Residential real estate prices decline in Q3 2020

Residential real estate prices of various types of new housing units in the Philippines contracted by 0.4 percent year-on-year (y-o-y) in Q3 2020 based on the Residential Real Estate Price Index (RREPI). A similar trend was observed quarter-on-quarter (q-o-q) with the RREPI declining by 14.1 percent (Figure 1). This is the first time that the RREPI posted negative y-o-y growth since the start of the series in Q1 2016. The decline in the RREPI may be partly due to the weak consumer demand for houses and lots. This is consistent with the outcome of the Q3 2020 Consumer Expectations Survey (CES), which pointed to the low preference of consumers to buy real estate property amid the pandemic and economic uncertainty.^[1] 

 

Figure 1. Residential Real Estate Price Index (RREPI) by Area

Q1 2016 – Q3 2020

Residential property prices in NCR declined by 12.2 percent relative to a year ago, while prices in AONCR grew by 6.4 percent (Figure 1). In NCR, the decrease in prices of condominium units and duplexes outweighed the increase in prices of single detached/attached houses and townhouses. Meanwhile, prices in AONCR rose across all types of housing units, except for the prices of duplexes in the same period.

The change in residential property prices by type of housing units was mixed in Q3 2020. Prices of condominium units and duplexes fell in Q3 2020 relative to Q3 2019 levels by 15 percent and 8.8 percent, respectively. By contrast, townhouses and single detached/attached houses recorded a growth in prices at 12 percent and 7.4 percent, respectively, for the same period.

 

Figure 2. RREPI by Type of Housing Units

Q1 2016 – Q3 2020

Meanwhile, the q-o-q decline in the RREPI was accounted for by lower prices of condominium units and single detached/attached houses which more than offset the price increases of duplexes and townhouses (Figure 2). Notably, for both periods, the price of condominium units contracted.

In Q3 2020, the number of RRELs granted for all types of new housing units in the nation declined by 43.3 percent y-o-y, but rose by 59.7 percent q-o-q. Similarly, in both NCR and AONCR, a decline in the number of RRELs granted was registered (Figure 3).

 

Figure 3. Number of Loans Granted for New Housing Units

Q1 2016 – Q3 2020

The average appraised value per sqm of new housing units in the country contracted by 18.3 percent y-o-y and 35.6 percent q-o-q. Likewise, negative y-o-y and q-o-q growth rates were recorded in the NCR. In AONCR, the average appraised value per sqm of new properties increased y-o-y, but decreased q-o-q (Figure 4). By type of new housing units, single detached/attached houses and townhouses registered higher average appraised values y-o-y, while lower appraised values were observed for condominium units and duplexes. On a q-o-q basis, prices of duplexes and townhouses increased, while that of condominium units and single detached/attached houses decreased (Figure 4).

 

Figure 4. Average Appraised Value of New Housing Units (per sqm)

Q1 2016-Q3 2020

In Q3 2020, the purchase of new housing units accounted for 74.9 percent of residential real estate loans (RRELs). Meanwhile, by type of housing units, most of the residential property loans were used for the acquisition of condominium units (48.7 percent), followed by single detached/attached houses (43 percent) and townhouses (7.9 percent) as seen in Figure 5.

 

 

Figure 5. Residential Real Estate Loans Granted

Q3 2020

Most of the RRELs granted in NCR were for the purchase of condominium units, while RRELs granted in AONCR were for the purchase of single detached/attached houses. By region, 46.5 percent of the total number of RRELs granted were accounted in NCR, while the rest were distributed in AONCR―CALABARZON (26.5 percent), Central Luzon (7.7 percent), Western Visayas (5.1 percent), Central Visayas (4.9 percent), Davao Region (2.8 percent) and Northern Mindanao (2 percent). NCR and the said six regions combined accounted for 95.5 percent of total housing loans granted by banks (Figure 5).

The RREPI is a measure of the average change in the prices of various types of housing units, i.e., single detached/attached houses, duplexes, townhouses and condominium units, based on banks’ data on actual loans granted to acquire new housing units only. It is a chain-linked index, which is computed using the average appraised value per square meter, weighted by the share of floor area of each type of housing unit to the total floor area of all housing units. The RREPI is used as an indicator for assessing the real estate and credit market conditions in the country. The BSP has been releasing the report since Q1 2016.

Data for the RREPI are obtained through BSP Circular No. 892 dated 16 November 2015, which requires all universal/commercial banks (UBs/KBs) and thrift banks (TBs) in the Philippines to submit to the BSP a quarterly report on all RRELs granted.