According to the BSP, Philippine Real Estate Prices in 2018 Q1 Posted Gains but Single Detached Homes Declined

According to the BSP's Residential Real Estate Price Index (RREPI), residential real estate prices for the entire Philippines (All Types) increased by 2.11% year-on-year (yoy). Most of the increase took place in the NCR region, which increased by 2.70% yoy in 2018 Q1.  Ex-NCR increased by just 0.90% yoy for the same period.

The prices for Single Detached Homes in the NCR declined by a substantial 5.33% year over year, from 91.9 as of the first quarter 2017 to 87.0 as of the first quarter of 2018. Ex-NCR prices for Single Detached Homes decllined by -0.37% for same time period. On an overall basis, prices for Single Detached Homes declined by -0.56% year over year.

Duplex prices increased very substantially. NCR prices increased by 465.77% for the year leading up to the first quarter of 2018. For Ex-NCR, the increase in duplex prices was much more muted, only 4.16% year on year for the same period. Overall, Philippine duplex prices rose by 44.19% year on year, from 91.2 in 2017 Q1 to 131.5 as of 2018 Q2.

Townhouse prices also increased substantially year on year. NCR townhouses increased in price by 9.06% for the year. Ex-NCR townhouses increased by 15.64% for the same period. Overall, Philippine townhouse prices increased by 7.26% year on year to reach 122.4 in 2018 Q1, up from 107.7 in 2017 Q1.

Condominiums were another bright spot in the residential real estate sector. Throughout the Philippines, prices gained 2.03% year-over-year. The gains were primarily due to NCR condominiums, which rose 3.31% year-over-year. Ex-NCR condominium prices declined by -3.13% 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

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

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

Perhaps because the index has been in its infancy but according to BSP's Residential Real Estate Price Index (RREPI) investors in residential real estate have been experiencing a nausea-inducing roller-coaster ride in terms of asset prices.

The swings in the areas outside the National Capital Region (Ex-NCR) are particularly problematic. Within the past two years, RREPI - All Types for the Ex-NCR area has swung from a high of 125.7 in the second quarter of 2016 from a low of 106.2 as of the 2nd Qtr. of 2015, an increase of 15.51% in just one year. Then in the next quarter, the index drops by 10.74% to 112.2 as of the 3rd Qtr of 2016. The RREPI - All Types index for the Ex-NCR area now rests at 116.8 as of the 1st Qtr 2017 or 4.10% higher than what it was just two quarters ago.

This volatility of the Ex-NCR RREPI-All Types has influenced large swings in the overall Philippine RREPI-All Types. Since its inception, the nationwide index has swung 10.18% from bottom to top. No doubt, the volatility of the Philippine-wide RREPI-All Types was tempered by the low volatility of the NCR RREPI - All Types, which fluctuated by only 2.63% from peak to trough.

The same dynamic has been playing out as you drill down into the index's sub-sectors, whether they be Single Detached Homes, Duplex, Townhouses, or Condominiums. Ex-NCR is volatile while NCR has smoother fluctuations, leading to a more volatile nationwide index for each sub-sector.

The Philippines was one of the last countries in the ASEAN to institute a National Residential Real Estate Index. Other countries have done this much sooner. However, late is better than never. In the meantime, for planning purposes, the index has limited utility.

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.