Residential property price growth slows in Q3

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RESIDENTIAL property prices grew in the third quarter of 2016 but at a slower pace than the preceding quarter and from a year earlier, marked by rising vacancy rates.

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According to the Residential Real Estate Price Index (RREPI) report released by the Bangko Sentral ng Pilipinas (BSP) over the weekend, residential property prices from July to September this year increased by 2.2 percent from a year earlier.

“Residential real estate prices grew at a slower pace of 2.2 percent in Q3 2016 as the RREPI rose to 113.4 from 111.0 for the same quarter a year ago. The annual growth in residential real estate prices was lower than the 11.3 percent increase registered a quarter ago,” the BSP said in a statement.

By type of housing unit, townhouses posted the highest year-on-year growth in prices at 4.9 percent, followed by condominium units at 3.1 percent and single detached housing units by 2.4 percent, while prices of duplexes dipped by 5.1 percent.

Growth in real property prices in the National Capital Region (NCR) dropped marginally 0.2 percent from 8 percent a year ago, but prices in areas outside NCR (AONCR) grew faster by 4.9 percent compared to the 2.8 percent rise recorded in the third quarter of 2015.

“This is due mainly to the faster rate of increase in prices of single detached housing units and townhouses in AONCR compared to those of NCR. Meanwhile, the prices of condominium units increased in both NCR and AONCR,” the BSP explained.

IHS Markit Asia Pacific chief economist Rajiv Biswas said despite the strong domestic economy and rapid gross domestic product growth, the rapid rise of residential property prices in recent quarters has impacted upon affordability for new buyers, while a strong pipeline of residential project completions is expected to result in some increase in the stock of unsold properties as well as increasing vacancy rates for rental properties.

“This could dampen the outlook for the residential property market in the near term,” he said.

However, Biswas noted that the medium term fundamentals for the residential property market remain favorable, helped by the rapidly growing size of the middle class, favorable demographics due to a youthful workforce, and the strong pace of economic growth projected for the Philippines economy over the medium term.

“The buoyant growth of the IT-BPO [information technology-business process outsourcing industry]is another positive factor for the residential property market over the medium term, as IT-BPO clusters creating thousands of professional, white collar jobs continue to develop in major cities across the nation, including Manila, Cebu, Davao, Metro Laguna and Bacolod City,” he said.

By region, NCR accounted for 46.3 percent of the residential real estate loans granted in the third quarter of 2016, followed by Calabarzon (29.6 percent), Central Luzon (6.1 percent), Central Visayas (4.7 percent), Western Visayas (4.5 percent), Davao Region (3.4 percent), and Northern Mindanao (1.7 percent).

The index also showed that about seven out of 10 residential real estate loans granted were for the purchase of new housing units.

By type of housing unit, about 48 percent of residential property loans were for single detached units, followed by condominium units (44.3 percent) and townhouses (7.6 percent). Condominium units were the most common house purchases in the NCR while single detached houses were mostly acquired in AONCR.

The RREPI 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 serves as a measure to assess trends in real estate and credit market conditions in the country.

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