Rise not of ‘bubble proportions’
RESIDENTIAL property prices continued to rise in the second quarter from a year earlier, driven by higher property prices in areas outside of the capital, the central bank said on Friday.
An analyst said that while the increase in property prices was substantial, it was not enough to form an asset bubble.
According to the Residential Real Estate Price Index report released by the Bangko Sentral ng Pilipinas (BSP) on Friday, residential property prices from April to June this year increased by 11.3 percent compared to a year ago.
“The annual growth in residential real estate prices was higher than the 9.4 percent increase posted a quarter ago,” the BSP said in a statement.
By type of housing unit, single detached posted the highest year-on-year growth in prices at 18.6 percent, followed by townhouses at 14.7 percent and duplex by 0.6 percent, while prices of condominium units dipped by 0.1 percent.
Growth in real property prices in the National Capital Region (NCR) moderated to 2.7 percent from 17.6 percent a year ago, but prices in areas outside NCR (AONCR) climbed by 18.4 percent compared to the 9.9 percent rise recorded in the second quarter of 2015.
“This is due largely to the higher rates of increase in prices of single detached housing units and townhouses in AONCR compared to those of NCR. Moreover, the prices of condominium units edged lower in NCR but increased slightly in AONCR,” the BSP explained.
By region, NCR accounted for 42.1 percent of the residential real estate loans granted in the second quarter of 2016, followed by Calabarzon (31.5 percent), Central Luzon (6.7 percent), Central Visayas (5.2 percent), Western Visayas (4.9 percent), Northern Mindanao (3.4 percent), and Davao Region (2 percent).
The index also showed that about seven out of 10 residential real estate loans granted were for the purchase of new housing units.
“I would think that the price increase is substantial, even though not of bubble proportions yet,” said University of Asia and the Pacific economist Victor Abola.
However, he noted that there were wide variations in terms of type of housing units.
“The large increase in single-detached units shows the big preference of end-users for that type. On the other hand, the slowdown in condominium prices would suggest that the segment is fairly saturated,” Abola said.
This is why some developers are shifting into regular income-generating projects via leasing, he explained.
The Residential Real Estate Price Index measures the average changes in the prices of different types of housing units over a period of time across different geographical regions and the growth rate the index records indicates price inflation, the central bank said.
It is computed as a weighted chain-linked index based on the average appraised value per square meter weighted by the share of floor area of housing units.
Besides the overall index, sub-indices have also been constructed for the different types of housing units, such as single, duplex, apartments, and residential units.
The BSP said the index could serve as a measure in assessing the trends in real estate and credit market conditions in the country.
Earlier this month, the central bank downplayed concerns that a real estate bubble is forming in the financial system, stressing that there is clear demand for residential and commercial space and banks’ exposure to the sector remains at a comfortable level.
“No, there is no evident sign of a bubble in the real estate sector today,” BSP Governor Amando Tetangco Jr. said at the time.