. Now it sells at P6,000 per sq m.
In General Santos City, some lots being sold at P10,000 per sq m two years ago now carried a purchase price of P12,000.
Here in Davao City, the northern suburb of Bajada, with a row of shopping malls, an area almost 1 hectare was then tagged at a price of P20,000 to P25,000 per sq m only five years ago. Now it is selling at P80,000 per sq m.
In the southern suburb of Bangkal, where a Jesuit-ran school was finishing the construction of its senior high-school campus in a 5-hectare area, the owner was selling it then at P10,000 to P12,000 per sq m. Right now, the surrounding areas are selling their lots for as much as P100,000.
“That’s what the public only knew of the current prices. But in the negotiations, the prices could still double,” Tamayo said, adding this may be used by scrupulous speculators to spike further the prices and keep investors discouraged.
Price bubbles were the indicators of global economic crisis, such as the Asian financial meltdown in 1997 and the global recession in 2008, and were directly related to the real-estate mortgage activities.
The skyrocketing price was primarily due to speculation among owners of the land, who were erstwhile known to be difficult to be persuaded to open up their spaces for locators of business-process outsourcing and some few manufacturing companies.
“They know that locators from outside are scrambling for any available space here in the city, not only because the President comes from here, but because movement of businesses going to Davao City has been going on for several years already,” he said.
The Anvil Business Club, a group of Metro Manila-based young Filipino-Chinese businessmen, has also noticed the sharp improvement in the business climate, from the ease of doing business to actual business operations.
“We are amazed at how the roads have been widened to four and six lanes from the city to the production areas outside the city and across the island of Mindanao,” said a member with a manufacturing operation outside Manila.
Wilson Y. Lee Flores, chairman of the Anvil Business Club, said the club members would not like “to be left behind” in the exodus of economic activities down South.
Tamayo said the city could rein in its land-use ordinance.
“The key is in the managing of its Comprehensive Land Use Policy to stop the loss of potential lands for commercial and agriculture use,” he said.
While the city is still blessed with land for a variety of use, “it would be appropriate to control its utilization, concentrating on protecting the advocacy of Mayor Sara Duterte on the environment.” The city is the second largest city in the world in area, at 244,000 hectares.
The city mayor has corroborated the sharp spike in real-estate prices but conceded to the private nature of the transactions.
“We acknowledge that these prices are part of the private transactions between the owners of the land and the buyers,” she told reporters after she delivered her State of the City Address on Tuesday.
She said this would pose some problem in her bid to protect the agriculture areas from being pushed hither into the interior by the onslaught of housing projects.
“We can not oblige farm owners not to sell their lands,” she said.
One option was to encourage buyers of agriculture lands to engage in agricultural production of cash crops such as coffee, cacao and abaca.
The city is currently pushing its bid to be acknowledged the chocolate capital of the Philippines, banking on the city as the leading producer of the world’s renowned cacao.
Hence, she said, the city would need available lands to ensure adequate production.
The city, however, has shown its iron hand in implementing the land-use ordinance. One mall developer from Cebu has been slapped with two court cases for violating the ordinance when it rushed the construction of a small shopping mall along an area declared as outside the commercial district.
“There were notices on several hundred other violations of the land use that also served by the City Planning Office to businesses in the city,” Ivan C. Cortes, chief of the office, told the BusinessMirror.