BSP says real estate market to recover next year as economy improves

The real estate market is seen recovering next year as the country continues to rebound from the pandemic induced recession, according to Bangko Sentral ng Pilipinas Governor Benjamin Diokno.

Diokno said the real estate and construction sub-sectors have started to recover in the second quarter amid the gradual easing of restrictions on mobility and economic activity after contracting throughout 2020 and the first quarter of 2021.“The BSP anticipates that activity in the real estate market will recover in line with rebound in overall economic growth in 2022,” Diokno said. He expects the country’s gross domestic product (GDP) to grow by more than six percent this year after averaging 4.9 percent from January to September.


The Philippines booked a faster-than-expected GDP expansion of 7.1 percent in the third quarter. It exited recession that stretched five quarters with a GDP growth of 12 percent in the second quarter from a 3.9 percent contraction in the first quarter.
The country slipped into recession last year as the GDP shrank by a record 9.6 percent when the economy stalled due to the imposition of the longest and strictest lockdown in the world to slow the spread of the deadly COVID-19. 

Real estate demand slipped due to the uncertainties brought about by the global health crisis as capital values for office and residential units in the country’s major commercial and business districts slumped in 2020.

Based on the latest Residential Real Estate Price Index (RREPI), the residential real estate prices of various types of new housing units declined further in the second quarter of this year.

Nationwide house prices contracted by 9.4 percent year-on-year in the second quarter this year slower than the 4.2 percent contraction in the first quarter as the COVID-19 pandemic hit demand.

“However, high base effects may also have contributed to the significant decline during the period as the index peaked in Q2 2020 while posting a 4.8 percent increase quarter-on-quarter,” Diokno said.

Likewise, Diokno added the national Commercial Property Price Index, which measures the average changes in appraised values of commercial properties, showed a deceleration in growth in the second half of last year.

According to the BSP, the real estate industry is viewed as an important sector in the BSP’s conduct of monetary policy and financial supervision.

“First, asset prices affect volatility in general price levels and economic output.

Also, volatility in asset prices, which could result from undue speculation or bubbles, may give rise to widespread financial instability,” Diokno said.

The BSP chief said real estate is a credit-intensive good but is one of the most illiquid assets of financial institutions.

According to him, the central bank’s policy actions affect the movements and behavior in the property market.

For one, DIokno said a hike in policy rate lowers the value of asset holdings of individuals and financial institutions, potentially making credit financing more costly for both buyers and property suppliers.

Real estate loans grew by 6.1 percent to P2.3 trillion as of end June this year. The real estate exposures of banks are largely composed of real estate loans at 85.4 percent of the total.

Likewise, banks have also invested in debt and equity securities, the proceeds of which are used to finance real estate activities, although at a smaller magnitude.

Diokno said banks have remained prudent in their assessment of real estate loans as the ratio of overall non-performing real estate loans to total real estate loans remained at single digit level.

“The BSP foresees that lending to the sector will remain a priority area for banks for the years ahead,” Dioko added.

Based on the First Semester Banking Outlook Survey, lending to real estate activities would be among the primary services of corporate and retail segments of banks for the next two years.

He cited the firm demand for real estate given the national government’s strategy of establishing safe, resilient, and sustainable communities under the Philippine Development Plan.

“There is greater urgency to achieve this goal now more than ever due to the propensity of the COVID-19 virus to propagate in densely populated communities and in areas with poor sanitation and access to water,” he said.

Latest

Discovery Samal helps strengthen Davao tourism

With an approximate area of 5 hectares, Discovery Samal lies along the coast of Samal Island—a sprawling enclave offering carefully curated dining...

Royal Enfield launches new flagship store in Quezon City

Royal Enfield, the oldest motorcycle brand in continuous production, is enhancing the accessibility of its motorcycles, service, and accessories with the launch...

Once Again, ZamPen!

“Basilan province has been peaceful for a long time.” This was Mayor Sitti Djalia A. Turabin-Hataman’s (Mayor Dadah) pronouncement when she spoke...

These minimalist furniture pieces are made from recycled plastic

In the circular economy of plastics, plastic is viewed as a valuable material like wood and glass and can be reused continuously....

Spotlight on retail: Villar Convention RISE

Villar Group holds third edition of successful convention series Retail is alive and booming again with revenge spending brewing...