Housing price growth slows in first quarter

Residential property prices nationwide rose at a slower pace in the first quarter, the Bangko Sentral ng Pilipinas (BSP) said.

Data from the central bank showed that the Residential Real Estate Price Index (RREPI) rose by an annual 6.1% in the January-March period but slowed from the 6.5% growth in the previous quarter and 10.2% expansion a year ago.

This was also the weakest growth in nationwide home prices since the 2.6% recorded in the second quarter of 2022.

On a quarterly basis, residential property prices grew by 1.1%, a turnaround from the 3.6% decline in the fourth quarter.

The RREPI tracks the average price changes of residential properties across different housing types and locations. This provides the central bank with insights into the property market, which is regulated due to bank exposure.

Joey Roi H. Bondoc, associate director for research at Colliers International Philippines, attributed the slowing price growth to weak demand for residential projects.

“We are seeing flattish growth in prices due mainly to tepid demand in the residential market. In Metro Manila, only 3,000 units were sold in the pre-selling sector, down 52% year on year. We are also seeing this in terms of launches, which dropped 59% year on year,” he said in an e-mail.

Data from the BSP showed that prices of condominium units rose by 10.2% year on year. This was faster than 4.1% a quarter earlier and 1.2% in the same period a year ago.

Duplex housing unit prices jumped by 36.2% in the first three months, a turnaround from the 33.5% contraction a quarter ago and faster than the 22.1% growth a year prior.

Prices of townhouses grew by 5.6%, faster than 4.9% in the fourth quarter and 1.8% in the same period in 2023.

Meanwhile, prices of single-detached/attached houses rose by 5.1%. This was much slower than 9.5% in the previous quarter and 17% a year ago.

Mr. Bondoc noted that horizontal projects remain attractive, especially among overseas Filipino workers (OFWs) but demand has yet to return to pre-pandemic levels.

Housing prices in the National Capital Region (NCR) went up by 2.8% in the first quarter, slower than 4.3% a quarter ago and 7.3% a year earlier.

“On a year-on-year basis, residential property prices in the NCR rose by 2.8% in the first quarter of 2024 as the growth in the prices of townhouses and condominium units outweighed the decline in the prices of single-detached/attached houses,” the BSP said.

On the other hand, housing prices in areas outside NCR (AONCR) jumped by 7.4%, slower than 7.8% in the fourth quarter and 11.4% in the year prior.

“We are projecting demand growth to come from areas outside NCR, including central Luzon, Calabarzon, Western Visayas, Central Visayas, and Davao Region especially for house-and-lot and lot only developments,” Mr. Bondoc said.

Meanwhile, residential and real estate loans granted for all types of new housing units rose by 8.9% in the first quarter, much slower than the 30.5% growth in the fourth quarter and 16% a year ago.

Broken down, housing loans in NCR and AONCR increased by 3.2% and 11.4%, respectively.

Majority of the loans were used to purchase single-detached/attached houses (43%), condominium units (34.7%), and townhouses (22%).

In the first quarter, the average appraised value of new housing units in the Philippines stood at P82,260 per square meter (sq.m.).

The average appraised value in NCR stood at P132,743 per sq.m., while the average appraised value in AONCR was at P61,163 per sq.m.

“Moving forward, we expect developers to be more cautious in launching pre-selling condominium units in Metro Manila given that the remaining inventory life (RIL), or the length of time needed by the market to absorb pre-selling and ready for occupancy (RFO) units, is still at about three years,” Mr. Bondoc said.

He also noted the impact of elevated interest and mortgage rates.

“While horizontal (house-and-lot and lot only) projects are among their preferred properties, still elevated mortgage rates compel OFW buyers to wait-and-see,” Mr. Bondoc said.

The Monetary Board has kept its benchmark rate unchanged at 6.5%, the highest in over 17 years, for a sixth straight meeting last week.

“If there is no interest rate cut for the remainder of the year, we might still see tepid demand in the residential sector. Given this, we do not see a substantial spike in demand and prices for the remainder of 2024,” he added.

BSP Governor Eli M. Remolona, Jr. has said it is still on track to easing rates as soon as August, by possibly 25 basis points (bps).

The central bank could reduce rates by 25 bps again in the fourth quarter, he added.

Source: Business World

Business, consumer sentiment worsens

Headwinds dampened both consumer and business sentiment in the second quarter, the Bangko Sentral ng Pilipinas (BSP) reported, and outlooks for the next three months also worsened.

Business confidence also weakened for the next 12 months, but that for consumers was marginally more bullish, results of a central bank survey showed.

The confidence index (CI) for confidence index for consumers worsened to -20.5 percent for the second quarter from -10.9 percent three months earlier. The business CI, meanwhile, declined to 32.1 percent from 33.1 percent.

A positive result means that optimists outnumber pessimists. The reverse applies with regard to negative CIs.

Weaker consumer confidence stemmed from concerns about rising prices, higher expenses, lower income, fewer jobs and doubts about government policies on inflation, traffic, transportation, aid and employment.

Business sentiment, meanwhile, declined due to concerns about weaker demand for goods and services, rising oil prices from international conflicts, reduced business activity from El Niño's extreme weather and persistent inflation affecting consumer spending.

The CI for consumers for the next three months turned negative at -0.4 percent from 2.7 percent. For the year ahead, however, the index picked up to 13.5 percent from 13.4 percent.

The pessimism for the next quarter stemmed from expectations of faster price increases, higher household expenses, lower income and fewer job opportunities.

For businesses, the CI for the third quarter and next year declined to 43.7 percent and 56.5 percent from 48.1 percent and 60.8 percent, respectively.

