Property prices slump anew in Q1

MANILA, Philippines — Property prices slumped anew in the first quarter after a slight uptick in the fourth quarter of last year amid the steady decline in prices in the National Capital Region (NCR).

The Bangko Sentral ng Pilipinas (BSP) said the Residential Real Estate Price Index (RREPI) contracted by 4.2 percent to 132.2 in the first quarter from 138 in the same quarter last year primarily driven by the fall in prices of condominium units and duplexes.

The nationwide house prices in the first quarter were also 1.6 percent lower than the 134.4 in the fourth quarter of last year due to the lower prices of duplexes, townhouses, and single detached or attached houses, which more than offset the higher prices of condominium units.

“Nationwide house prices contracted due to the subdued demand for residential prices amid the pandemic,” the BSP said.

The RREPI, launched in the first quarter of 2016, is used as an indicator for assessing the real estate and credit market conditions in the country

BSP Governor Benjamin Diokno earlier said asset pressure remains manageable despite the massive P2.2 trillion released into the financial system via the COVID-19 response measures.

“Property prices, for instance, remain broadly in line with market fundamentals and within historical range. The likelihood of asset price inflation due to a credit boom is also reduced by weak economic activity and banks’ risk aversion as these tend to dampen asset price movements and lending activity, respectively,” Diokno said.

Latest data showed prices of condominium units fell by 10.7 percent to 163.2 in the first quarter from 182.7 in the same quarter last year. Prices also declined by 15 percent in the third quarter and by 8.4 percent in the fourth quarter of last year.

“This is the third consecutive quarter that condominium prices declined owing to the lackluster demand for condominiums in the NCR,” the BSP said.

Likewise, the price of duplex housing units plunged by 20.7 percent to 132.6 from 167.3.

On the other hand, prices of townhouses increased by 8.3 percent to 157.2 from 145.1, while that of single detached or attached houses inched up by 0.2 percent to 115.6 from 115.4.

Data from the central bank also showed that residential property prices in NCR recorded a double-digit 10 percent decline to 142.8 in the first quarter from 158.7 in the same quarter last year.

“This was due to the decrease in the prices of condominium units, which outweighed the increase in the prices of duplexes, single detached or attached houses, and townhouses,” the BSP said.

On the other hand, the central bank said property prices in areas outside the NCR inched up by 0.8 percent to 127.4 from 126.4.

The bulk or 52 percent of the residential real estate loans were used for the acquisition of condominium units, followed by single detached or attached houses with 38.6 percent, townhouses with 8.1 percent, and duplex with 1.1 percent.

Diokno said the regulator has sharpened some of its macroprudential tools to monitor and contain the potential buildup of risk arising from banks’ exposure to the property sector.

“These tools include the cap on loan to value ratio, limits on real estate loans, monitoring of banks’ real estate exposures, and the real estate stress test limit,” Diokno said.

For his part, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the downward correction in property prices was due mainly to the impact of the pandemic after rising in recent years due to the boom of the Philippine offshore gaming operator (POGO) industry.

Ricafort said the displacement of about 500,000 overseas Filipino workers (OFWs), the work-from-home arrangement, the tax issue surrounding POGOs that paved the way for the downscaling of operations as well as the sharp drop in foreign tourists in the country reduced the demand for real estate and accommodation facilities.

“Offsetting factors include the sharp reduction in interest rates since the pandemic that encourage more people to take up mortgages or housing loans to finance the purchase of homes, just like what is happening in many developed countries,” Ricafort said.