Why There is a Housing Crisis in Southeast Asia


In 2008 I hosted SM’s top international real estate broker to offer condominiums to Filipino-Americans in Northern NV.   SM, fondly known as “Shoe Mart” to locals is the largest retailer, shopping mall developer and operator with 46 malls in the Philippines and five in China, with a combined GFA of 6.3 mn sqm., It is my home country’s version of WalMart.

Around 2005, always on the lookout for growth, SM joined the party in  building and selling residential real estate.  In less than five years they were number one in units sold as Philippine’s housing market rose to unprecedented highs — something that I haven’t seen since I left to migrate to the U.S. in early 1990’s.

When I hosted them in my office in 2008, I wasn’t sure at that time, it was the start of an unprecedented housing bubble that is about to pop in two to four years from now, probably earlier.  Parts of Asia, like Hong Kong, are experiencing similar asset bubbles.

By 2010, It was getting clearer to me that this party is not going to end well as I personally witnessed this asset bubble snowball through local Asian news and real estate investments made by people I knew from back home. I started studying and observing patterns from past Asian crisis that looked eerily similar to the present bubble.

An Open Letter to the President of the Philippines

Last week I published an open letter to the President of the Philippines urging him to start preparing for this massive crisis. Found here:

An Open Letter to Philippine President Benigno Aquino III: Now is the time to prepare for a massive housing crisis in Asia

In this letter I wrote in-depth about what happened in the 1997 East Asian Financial Crisis and the similarities to the present one.  Here’s the flesh and bones of the above article:

  • In 1994, three years before the 1997 housing crisis, Paul Krugman wrote about the mistaken belief on the source of growth in many Asian “tiger” economies: “There was tremendous growth but the growth happened by injecting vast resources into the economy. It was not a miracle.  Perspiration rather than inspiration. “
  • In a November 2012 report from PIDS (Philippine Institute for Deveopment Studies) reporting on the latest Total Factor Productivity in the Philippines: “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.”
  • “Hot money” through FDI (Foreign Direct Investments) flowed then is flowing now into developing Asian countries like the Philippines, a bulk of which is invested on real estate.
  • This year, foreign direct investments (FDI) reached $917 million in the first half, up by 10.6 percent from the $829 million of the same period last year.
  •  Donald Trump has put his name to a $150-million, 56-story, curtain-glass-walled Trump Tower that broke ground this year — 70% of the 220 residential units, which are worth up to $1.86 million each, have been sold according to Trump.
  • Mr. President, we need to prepare as early as now or we could face a similar fate as the Spanish people. We need to figure out what to do before the storm hits. 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.

 It is my hope that this article will start a dialogue among the Asian investors active in the Bigger Pockets community.  As in any bubble markets, there’s a tremendous opportunity awaiting after the dust settles.

Photo: Benson Kua

About Author

Fascinated with business models more than super models. Joe is a real estate blogger from Northern NV (based in Reno) stalking the Reno- Lake Tahoe Real Estate market since 2007. He is most at ease (and peaceful) when at home spending time with his beautiful wife Anna and their two kids. (And watching the 2011 2013 NBA Playoffs.)


  1. Paolo Flores on

    Hi Joe,

    Nice arguement with the following article. I can say that the property market may slow down in the future. Maybe 5 years from now, but it wont be as drastic as what happened with U.S. But right now, the reason people are buying is to have a retirement home. In my opinion, part of the reason that the country enjoys a slow but steady climb in property prices is because of the healthy economic activity. It is driven by demand. The fact that there’s a lot of BPO companies setting offices in our country. A global electronic hub and more companies from the mining and construction sectors make the flow of money very much better for our economy. With our cheap labor and our familarity with the western cultures, we have been very competitive with our asian peers in the labor force. More jobs and salary increases are iminent with this outlook. So as a result, creating indirect demand for the real estate sector. With more spending power, this creates an indirect demand with the real estate. And I guess the fact that the interest rates are higher compared to U.S. regulates the buyers to save than to buy units for secondary purposes.

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