BSP: Elevated borrowing costs tempered home prices in Q4 2023

MANILA — Home prices in the Philippines rose at a slower pace in the final quarter of 2024 amid a high interest rate environment that weighed on demand for fresh housing loans, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.

Prices of various types of new housing units nationwide rose by 6.5 percent year-on-year in the fourth quarter, easing from the 12.9-percent gain recorded in the preceding three months, central bank data showed.

On a quarter-on-quarter basis, home prices contracted by 3.6 percent, a reversal from the 3.4 percent sequential growth chalked up in the third quarter.

The report of the BSP measures the average change in the prices of various types of housing units based on data from banks on actual mortgage loans granted to purchase new housing units. The central bank excludes pre-owned or foreclosed properties in the quarterly tracking.

Nicholas Mapa, senior economist at ING Bank in Manila, said demand for new home loans was tempered by elevated borrowing costs as a result of the BSP’s aggressive anti-inflation rate hikes.

Elevated borrowing costs

“Higher borrowing costs continue to weigh on the sector and on capital formation in general,” Mapa said in a Viber message.

At its meeting last February, the BSP left its policy rate unchanged at 6.5 percent, the highest in nearly 17 years, amid persistent risks to inflation.

Banks typically use the benchmark rate of the BSP as a guide when charging interest on loans, including those that consumers tap to buy new houses.

READ: In a ‘prudent’ move, BSP keeps key rate at 6.5%

Data from the central bank showed home loans extended by lenders in the fourth quarter went up by 30.5 percent during the October-December period, a turnaround from the 1.8-percent decline in the third quarter.

But despite the rebound in home loans, Mapa continued to see a “subdued” performance by the sector.

READ: Housing loans feel pinch from BSP’s hawkishness

“With BSP retaining rates at these restrictive levels, we can expect growth for the sector to remain subdued,” he added.

By housing type, costs of single-detached/attached houses registered the highest growth rate at 9.5 percent. This was followed by townhouses at 4.9 percent and condominium units at 4.1 percent.

On the flip side, prices of duplex housing units decreased by 33.5 percent. —Ian Nicolas P. Cigaral