Houses and lots join condos to trigger record surge in property costs
MANILA, Philippines — Housing prices crushed expectations of a downturn to post their fastest growth on record at the height of coronavirus lockdowns in the second quarter, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
The annual uptick, a massive 27.1% across all home segments, demonstrated the property market’s resilience, one that surprised even analysts projecting a slump. The unexpected result bodes well for future rebound for an economy battered by the health crisis.
“It’s an unusual increase,” said Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said in a text message when sought for comment. “A crisis usually depresses demand for new housing. It doesn’t add up with the current environment.”
Demand for higher-end projects, where foreign buyers typically swarm, was cited as one major contributor for higher home prices. At the same time though, BSP said banks extending home loans, which decreased 55.2% on-year for new homes with high property costs, also saw a jump in raw materials for construction, thereby increasing overall prices of residences..
By housing type, condominium units continued to clock the fastest price gain of 30.1% year-on-year as of June. But single detached homes sprung a surprise in second quarter, with their average costs jumping 24.1% annually, the fastest on record that started only in 2015.
Prices of townhouses rose 10.8% on-year, while duplex homes went more expensive by 0.8% from year-ago levels.
“Buyers are probably looking for bigger space in less dense areas. We saw this trend during the lockdown, some were even looking for beach-side properties,” said Joey Roi Bondoc, senior research manager at Colliers Philippines, a property consultancy.
For Emilio Neri Jr., lead economist at Bank of the Philippine Islands, “massive liquidity” in the financial system helped support real estate during the hard times. This is thanks to the central bank’s aggressive easing that lowered bank benchmark rates to record-lows, and gave banks more funds to lend.
An outlier
An outlier to a series of bad economic data lately, a demand-supported property sector provides good foundation for economic recovery from the pandemic. As it is, the sector’s buoyant performance appeared to have even tempered an already massive 16.5% annual slump in economic output last quarter.
What’s more, the property boom was sustained across the archipelago. In Metro Manila, where movement restrictions were tightened to arrest coronavirus spread, prices of shelters spiked 34.9% annually driven by higher prices of single homes and condominiums that surged 70% and 36.4%, respectively.
“In short, affluent investors opted to load up on condominiums for additional alternative options or for rental/resale income when things normalize,” Nicholas Mapa, senior economist at ING Bank, said in an e-mail when sought for comment.
Elsewhere, home prices trekked at slower increase of 18.1%, with single detached homes rising faster by 21.1% on-year. “Households are likely looking for homes outside the city, presumably with more space to escape lockdowns in the city,” Mapa explained.
For Colliers’ Bondoc, cooling unemployment rate and a recovery of remittances “should have a positive impact on the residential market across the Philippines.” But ING Bank’s Mapa is pessimistic, especially with recent news of shutdown by offshore gaming firms that has taken the place of migrant workers and outsourcing offices as top property occupants.
“Going forward, we do expect the economic recession to manifest in real estate prices as rental incomes thin out with businesses and POGOs closing down,” he said.
"Meanwhile, after the initial wave, I do expect loans to the sector to continue to tank, which will also lead to lower supply, with the economy likely lacking the punch from construction," he added.
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