No asset bubble Philippines property sector vibrant

Lawrence Agcaoili - The Philippine Star

MACTAN, Cebu, Philippines – The country’s property sector remained vibrant in the first quarter, according to the Residential Real Estate Price Index (RREPI).

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo told participants in the central bank’s 12th Media Lecture Series the RREPI increased 9.2 percent in the first quarter from 5.1 percent in the fourth quarter of last year. 

The RREPI in the National Capital Region (NCR) went up to 9.7 percent from 6.3 percent, while that of areas outside NCR (AONCR) increased to 9.4 percent from 5.9 percent.

“This represents a vibrant housing industry in the Philippines and the robustness of this conclusion is confirmed by the trends in consumer prices as well as the recent result of the Consumer Expectation Survey,” he said.

The Consumer Expectations Survey (CES) for the first quarter showed the overall confidence index rising to -5.7 percent from -8.1 percent in the fourth quarter of last year, matching the all-time high of -5.7 percent recorded in the second quarter of 2013.

The robust confidence of Filipino consumers was attributed to the higher election-related spending. 

Guinigundo said real property price movements in NCR and AONCR relatively follow the same pattern from the first quarter to the third quarter in 2015 with growth rates in AONCR at the lowest.

He pointed out year-on-year growth of real property prices in AONCR increased at a faster rate starting in the third quarter of last year due to higher growth rates in prices of townhouses and condominium units.

He said condominium units posted the highest year-on-year growth in prices at 12.9 percent followed by townhouses at 8.5 percent.

Furthermore, about seven out of 10 residential real estate loans granted were for the purchase of new housing units. 

“Condominium units were the most common house purchases in NCR, while in AONCR, single detached houses were the most popular,” he said. 

Data showed NCR accounted for half or 50.4 percent of the residential real estate loans granted in the first quarter followed by Calabarzon with 28.4 percent, Central Luzon with 7.6 percent, Western Visayas with 3.8 percent, and Central Visayas with 3.3 percent.

“Because of the vibrant nature of the housing industry, asset price inflation is quite remote because it is driven by robust demand, not oversupply,” Guinigundo said.

The BSP started collecting data from banks last November through the issuance of a circular requiring all universal and commercial banks as well as thrift banks to submit quarterly reports on Residential Real Estate Loans granted to help detect macro-prudential risks stemming from the real estate market.

The construction of RREPI based on banks’ approved housing loan applications is a first in the Philippines and is expected to provide a valuable tool in assessing the real estate and credit market conditions in the country. 

The availability of data on property prices is one of the information gaps identified in the Group of Twenty (G-20) report following the Global Financial Crisis, and is also included in the Special Data Dissemination Standard (SDDS) Plus categories under Financial Soundness Indicators that member countries of the International Monetary Fund should adhere to within five years from the time the country signifies its intent to participate in this global undertaking.

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