Merly Paz, a Filipina domestic worker in Hong Kong, has stopped sending money for the construction of her home in southern Iriga City because the value of her salary in pesos, which are pegged to the U.S. dollar, has fallen sharply.

"My salary is limited, so I placed the house on hold," said Paz, 31, who has been working in Hong Kong for nearly eight years. "But the longer I'm putting it on hold, the more that prices of construction materials are rising."

And share prices of property companies have fallen because of a slowdown in overseas sales and worries of mortgage defaults.

But domestic sales are staying strong because of a large housing backlog, low interest rates, friendly payment terms, higher incomes of workers in the growing outsourcing industry and a rising expatriate population.

The slowdown in housing construction after the Asian financial crisis of 1997-98 led to a housing backlog of 3.8 million units in the Philippines, said Alex Pomento of Macquarie Securities.

About 70 percent of the population of 90 million do not own homes, he said.

Victor Asuncion of the property services company CB Richard Ellis Philippines, said, "It's end-user demand driven. It is not investor driven."

"That's the difference with the property boom before the Asian crisis," Asuncion said. "It is not speculative. There is a specific demand being addressed."

Construction is rising across much of the country, especially in Manila, a mostly low-rise city where dozens of residential towers are beginning to dot the skyline.

At least 38,000 new apartments will be available by 2013 in the Makati financial district and in the nearby Bonifacio Global City, property firms say. There has been no dip in demand.

In just four days last month, a market leading real estate company, Ayala Land, sold about a third of the 3.3 billion peso, or $81.1 million, residential tower at Bonifacio Global City.

"They say the property market is slowing," said Rex Mendoza, head of residential and corporate sales at Ayala Land. "But despite the slower U.S. sales for our premier product, we really can't feel it yet because the local market is still strong."

Reservations for all of its residential projects are up 39 percent in the first two months of the year, the same pace as for all of 2007.

But the surge in real estate prices seems to be a thing of the past. Pomento said he expected prices to rise about 6 percent in 2008 and 2009.

"The days of aggressive growth appear to be behind us," he said. "We expect price hikes to be capped by the more competitive environment."

At least partly because of that, local property firms' stock prices have fallen significantly. Ayala Land shares are down nearly 25 percent and stock in the mass housing development leader, Vista Land and Lifescapes, has fallen 50 percent in the first quarter, compared with a 17.6 percent drop in the main stock index.

Real estate firms say that the fall in shares is related to an overall weakening in the stock market and that while local demand for housing is strong, they have not given up on the overseas market.

In the first two months of this year, Ayala Land says its sales to Filipinos abroad were down to 22 percent of total housing revenue, compared with 35 percent in 2007.

To offset falling demand from the United States and Hong Kong, where the local currency is pegged to the U.S. dollar and where many overseas Filipino workers work, property firms are aggressively selling their residential projects to such workers in the Middle East and Europe.

"I think our growth potential will continue, so I'm hoping the market will recognize that," said Ayala Land's president, Jaime Ayala, adding that the company's share price was "very much driven by global sentiment."

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