The Bangko Sentral ng Pilipinas (BSP) plans to launch a commercial property price index within the year to supplement its Residential Real Estate Price Index (RREPI), launched in the first quarter of 2016.
During a virtual briefing held June 3rd, BSP Governor Benjamin Diokno remarked that the Commercial Property Price Index (CPPI) is part of BSP’s efforts to expand its surveillance tools that monitor the exposure of banks to price trends in the property sector.
When requested by MSN for more information on the index, BSP Department of Economics Redentor Paolo Alegre replied that it will likely roll out in the fourth quarter of the year, but offered no other information as the Monetary Board has yet to give its approval.
The index was influenced by events of the Global Financial Crisis of 2007 and 2008, which revealed the susceptibility of the financial sector to unpredictable changes spurred by the vulnerabilities of banks in the real property market, according to The Philippine Star’s Property Report PH.
Before the implementation of the index, there was also an inadequate supply of information regarding the property exposures of banks. “As such, it is imperative for policy makers to possess timely, relevant, and accurate data on financial exposure of banks, as well as price trends, in the property sector of a country,” Diokno said.
The RREPI in focus
The first of BSP’s surveillance tools to be released was the RREPI. Currently, it’s still what the BSP primarily uses to record changes in housing unit prices. When the RREPI value rises, this is indicative of a rise in average residential prices. A declining RREPI denotes the opposite.
This value encompasses single-detached houses, condominium complexes, apartments, and townhouses throughout the country. It’s calculated by taking the average appraised value of the property per square meter based on data collected from the central bank’s quarterly reports on local banks.
Since its introduction, BSP has used RREPI data to formulate relevant policies in conjunction with regulatory agencies to curb risk, according to a report by PhilStar. The government agency plans to use the CPPI in the same manner.
The most recent RREPI revealed that property values bounced back in the fourth quarter of 2020 after a slump in the third quarter prompted by the COVID-19 pandemic. This figure is further supported by data from Lamudi in a report titled One Year Later: Are Property Seekers Buying Again?
The report mentions that purchase listings encompassed over 47 percent of leads during the first half of 2020, and increased to almost 60 percent in the fourth quarter of last year.
In particular, the demand for houses earned the largest number of leads and pageviews during that period, which is in line with the data suggesting consumer trends leaning towards open areas, extra storage, and multi-purpose space.
A bullish forecast for commercial real estate
Beyond anticipating the CPPI, Lamudi’s data offers a glimpse into the current and future state of commercial real estate in the Philippines based on historical data from the preceding years.
According to a report titled What’s Next? A Forecast on PH’s Residential and Commercial Real Estate, the consumer appetite for commercial real estate is projected to rebound even further from the lull it experienced during the height of the pandemic, and even from the improvement it experienced during the fourth quarter of last year.
Makati is predicted to have the highest increase in pageviews for commercial properties, with Muntinlupa seeing the highest growth in demand, veering away to the south of Manila.
The report also cites infrastructure projects that make transportation between the province and the metro easier as a reason for increasing commercial land values. Investors are advised to look outwards from the congested capital region, towards technoparks in provincial cities for lucrative commercial real estate.
Cities with thriving central business districts such as Makati and Quezon City are projected to remain steady as a viable source of commercial and residential real estate. The report suggests that this is due to the fact that property seekers put proximity to essential establishments above their list of priorities.
The CPPI’s implementation within the year will give these projections even more weight, and offer a comprehensive view of the commercial real estate market so property seekers everywhere can make informed decisions.