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Thursday, January 18, 2018

Are Philippine Real Estate Prices Starting a Downtrend?

According to the BSP's Residential Real Estate Price Index (RREPI), residential real estate prices for the entire Philippines (All Types) declined for two quarters in a row, from 111.8 as of the first quarter 2017 to 111.6 as of the third quarter 2017 - a decline of 2.02% in six  months. The decline was led by ex-NCR real estate prices, which declined by 3.14% from a high of 111.6 as of the first quarter 2017 to 108.1 in the third quarter of 2017. The decline in NCR prices was marginal, only 0.17% in six months.




 The prices for Single Detached Homes in the NCR declined by a substantial 4.58% year over year, from 80.4 as of the third quarter 2016 to 76.5 as of the third quarter 2017. Ex-NCR prices for Single Detached Homes gained 1.43% for the same time period. On an overall basis, prices for Single Detached Homes increased by 0.78% year over year.


 Duplex prices declined substantial 8.58% year-over-year, from 96.7 as of the third quarter 2016 to 88.4 as of the third quarter 2017. The decline was led by NCR Duplex prices, which declined by an astounding 13.58%, from 89.1 as of the third quarter 2016 to 77.0 a year later. Ex-NCR prices also declined during this period, but only by 5.65%.


Townhouse prices were one of the bright spots in the residential real estate sector, climbing 7.25% from the third quarter 2016 to the third quarter 2017. The gains were led by NCR Townhouses, which increased by 11.61% for the same period. Gains in Ex-NCR Townhouse prices were more muted, gaining 2.55%.





Condominiums were another bright spot in the residential real estate sector. Throughout the Philippines, prices gained 3.64% year-over-year. The gains were primarily due to Ex-NCR condominiums, which rose 13.12% year-over-year. NCR condominium prices gained only 2.42% in one year.

How reliable are these trends? BSP's Residential Real Estate Price Index (RREPI) is relatively new, having begun only in the second quarter of 2015. So, it's a little over two years old and the results have been volatile. The kinks in the statistics will, hopefully, over time, be worked out.

Read: The Unbearable Volatility of BSP's Residential Real Estate Price Index

Thursday, January 11, 2018

At What Point Will People Not In Labor Force Break 100 Million?

At what point will people who are not in the labor force break the important psychological barrier of 100 million?

The short answer? By June 2019, just in time for the 2020 Presidential elections.


Thursday, January 4, 2018

Singapore Breaks its Controlled Slide of House Prices While Philippine House Prices Hit New Highs in 2017 Q3

Almost all countries discussed in this blog post, with the exception of Thailand, have been experiencing rapid growth in home prices that have outstripped inflation by a wide margin.  The gap between home prices and their inflation adjusted levels are at the widest ever, particularly in Singapore, Hong Kong, and the Philippines.

Singapore

Singapore's home prices have now been declining for fourteen straight quarters, which, according to Bloomberg, is the longest losing streak in five years.  Home prices are still  67.32% above their year-end 2004 levels. Overall prices levels, as measured by inflation have just increased by 29.59% since year end 2004.  In other words, for the past ten years, Singaporean home prices have outpaced inflation by almost than 40 percentage points.




 Malaysia


Neighboring Malaysia's House Price Index now stands at 255.74 as of the fourth quarter 2016, 155.74% higher than year-end 1998 levels.  General price levels as of the fourth quarter 2016 are only around 49.03% higher than their year-end 1998 levels.



Indonesia

Meanwhile, in Indonesia, home prices have shown no signs of slowing down their upward trajectory.  In fact, prices are now at 149.75 as of the third quarter of 2017 or 49.75% above their first quarter 2007 levels. Inflation, however, has marched higher.  General prices are 81.32% above first quarter 2007 levels. House prices, therefore, have lagged inflation by 31.37%.





Philippines

Philippine house price index stands at 235.20% as of the third quarter 2017 or over 135.20% above their year-end 2004 levels.  Philippine home prices have posted one of the largest 10 year gains among all the countries considered in this blog post.  Philippine home prices have outstripped inflation by almost seventy percentage points.  General prices stood at 167.13% or 67.13% above their year-end 2004 levels. Like Indonesia, Philippine home prices have so far no signs of slowing down their upward trajectory for the foreseeable future.   The question is, is this momentum sustainable?  Or will the Philippines and Indonesia follow its ASEAN neighbors, Singapore, Malaysia, and Thailand, in exhibiting plateauing or declining house prices?  That remains to be seen.


