Land values in the country’s major business districts rose at the end of last year despite recent regulatory curbs implemented in 2014 aimed at slowing demand for new offices and homes.
The Bangko Sentral ng Pilipinas (BSP) said that, despite the rise in land values, property prices in the country were still well below the peaks reached in real terms before the 1997 Asian financial crisis.
Regulators keep a close watch on real estate prices, given the industry’s historically volatile nature that tends to affect the rest of the economy. The Asian crisis in the late 1990s, as well as the 2008 global financial crisis both trace their roots to real estate.
Capital values for office buildings in the Makati central business district in the fourth quarter of 2014 were higher in nominal terms than their quarter- and year-ago levels, the BSP said in a recent report.
“Grade A” office capital values in Makati rose to P98,000 per square meter—higher by 1.7 percent and by 9.4 percent compared to the quarter- and year-ago levels, respectively.
“Office capital values were also higher than the 1997 levels in nominal terms,” the BSP said.
In real terms, office capital values were about 54.3 percent of the comparable levels in 1997.
Also, capital values for luxury residential buildings in Makati in fourth quarter increased from their quarter- and year-ago levels. Average prices for three-bedroom luxury residential condominium units increased by 1.2 percent quarter-on-quarter and 7.1 percent year-on-year.
“Capital values for luxury residential buildings were above their 1997 levels in nominal terms. In real terms, residential capital values were about 65.2 percent of the comparable levels in 1997,” the BSP said.
Similarly, data from Colliers International indicated that implied land values in the Makati business district in the fourth quarter reached P440,000 per square meter—higher by 1.1 percent and 28.8 percent relative to the levels recorded in the third quarter of 2014 and the fourth quarter of 2013, respectively.
Implied land values in the Ortigas Center rose by 2.9 percent from the previous quarter, and by 9.6 percent from the year before to P158,500 per square meter.
Land values in Makati were slightly above their 1997 levels in nominal terms, but only about 45.6 percent of their 1997 levels in real terms, the BSP said. Meanwhile, land values in the Ortigas Center were lower than their comparable levels in 1997 in both nominal and real terms by about 81.3 percent and 35.8 percent, respectively.
In 2014, the BSP implemented measures to trim demand and keep the property sector from overheating.
Among these were restrictions on the acceptability of real estate assets as collateral for bank loans, as well as new stress tests that forced banks to put up more capital as buffer from potential losses in their property lending portfolios.