Residential Real Estate Price Rise in Q2 2020

Nationwide residential property prices grew by 27.1 percent year-on-year in Q2 2020

 

Residential real estate prices of various types of new housing units in the Philippines rose by 27.1 percent year-on-year (y-o-y) in Q2 2020 based on the Residential Real Estate Price Index (RREPI) (Figure 1). This is the highest y-o-y growth rate recorded since the start of the series in Q1 2016.

 

Banks cited the following reasons for the uptick in real estate prices in Q2 2020: a) higher demand for high-end projects, which drove the average price per square meter (sqm) upwards; and b) rising prices of construction materials, labor costs and other indirect costs, e.g., higher marketing costs of appraised premium properties.1    Further, in terms of area and type of housing unit, the highest contributors to the increase in housing prices were loans for the purchase of condominium units (particularly those in NCR) and single attached/detached houses. Low base effects also contributed to the price growth.2

By area, residential property prices in both the National Capital Region (NCR) and in Areas Outside NCR (AONCR) register growth y-o-y

 

Residential property prices in NCR grew by 34.9 percent relative to a year ago, which is higher than the 18.1 percent growth in AONCR (Figure 1). In NCR, all types of housing units registered an increase in prices, except for duplexes as no loans for the purchase of duplexes in the said area were granted and reported in Q2 2020. Likewise, prices in AONCR increased across all types of housing units.

 

By category of housing units, residential property prices climb y-o-y across all types of dwelling

 

All types of housing units recorded a growth in prices in Q2 2020 relative to Q2 2019 levels. Prices of condominium units rose the fastest at 30.1 percent y-o-y. Similarly, prices of single detached/attached houses, townhouses and duplexes grew by 24.1 percent, 10.8 percent and 0.8 percent, respectively (Figure 2).3

Quarter-on-quarter (q-o-q), the RREPI for the Philippines rose by 10.7 percent (Figure 1) as the price increases of single detached/attached houses, condominium units and townhouses outweighed the -32.9 percent decline in the prices of duplexes in Q2 2020 (Figure 2).

 

Residential real estate loans for new housing units decrease in Q2 2020

 

In Q2 2020, the number of RRELs granted for all types of new housing units declined by 55.2 percent y-o-y and 54.9 percent q-o-q. Similarly, declines in RRELs were also observed in both NCR and AONCR (Figure 3).

 

The average appraised value per sqm of new housing units grew by 66 percent y-o-y and 24.2 percent q-o-q. All types of new housing units recorded a growth in their average appraised values from a year ago. Similarly, on a q-o-q basis, increases were also observed, except for duplexes, where a decline was recorded. Meanwhile, in both NCR and AONCR, the average appraised value per sqm of new properties grew y-o-y, while a slight decrease q-o-q was noted in the average appraised value of new housing units in AONCR (Figure 4).

 

Profile of residential real estate loans in Q2 2020

 

In Q2 2020, the purchase of new housing units accounted for 84.8 percent of residential real estate loans (RRELs). Meanwhile, by type of housing unit, more than half of residential property loans were used for the acquisition of condominium units (62.7 percent), followed by single detached/attached houses (32.1 percent) and townhouses (4.8 percent) as seen in Figure 5.

Most of the RRELs granted in NCR were for the purchase of condominium units, while RRELs granted in AONCR were for the purchase of single detached/attached houses. By region, NCR accounted for more than half (58.6 percent) of the total number of RRELs granted in Q2 2020, followed by AONCR-CALABARZON (21 percent), Central Luzon (5.5 percent), Western Visayas (3.3 percent), Central Visayas (3.2 percent), Davao Region (2.5 percent) and Northern Mindanao (1.9 percent). NCR and these six other regions combined accounted for 96 percent of total housing loans granted by banks (Figure 5).

 

About the report

 

The RREPI is a measure of the average change in the prices of various types of housing units, i.e., single detached/attached houses, duplexes, townhouses and condominium units, based on banks’ data on actual loans granted to acquire new housing units. It is a chain-linked index, which is computed using the average appraised value per square meter, weighted by the share of floor area of each type of housing unit to the total floor area of all housing units. The RREPI is used as an indicator for assessing the real estate and credit market conditions in the country. The BSP has been releasing the report since Q1 2016.

 

Data for the RREPI are obtained through BSP Circular No. 892 dated 16 November 2015, which requires all universal/commercial banks (UBs/KBs) and thrift banks (TBs) in the Philippines to submit to the BSP a quarterly report on all RRELs granted.

 

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1 The RREPI registered 149.4 index points in Q2 2020 (from an index of 134.9 in Q1 2020 and 117.5 in Q2 2019). The increase in the index may be attributed to the higher percentage of loans granted for houses with prices above Php100,000 per square meter, which comprised almost half of total loans (at 49.5 percent in Q2 2020 from 24.5 percent in Q2 2019). Consequently, the average, median and minimum price per square meter grew y-o-y by 66 percent, 122.9 percent and 317.5 percent, respectively, in Q2 2020.

2  Base effect refers to how a small absolute change from a low/high level translates to a large/small percentage change.

3 The overall RREPI for duplexes was due to the loans granted and reported in the AONCR.

 

 

Source: Bangko Sentral ng Pilipinas (BSP)