Property prices book steepest decline in Q2 amid year-long drop in condo prices

Property prices booked its steepest decline in the second quarter as the year-long drop in the prices of condominium units especially in the National Capital Region (NCR) dragged the entire market, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP reported that the Residential Real Estate Price Index (RREPI) for the second straight quarter shrank by 9.4 percent to 138.5 in the second quarter of the year from a year-ago level of 152.8.

“In Q2 2021, the nationwide house prices contracted by 9.4 percent year-on-year from -4.2 percent in Q1 2021 due to the continued effects of the pandemic on the residential property demand,” the BSP said.

The RREPI, launched in the first quarter of 2016, is used as an indicator for assessing the real estate and credit market conditions in the country. Since its introduction, the RREPI booked year-on-year contraction in the third quarter of 2020 as well as the first and second quarters of this year.

Despite rising COVID-19 cases, the RREPI peaked at 152.8 in the in the second quarter of 2020 after surging by 26.6 percent due to the significant decrease in the proportion or the weight of properties valued at less than P100,000 per square meter amid the pandemic.

“High base effects may also have contributed to the drop in prices given the registered peak of the index in Q2 2020,” the central bank added.

ING Bank Manila senior economist Nicholas Mapa said the latest round of real estate price reports showed that property prices fell for the second straight quarter as condominium prices dragged on the entire market. 

“Condos especially in the NCR region fell for four straight quarters as this sector reels from the pandemic which has forced home owners out into the suburbs seeking more clean and green,” Mapa added.

Data showed prices of condominium units fell for the fourth straight quarter contracting by 14.3 percent to 172.2 in the second quarter from 201 in the same quarter last year due mainly to the lackluster demand for condominium units in NCR as more families sought refuge in the provinces to avoid the strict lockdown and quarantine measures in NCR.

Likewise, the prices of single-detached housing units also shrank by 7.4 percent to 118.1 in the second quarter from 127.5 in the same quarter last year.

In contrast, the price of duplex housing units surged by 28.9 percent to 144.7 from 112.3, while that of townhouses went up by 15.1 percent to 174.7 from 151.8.

As more families return to the provinces as the country continues to struggle to contain the COVID-19 pandemic, property prices in NCR fell by 18.3 percent to 147.6 from 180.6, marking four consecutive quarters of decline since the third quarter of last year.

Likewise, the BSP said property prices in areas outside NCR slipped marginally by 0.6 percent to 133.9 from 134.7 as the drop in the prices of single detached or attached houses more than offset the growth in the prices of townhouses, duplexes, and condominium units

Quarter-o-quarter, property prices in the country increased by 4.8 percent to 138.5 in the second quarter from 132.2 in the first quarter. Real estate prices in NCR increased by 3.4 percent, while prices in areas outside NCR went up by 5.1 percent.

Mapa added rental price inflation remains subdued with the latest consumer price index (CPI) reading showing a print of 1.1 percent. 

“Not exactly the telltale signs of a property bubble about to burst,” he said.

According to the Dutch financial giant, calls for a hurried removal of policy support stem from unwarranted fears of asset price bubbles formed by months of negative policy rates. 

“And although prolonged periods of negative rates are not ideal, the BSP signals that there is not much evidence to support these claims of these negative repercussions,” Mapa said.

The economist explained emphasis has emerged on the so-called “scarring effects” of the prolonged downturn in economic activity as the economy struggles through a protracted recession.

“Early signs of scarring effects are now evident, which may have pushed authorities to get the economy back on its feet at the earliest. Just like anytime we are healing from a wound however, we oftentimes cannot resist the uncontrollable urge to pick at and remove the scab formed over the injury,” he said.

Mapa added the premature removal of the scab often backfires as the wound has not completely healed, resulting in an even uglier scar or even worse, a reinfection.