BSP buys time to finetune asset bubble-tracking indices

The Bangko Sentral ng Pilipinas is holding off the launch of a revamped Real Residential Real Estate Price Index (RREPI) and the debut of its Commercial Property Price Index (CPPI), which are critical parts for the analysis of policy on financial stability, as these need further preparations.

This was decided based on recommendations of the International Monetary Fund (IMF), which conducted a remote technical assistance mission to help the BSP with its property price statistics between May 16 and June 17 in 2022.

The mission was the first to be done under the IMF’s DATA for Decisions Fund, and resulted in recommendations for the medium and longer term development of reliable property price data for the BSP.

Policymakers use such data as input for policies that are aimed at reducing extreme developments like asset bubbles, as well as at guiding monetary policy and inflation targeting.

During the mission, a new methodology that the BSP intended to use for an improved RREPI and to roll out a new index on land prices was evaluated to ensure that it adheres to international standards and best practices.

“Some further improvements to the methods should be implemented, including amending the level at which the weights are applied in the aggregation process,” the IMF said in a post-mission report.

The IMF added that in the next few years, the BSP should continue to develop the statistical methodology.

In the latest RREPI that the BSP compiled, covering the third quarter of 2022, the regulator had seen signs of increased consumer pessimism toward the yearend.

The index showed that prices of new housing units across the country had risen by 6.5 percent in the third quarter while housing loans fell by 4.2 percent.

RREPI data are based on information related to actual mortgage loans granted to acquire new housing units only, which are submitted by universal, commercial and thrift banks in the country.

On a year-on-year basis, residential property prices surged by 17.5 percent in the National Capital Region and by 2.3 percent in areas outside the National Capital Region.

The BSP said this was primarily driven by the increase in the prices of condominium units and single-detached/attached houses, which outweighed the decrease in the prices of townhouses.

In the third quarter, increases in the prices of duplex housing units (27 percent), condominium units (19 percent) and single-detached/attached houses (9 percent) contributed to the growth of the overall RREPI. At the same time, prices of townhouses fell by 16.3 percent.

Further, the number of residential real estate loans granted for all types of new housing units in the Philippines decreased by 4.2 percent

Of the loans granted, 48 percent was used to fund purchases of single-detached or -attached houses; 39 percent for condominium units and 13 percent for townhouses.