 

Tuesday, December 19, 2017

Recovery in the Great Recession Has Been Amost Imperceptible - Let Me Tell You Why!

The economic recovery of the Great Recession has been almost imperceptible to most Americans. On a per capita bais, real GDP per Capita grew by 6.71% in the past ten years - or roughly a compounded annual average growth rate of only 0.72% per annum. This is far less than the so-called "Hindu Rate of Growth" threshold of 1.30% per annum.  This growth rate is so slow that it is almost imperceptible.



Sometime in 2018, if growth rates continue their current trend, something extraordinary will happen. Those who survived the Great Depression in 1940 (eleven years after the onset of the Great Depression) will be substantially better of than the survivors of the Great Recession in 2018. Real GDP Per Capita for Great Recession survivors would have grown by another anemic 0.72% per annum in 2018. But for survivors of the Great Depression era, their incomes per capita would have grown by an astounding 7.75% in just one year. Moreover, that trend will only accelerate in the next three years. By 1943, Great Depression survivors will be almost 56%  richer than they were in 1940. 

Can we expect the same for survivors of the Great Recession in the next three years? It's possible but not probable.






Thursday, December 14, 2017

Have Philippine Real Estate and Construction Loans Reached a Permanently High Plateau? - As of September 2017

Have Philippine Real Estate and Construction Loans reached a permanently high plateau? Real Estate and Construction Loans as a percentage of Total Loan Portfolio (TLP) rocketed past its historical range of 12.6% to 16.6% of TLP sometime in 2011.  That ratio peaked at 20.55% as of September 2013 but has bottomed out at 18.61% of TLP as of December 2014. This ratio has climbed back up to 19.40% as of September 2017.


Now, are we up to the levels of the previous real estate boom? (as in mid 1990s to 1997?) Honestly, we don't know.  BSP data only goes as far back as 1999 when the previous real estate bubble had already burst and the financial system was most likely deleveraging. However, we do know that investment in construction as percentage of GDP is at an all time high of 13.01% as of September 2017, surpassing the previous all time high of 12.10% of GDP in 1990.




This has led to a substantial cumulative overhang in the construction sector. Investment in the construction sector has been way higher than normal, leading to a possible investment hangover sometime down the road.



Has the Philippine Real Estate Bubble Already Burst?

Is there a Real Estate Bubble in the Philippines?

Are Philippine Real Estate Loans Out of Whack?

Monday, October 16, 2017

Have Philippine Real Estate and Construction Loans Reached a Permanently High Plateau? - As of June 2017

Have Philippine Real Estate and Construction Loans reached a permanently high plateau? Real Estate and Construction Loans as a percentage of Total Loan Portfolio (TLP) rocketed past its historical range of 12.6% to 16.6% of TLP sometime in 2011.  That ratio peaked at 20.55% as of September 2013 but has bottomed out at 18.61% of TLP as of December 2014. In 2016, this ratio has climbed back up to 19.65% as of June 2017.



Now, are we up to the levels of the previous real estate boom? (as in mid 1990s to 1997?) Honestly, we don't know.  BSP data only goes as far back as 1999 when the previous real estate bubble had already burst and the financial system was most likely deleveraging as evidenced in this chart:


Has the Philippine Real Estate Bubble Already Burst?

Is There a Real Estate Bubble in the Philippines?


Are Philippine Real Estate Loans Out of Whack?

Friday, September 8, 2017

Construction Gross Value as a Percentage of GDP Is at an All Time High! - Updated as of 2nd Qtr. 2017

Last May 4, 2015, we noted that Construction Gross Value (Construction GV) at 11.21% as of the year-end 2014 was already well above its historical average of 9.65% of GDP since 1990.  This ratio has run at an above average rate since 2009 and has already eaten away at the "cumulative underhang" or underinvestment in construction that has taken place since 2004, when the excessive investment in construction that took place in the mid to late 1990's was being absorbed.



As of the 2nd Qtr of 2017, Construction GV as a percentage of GDP now stands higher at 14.31% of GDP - an all-time high for the past 25 years.  But the real story is that Cumulative Construction GV has gone well above equilibrium and now stands at 7.2% above equilibrium, a rise of 7.1% in just eighteen months.  Given all the planned new projects that are already at the execution stage, the momentum in Construction Investment will continue.