Economic recovery got home prices burning in Q3

MANILA, Philippines — Housing prices in the country bounced back in the third quarter after two straight quarters of decline, the Bangko Sentral ng Pilipinas reported Wednesday, boding well for the economy’s recovery from the pandemic.

Data from the central bank showed the Residential Real Estate Price Index (RREPI) rose 6.3% year-on-year in the July-September period. On a quarter-on-quarter basis, home prices nationwide inched up 0.7%.

RREPI figures were based on actual mortgage loan data from banks. As it is, the latest reading was a turnaround from two consecutive quarters of slump, with the BSP attributing the growth to “stronger consumer demand for residential property… amid signs of economic recovery.”

Nicholas Mapa, senior economist at ING Bank in Manila, agreed with the BSP, adding that the ascent in home prices during the period was a “healthy” one. “Concerns over a property bubble, usually associated with months of steep gains, can be allayed for now," Mapa said in a Viber message.

With interest rates at record-low, data showed loans taken out to purchase new residential properties ballooned 51.1% year-on-year in the third quarter. By type of housing units, prices of condominium units grew 13.6% on-year, reversing four consecutive quarters of decline, while townhouses got pricier by 37.1%.

Those increases offset a slump in prices of single detached/attached houses and duplex housing units, which contracted at an annualized rate of 4.2% and 0.2%, respectively, last quarter.

What’s more, the property boom was sustained across the archipelago. In Metro Manila, prices of shelters grew 11.4% year-on-year while cost of housing units outside the capital region increased by 4.9%.

For Michael Enriquez, chief investment officer at Sun Life Investment Management and Trust Corp, the residential property market stayed “resilient especially in the middle- to high-income segment” despite pandemic uncertainties. 

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"Not much disruption on overseas Filipino workers. Property companies have made their payment schemes more flexible amidst the adjustments in prices in certain developments," Enriquez said in a Viber message.

But for Jun Neri, lead economist at Bank of the Philippine Islands, said the rising prices may be a cause for concern “especially in terms of affordability.”

“POGO (Philippine Offshore Gaming Operators) demand has slowed down remarkably since the pandemic and should have translated to meaningful price deflation. Ironically, property prices have continued to go up," Neri said in a Viber message. He was referring to online casino operators which left the country in droves during the pandemic after the cash-strapped government ran after those not paying taxes.

"Too much monetary accommodation (i.e. negative interest rates) may be part of the reason. For financial stability reasons, the Monetary Board may have to consider unwinding some of its emergency policy settings, especially the protracted negative real policy rate environment," Neri added.