BSP to launch commercial property price index

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is set to launch the commercial property price index to augment its market surveillance tools in monitoring the exposure of banks in the volatile property sector.

In his weekly press conference, BSP Governor Benjamin Diokno said the central bank is releasing the Commercial Property Price Index (CPPI) within the year to complement the Residential Real Estate Price Index (RREPI) launched in the first quarter of 2016.

”As part of expanding the surveillance and financial exposure of banks to price trends in the property sector, the BSP will be releasing the commercial property price index within the year,” Diokno said.

The BSP chief said the CPPI and the RREPI would be used to monitor developments in the property sector as a whole.

The adoption by the BSP of the RREPI several years ago has strengthened the central bank’s market surveillance activities that are essential to the identification of risks and the formulation of policies.

“Using RREPI data, the BSP is able to measure and monitor the banking sector’s exposure to the residential property sector, monitor developing price and credit trends, and develop timely and appropriate policies, together with other regulatory agencies, if needed, to stem the rise of systemic risk,” Diokno said.

The RREPI is an indicator of change in the prices of residential properties in the Philippines over a period of time. The growth rate of the index measures house price inflation. A rising RREPI denotes rising residential prices on average, while a declining RREPI indicates the reverse.

The development of the index was borne out of the experience during the global financial crisis in 2007 and 2008 that highlighted the vulnerabilities of the financial sector to domestic and external shocks due to the sizable exposures of banks in the real property sector, as well as the limited amount of information on the property exposures of banks.

“As such, it is imperative for policy makers to possess timely, relevant and accurate data on financial exposure of banks, as well as price trends, in the property sector of a country,” Diokno said.

The latest RREPI showed property prices recovered in the fourth quarter of last year after slumping for the first time in five years in the third quarter due to uncertainties brought about by the COVID-19 pandemic.