Search This Blog

Friday, April 14, 2017

What Gives in the Philippine Real Estate Market? Sales Volumes Are Up Yet House Prices Decline in 2016

According to the HLURB, sales volume increased by a dramatic 17.59% to reach 255,115 units sold in 2016 from only 216,503 units sold in 2015.  Yet prices stayed flat or declined slightly year-on-year in 2016.  The Philippine House Price Index, computed from changes in house prices in the Makati CBD as published in the Global Property Guide, fell by a slight 0.75% from year-end 2015 to reach 218.47 in 2016.

According to the Residential Real Estate Price Index put out by the BSP, prices for all types of housing grew by a marginal 0.3% year-on-year 2016, the slowest pace since the index came out in the second quarter of 2015.

Metro Manila saw a significant 8.6% year-on-year decline in the single detached housing market. In areas outside the NCR, the decline was marginal - only 0.18% in 2016. Overall, the market for single detached homes declined by 1.00% in 2016.

Price declines in the duplex market were also very significant, droppng 12.32% in 2016 alone.  The NCR singlehandedly contributed to this decline, dropping 8.80% in 2016, more than offsetting all of the gains in duplex prices outside Metro Manila, which grew by a respectable 5.50% in 2016.

The townhouse market remained healthy.  Townhouse prices increased by 6.24% in 2016 overall.  But almost all of this increase came outside Metro Manila.  Ex-NCR, townhouse prices increased by 16.31% in 2016. In the NCR, townhouse prices increased by a barely perceptible 0.08% in 2016.

Ex-NCR was also the bright spot in the condominium market.  Outside the NCR, condo prices increased by 6.24% in 2016. NCR condo prices also grew, albeit more slowly: 1.27% in 2016, bringing up the Philippine average by 1.79% in terms of condo prices in 2016.

Much of the growth, therefore, is coming not from the over-saturated NCR, but from outside of it, indicating that the benefits of economic growth are spreading out to the rest of the Philippine economy, which could result in a much healthier real estate market.

Friday, April 7, 2017

Singapore Continues its Controlled Slide of House Prices While Philippine House Prices Decline Slightly in 2016

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's home prices have now been declining for thirteen straight quarters, which, according to Bloomberg, is the longest losing streak in five years.  Home prices are still  68.93% above their year-end 2004 levels. Overall prices levels, as measured by inflation have just increased by 28.97% since year end 2004.  In other words, for the past ten years, Singaporean home prices have outpaced inflation by almost than 40 percentage points.


Neighboring Malaysia's House Price Index now stands at 235.06 as of the third quarter 2016, 135.06% higher than year-end 2004 levels.  General price levels as of the third quarter 2016 are only around 34.15% higher than their year end 2004 levels.


In Thailand, which has been experiencing political turmoil for some time, home prices have remained essentially flat since the end of 2004. Home Prices ended 2013 with the index at 100.54, just 0.54% higher than the end of 2004, but showing a substantial recovery since the recent low of 74.08 posted in the third quarter of 2009. Since 2013, home prices have rebounded to 114.69 or 14.69% higher than its year-end 2004 levels, way below its expected inflation adjusted levels. General Price levels are 34.09% above their year-end 2004 levels. In other words, Thailand Home Prices have lagged inflation by as much as 19.40% since their year-end 2004 levels.


Meanwhile, in Indonesia, home prices have shown no signs of slowing down their upward trajectory.  In fact, prices are now at 146.88 or 46.88% above their first quarter 2007 levels. Inflation, however, has marched higher.  General prices are 75.92% above first quarter 2007 levels, lagging inflation by 29.04%.


Philippine house price index stands at 218.47% as of year-end 2016 or over 118.48% 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 more than fifty percentage points.  General prices stood at 163.35% or 63.35% 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.

Saturday, March 25, 2017

Where are the Imbalances in Philippine Construction?

In our last post, Construction Gross Value as a Percentage of GDP Is at a 25 Year High! - Updated as of 4th Qtr. 2016, we came up with a chart showing this:

As of year-end 2016, this ratio stood at 12.22%, a 25-year high since 1990 and significantly higher than the average construction gross value ratio of 9.65% of GDP throughout this period. Now where are the imbalances taking place?

You'd be surprised by the results. No, not in Metro Manila or anywhere near there. As of the latest available data in 2015, Western Visayas tops the list at 23.86%, almost double the national average of 11.55%. So does Bicol, of all places. Why is that? We don't know. But we aim to find out soon enough.

Source: Philippine Statistics Authority

Friday, March 10, 2017

Construction Gross Value as a Percentage of GDP Is at a 25 Year High! - Updated as of 4th Qtr. 2016

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 4th Qtr of 2016, Construction GV as a percentage of GDP now stands higher at 12.22% 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 2.9% above equilibrium, a rise of 2.6% in just one year.  Given all the planned new projects that are already at the execution stage, the momentum in Construction Investment will continue.

Monday, March 6, 2017

US House Prices Have Climbed Upwards But So Have Incomes

In our last post, "The US Housing Bubble Has Been Fully Reflated," we discussed how US House Prices have entered bubblicious territory because because median US House Prices stood at 5.63 times median household income - two standard deviations away from the long-term average of 4.24 times median household income.  Based on what I remember of my statistics classes, the probability of this taking place is exceptionally low: only 2.5%. Since then, house prices have continued to increase:

In 2015, house prices, as evidenced by the S&P/Case-Shiller 20-City Composite Index, increased by 5.03%, but so have incomes. Real Median Household Incomes increased even faster in 2015, by 5.33% to reach $56,516 at the end of 2015:

As a result, median new home prices are now only 5.11 times median household incomes in 2015, slightly less than two standard deviations above the long-term average of 4.24 times. Prices are still elevated but no longer in true bubble territory.

Source: St. Louis FRED

Friday, February 24, 2017

Philippine House Prices Have Resumed Their Relentless Upward Climb

In the last quarter of 2016, the Philippine House Price Index climbed by 2.33% to 218.47 from a low of 213.50 in the third quarter of 2016.  Overall, house prices are still 0.94% below their peak of 220.99 posted in the first quarter of 2016.

This is similar to what happened in Hong Kong, where home prices jumped 6.91% in the third quarter of 2016.

See related post:

After a 10% Market Decline in Late 2015 to Early 2016, Hong Kong Home Prices Resume Their Relentless Upward Trend in late 2016