For the first time in the reporting of the Bangko Sentral ng Pilipinas’ (BSP) Residential Real Estate Price Index (RREPI), residential property prices fell in the third quarter by 0.4 percent year-on-year due to weak demand brought on by the COVID-19 pandemic.
On a quarter-on-quarter basis, RREPI declined more significantly or by 14.1 percent. The decline in the prices of condominium pulled both periods’ RREPI.
This is the first time since the RREPI was introduced in 2016 that it had a negative year-on-year growth. “The decline in the RREPI may be partly due to the weak consumer demand for houses and lots,” said the BSP. “This is consistent with the outcome of the third quarter Consumer Expectations Survey, which pointed to the low preference of consumers to buy real estate property amid the pandemic and economic uncertainty.”
All housing units – these are single detached/attached houses, duplexes, townhouses and condominium units – reported contraction in prices during the months of July to September.
Prices of condominium units dropped by 15 percent year-on-year in the third quarter while prices of duplexes dropped by 8.8 percent. However townhouses and single detached/attached houses have increased prices of 12 percent and 7.4 percent, respectively.
The RREPI declined on a quarter-on-quarter basis because of the lower prices of condominium units which dropped by 23 percent while single detached/attached houses fell by 8.8 percent. Prices of duplexes and townhouses, in the meantime, grew by 17.1 percent and 2.2 percent, respectively, based on BSP data.
Residential property prices in the National Capital Region (NCR) areas declined during the period by 12.2 percent year-on-year, but areas outside of the NCR reported growth of 6.4 percent.
“In NCR, the decrease in prices of condominium units and duplexes outweighed the increase in prices of single detached/attached houses and townhouses. Meanwhile, prices in areas outside NCR rose across all types of housing units, except for the prices of duplexes in the same period,” said the BSP.
The RREPI, which measures the average change in the prices of various types of housing units using banks’ loans data or residential real estate loans (RRELs), showed that in the third quarter, RRELs declined by 43.3 percent year-on-year but recorded a 59.7 percent growth on a quarterly basis.
“The average appraised value per sqm (square meter) of new housing units in the country contracted by 18.3 percent year-on-year and 35.6 percent quarter-on-quarter,” said the BSP.
“Likewise, negative year-on-year and quarter-on-quarter growth rates were recorded in the NCR. In areas outside NCR, the average appraised value per sqm of new properties increased year-on-year, but decreased quarter-on-quarter,” it noted.
The BSP further explained that by type of new housing units, single detached/attached houses and townhouses registered higher average appraised values year-on-year, while lower appraised values were observed for condominium units and duplexes. “On a quarter-on-quarter basis, prices of duplexes and townhouses increased, while that of condominium units and single detached/attached houses decreased,” it added.
The BSP also reported that in the third quarter, 74.9 percent of RRELs are taken out by borrowers that bought new housing units, mostly condominium units (48.7 percent), followed by single detached/attached houses (43 percent) and townhouses (7.9 percent).
Borrowers in the NCR areas used these loans to buy condominium units, while those in areas outside NCR bought single detached/attached houses.
The BSP noted that by region, 95.5 percent of total housing loans were accounted for by NCR borrowers and six other regions.
About 46.5 percent of RRELs were in the NCR and the rest were distributed as: 26.5 percent in the CALABARZON areas; 7.7 percent in Central Luzon; 5.1 percent in Western Visayas; 4.9 percent in Central Visayas; 2.8 percent in Davao Region; and two percent in Northern Mindanao.
Since 2016, the BSP has been using data from the RREPI to monitor and assess the country’s real estate and credit market conditions, and as part of early warning signals of a property price bubble.