New property price index out by year-end

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is looking at releasing a new residential real estate price index (RRPI) before the end of the year amid a series of delays in the launch.

BSP Deputy Governor Diwa Guinigundo said the central bank is set to launch the RRPI within the year. “It will come out before the end of the year,” he told reporters.

Aside from cost of construction materials, he said the BSP is also collating data from the banks to include the type of houses being constructed and the composition of construction materials used.

 “We are refining it and also extending the coverage. Initially it will cover Metro Manila plus cost of construction materials, and other bank data,” he said.

The price index, he explained, would aid the BSP in monitoring the real estate sector.

As early as 2014, the BSP was contemplating on launching the index that would track property prices in Metro Manila and nearby provinces.

The monitoring would be expanded to cover other key cities in the country.

The RRPI would help the central bank in addressing concerns of a “bubble” in the country’s booming residential real estate sector brought about by the improving purchasing power of Filipinos.

The BSP stepped up its watch over the real estate sector as early as 2012 by ordering banks to disclose more comprehensive reports on their exposures to property industry.

In June last year, the BSP introduced stricter rules on banks’ real estate exposure to ensure that lenders have enough capital to absorb any potential losses.

The pre-emptive macroprudential policy measure approved by the Monetary Board required stress tests for banks to determine if their capital will be enough to absorb credit risk that may arise from their exposure to the property sector.

The BSP explained universal, commercial, and thrift banks would need to meet a capital adequacy ratio of 10 percent of their qualifying capital following the stress test results.

Moreover, universal and commercial banks, along with their thrift bank subsidiaries will also need to keep a Common Equity Tier 1 level of at least six percent of their qualifying capital. Stand-alone thrift banks, meanwhile, are required to maintain a Tier 1 ratio of six percent of their qualifying capital.

Banks that fail to comply would need to explain formally to the BSP why they should not be given any further remedial action.