How Crazy is the Philippine Real Estate Market? Prices have Climbed Over 63% Since Duterte Took Office!

Philippine house prices have gone parabolic. They have climbed 63.33% since President Duterte took office in the second half of 2016. Year-on-year price increase as of the 4th Qtr 2019 is an astounding 26.28%. Prices have outpaced inflation by a wide margin, 169.37 percentage points.

How long can this go on? Not long, considering sales volumes dropped by more than  25% in 2018, indicating that more and more people cannot afford the high price levels.

How Crazy is the Philippine Real Estate Market? Prices have Climbed Almost 50% Since Duterte Took Office!

Philippine house prices have gone parabolic. They have climbed 49.30% since President Duterte took office in the second half of 2016. Year-on-year price increase as of the 3rd Qtr 2019 is an astounding 21.20%. Prices have outpaced inflation by a wide margin, 139.88 percentage points.


How long can this go on? Not long, considering sales volumes dropped by more than  25% in 2018, indicating that more and more people cannot afford the high price levels.

While Philippine House Prices Rose Sharply in 2018, Sales Volumes Fell. Is this the Start of the Real Estate Crash?

In a classic technical analysis indicator, Philippine Home Prices rose by 15.40% in 2018 while sales volumes fell by a startling 25.55% over the previous year, indicating that fewer and fewer people could afford the higher prices.

Despite this, House Prices, at least in the Makati CBD, continued to rise even further, by 10.07% as of the second quarter of 2019.

Today, the BSP reported that its Residential Real Estate Price Index (RREPI) fell by 2.08% on a Philippine-wide basis and across all types. Prices in areas outside the National Capital Region (Ex-NCR) fell while real estate prices in the National Capital Region (NCR) stayed about flat.

Although this is only a slowdown and a very marginal one at that, it could lead to a crash as the market clears.

This is Even Nuttier! When's the Crash? Philippine Home Prices Have Gone Even More Parabolic!

This is Even Nuttier! When's the Crash? Philippine Home Prices Have Gone Even More Parabolic!

Philippine Home Prices have gone parabolic. Home prices are now 125.63% above their inflation-adjusted basis.

On a year-over-year basis, home prices have increased almost 20% year-on-year since the second quarter  of 2018. Since the third quarter of 2016, home prices have climbed 43.39%. This pace is unsustainable and will not last.

This is Nuts. When's the Crash? Philippine Home Prices Have Gone Parabolic!

Philippine Home Prices have gone parabolic. Home prices are now 116.03% above their inflation-adjusted basis.

On a year-over-year basis, home prices have increased almost 19% since the first quarter  of 2018. Since the third quarter of 2016, home prices have climbed 38%. This pace is unsustainable and will not last.

Philippine House Prices are Still Accelerating! - As of December 31, 2018

Despite the gloomy global macroeconomic environment for emerging markets, Philippine House Prices continued to accelerate in the fourth quarter of 2018. The Philippine House Price Index (culled from data from Colliers International Philippines on Luxury 3BR Condominiums in the Makati CBD), accelerated by 5.00% alone in the fourth quarter of 2018. This is the fastest quarter-on-quarter growth since the second quarter of 2013, when prices rose by 6.92% over the previous quarter. The index now stands at 278.21, almost three times more than its base of 100.00 since the fourth quarter of 2004. The index is also 97 percentage points higher than its inflation adjusted basis.

Source: Colliers International Philippines

Philippine House Prices Hit New Peak While Sales Volumes Drop Sharply in the 1st Semester of 2017

In the first half of 2017, the Philippine House Price Index hit a new peak of 232.41. This is 3.09% higher than the previous peak of 225.44 posted in the first quarter of 2017 and 8.05% on a year-on-year basis. From 2004 to the present, the Philippine House Price Index has climbed much faster than inflation. The gap between current house prices and house prices adjusted for inflation stands at its highest ever, 66.52%.  Meaning, had house prices merely tracked inflation since 2004, the Philippine House Price Index would now stand at just 165.89 as of the first half of 2017.

Source: Collier's International Philippines, Makati CBD Prices

Sales volumes, as indicated by the HLURB Licenses to Sell Statistics, have shown a dramatic slowdown in the first half of 2017. Annualized Sales Volumes now stand at 171,172 units for the first half of 2017. This is off by 34.20% since year-end 2016.  This sales volume now stands at slightly higher than the 170,379 level posted at year-end 2011 and below the 172,967 level posted almost ten years ago at year-end 2007.  If sales volumes do not pick up in the second half of 2017, the long-term upward trend in ever increasing sales volumes that has been in place since 2001 would have been broken, indicating a real estate bear market is imminent.

Source: HLURB Licenses to Sell

Singapore, Hong Kong, and Thailand Post Flat to Declining Housing Prices, Can the Philippines and Indonesia be Not Far Behind? - 2nd Qtr. 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



Singapore's home prices have now been declining for eleven straight quarters, which, according to Bloomberg, is the longest losing streak in five years.  Home prices are still  70.38% above their year-end 2004 levels. Overall prices levels, as measured by inflation have just increased by 29.09% since year end 2004.  In other words, for the past ten years, Singaporean home prices have outpaced inflation by more than 40 percentage points.

Thailand




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 In the first quarter of 2016, home prices have rebounded to 16.41, or 16.41% higher than its year-end 2004 levels, way below its expected inflation adjusted levels. General Price levels are 33.78% above their year-end 2004 levels. In other words, Thailand Home Prices have lagged inflation by as much as 17.36% since their year-end 2004 levels.

Indonesia




Meanwhile, in Indonesia, home prices have shown no signs of slowing down their upward trajectory.  In fact, prices seem to have gone parabolic, climbing 4.63% in the last quarter of 2013, from a base of 121.49 as of the third quarter of 2013 to 127.11 as of year end 2013.  In the second quarter of 2016, home prices have climbed an additional 16.86% to reach 143.97.  Since the first quarter of 2007, home prices have risen 43.97%, while inflation has raised general prices by 73.17% during the same period. Indonesian Home Prices, like Thailand, have lagged inflation since 2007.

Hong Kong


Hong Kong real estate prices have leaped by 215.30% in a little over 10 years to reach a staggering 315.30 as of the second quarter of 2016 from a base of 100 since year-end 2004. General inflation levels have just climbed 41.39% during this same period.  In other words, Hong Kong home prices have outpaced inflation by an astounding 173.90% during this period, the highest rate of appreciation in the countries covered in this post.


However, it is important to note that Hong Kong Home Prices have also entered into a correction phase, declining by 9.99% from its recent peak of 350.31 as of the third quarter of 2015 to just 315.30 as of the second quarter of 2016.  There is a distinct possibility that Hong Kong Home Prices may have entered a bear market just as it did in the aftermath of the 1997 Asian Financial Crisis. See previous post: How low can Hong Kong Property Prices Go? Some Clues from the Not Too Distant Past

Philippines

For the first time in years, Philippine House Prices seem to be on the decline.  As of the second quarter of 2016, the Philippine House Price Index stood at 218.29 or 1.22% below the peak of 220.99 as of the first quarter of 2016.  However, they still stand at 118.29% above their year-end 2004 levels.  Philippine home prices, with the exception of Hong Kong, have posted the largest 10-year gains among all the countries considered in this blog post.  Like Singapore and Malaysia, Philippine home prices have outstripped inflation by over fifty-six percentage points.  Like Indonesia and Hong Kong, 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.