The maiden results of the Residential Real Estate Price Index (RREPI) as compiled by the Bangko Sentral ng Pilipinas (BSP) are seen as a step forward to improving the level of market transparency in the Philippine property market. The RREPI, based on the quarterly reports for residential real estate loans of universal/commercial banks and thrift banks in the Philippines, will serve as a measure in assessing trends in housing prices. The RREPI tracks average changes in the prices of different types of housing units over a period of time within and outside Metro Manila (the country’s capital).
The RREPI increased by 9.2% y-o-y in 1Q16, while residential real property prices in Metro Manila grew faster than in areas outside the capital. In terms of housing unit types, condominium units posted the highest y-o-y growth in prices and were the most common house purchases within Metro Manila. The survey results suggested that the growth of loans accompanying the growth of real estate activity in the sector is still at manageable levels with adequate risk controls imposed by the BSP.
The RREPI could be the country’s best response to the clamour for credible market information, especially in the residential property market. The building boom in the last ten years has produced more than 200,000 residential condominium units in Metro Manila alone and has fuelled fears that overheating in the sector is imminent given the perceived growing vacancy rates and increasing property prices.
As more data is collected, the availability of the new property index in the Philippines, albeit limited in scope, will be a better policy tool when looking for the early signs of asset bubbles and knowing when to introduce measures to arrest any unsustainable rise of property values.
Moving forward, there is a need to cover the other property sectors, as well as establish more specialised property indices to measure returns against a benchmark. Foremost of these specialised indices (including the direct property indices and private real estate fund indices) are the listed real estate securities indices, which track the performance of REITs. As the government is expected to review the existing implementing rules and regulations of the local REIT market, there is a high probability that we will see this type of property index in the Philippine property market.
The need for high-quality, accessible data is one area where the Philippines can improve on to move up in its ranking in the JLL Global Real Estate Transparency Index. Ranking among the semi-transparent markets, the availability of the RREPI is a major leap forward in efforts to provide high-quality accessible data to local and, especially, foreign property investors. As the economy continues to grow and growth opportunities in the property investment sectors are made available, the step towards greater market transparency coupled with regulations that are more prudent is a bold move to attract more investments in the sector.
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