This was attributed to expected reduced demand for hardware, construction materials, food supplements and medical services, alongside higher inflation, the rainy season affecting operations, slower economic growth and impact from international conflicts.

Looking further ahead, the cautious business sentiment was said to be driven by weaker demand for hardware, construction supplies, poultry, dining and leisure activities, intense global competition, concerns over conflicts in Gaza and Ukraine, and ongoing pressure from rising food prices, notably rice.

With regard to the country's economic condition, family financial situation and family income, consumers were also less pessimistic in the second quarter: -38.8 percent from -22.9 percent, -17.1 percent from -6.5 percent and -3.5 percent from -3.2 percent, respectively.

Results for the third quarter also worsened with regard to the country's economic condition, family financial situation and family income: -7.7 percent from -4.3 percent, 1.4 percent from 5.4 percent and 5.2 percent from 7.0 percent, respectively.

For the year ahead, consumers are only worried about the country's economic condition, with the CI dropping to 3.7 percent from 6.7 percent.

Those for family financial situation and family income improved to 15.7 percent and 20.9 percent from 15.1 percent and 18.3 percent, respectively.

By business sector, meanwhile, second-quarter sentiment was less upbeat in construction (35.2 percent from 39.7 percent), services (36.5 percent from 29.1 percent), but rose for wholesale and retail (37.2 percent from 32.6 percent) and industry (30.3 percent from 26.4 percent).

"The business sentiment for Q3 2024 was less optimistic across all sectors, except for the wholesale and retail trade sector whose sentiment was more buoyant," the BSP said.

"Likewise, for the next 12 months, the outlook of businesses across all sectors was less upbeat, except for the construction sector whose outlook was more favorable for the said period," it added.

Firms anticipate a challenging financial environment and restricted credit access in the second quarter. Expectations included tighter cash positions and deteriorating financial conditions, along with continued limited access to credit.

They also expect the peso to weaken against the US dollar in the second and third quarters, but strengthen over the next 12 months.

Inflation and borrowing rates were seen rising in both quarters, along with stronger inflation expectations, and more firms predicted higher inflation compared to the first three months of 2024.

Company forecasts pointed to inflation rates of 4.3 percent in the second quarter and 4.4 percent in the next quarter, and 4.5 percent over the next 12 months, all surpassing the central bank's 2.0- to 4.0-percent target.

As for consumers, sentiment on buying big-ticket items was more pessimistic in the second quarter as the CI fell to -64.5 percent from -62.6 percent.

The percentage of households taking loans decreased slightly to 24.6 percent, down from 24.9 percent in the previous quarter, while households with savings also dropped to 31.4 percent from 33.5 percent.

Consumers expect unemployment to potentially rise and the peso to depreciate against the US dollar in the second and third quarter, and in the next 12 months.

Meanwhile, households anticipate a faster increase in interest rates in the second quarter, followed by a slower pace in the next three months and the subsequent 12 months.

Inflation is also expected to increase, albeit more moderately, reaching an average of 5.5 percent over the next year and also surpassing the BSP's target range.

Source: Manila Times

The Philippine condominium market in review

Over the past decade, condominiums have grown in popularity among Filipinos seeking new homes partly because of their versatility as a residential property and as a potential source of income. As more Filipinos move to Greater Manila and as developers build more projects vertically, the condominium market presents golden opportunities for developers and investors alike.

According to the Bangko Sentral ng Pilipinas (BSP), while real estate prices of various types of new housing units in the Philippines contracted by 3.6% in the fourth quarter of 2023, the market did rise by 6.5% year on year. Although condominium prices also declined by 8.6% in the fourth quarter of 2023, it saw a massive increase of 15.6% in the said quarter and saw a modest 4.1% growth overall for the whole year.

There is also an indication of the steady preference of Filipinos for condominiums as residential property. Data from the BSP suggests that 42.6% of Filipinos utilized their residential real estate loans (RREL) to purchase condominiums, the same percentage as those who bought single houses. Additionally, 14.7% opted for townhouses, while duplexes accounted for a meager 0.1% of the transactions.

Condominiums as second homes near tourist destinations are becoming a trend among homebuyers too. Real estate agency Santos Knight Frank mentions that a growing number of Filipinos are showing heightened interest in acquiring leisure condos outside of Metro Manila with the favored locations for these second homes including areas like Tagaytay, Pampanga, and Batangas.

Colliers’ Property Market Update for 2024 shows that the condominium markets in urban centers in Laguna, Cebu, and Cavite are improving as well with selling rates of P129,700 per square meter (sq.m.), P150,300/sq.m., and P150,400/sq.m., respectively. The same report says that the compound annual growth rate of condominium prices in those areas grew by 11.1% in Laguna, 6.9% in Cebu, and 12.4% in Cavite.

Additionally, Colliers’ Q1 2024 Metro Manila Residential Report suggests that close to 3,000 condo units were purchased in the region’s pre-selling market. This growth in demand was fueled by buyers from the lower and upper mid-income brackets, who collectively comprised nearly half of the total units sold during this timeframe, in areas like Mandaluyong, Quezon City, and Alabang-Las Piñas.

Meanwhile, the same report says that the number of pre-selling condominium launches in Q1 2024 totaled 2,600 units, a 59% decrease compared to the same period in the previous year. A potential reason for this cautiousness by developers may be due to “elevated mortgage rates, continued increase in prices of construction materials, surging land values in Metro Manila, and lengthened remaining inventory life.”

The Philippine condominium market is still a cornerstone for urban living amongst Filipinos looking to move to the metro. As the market ​​adapts to evolving consumer demands and market conditions, developers innovate and expand their portfolios to accommodate more Filipinos and investors. The condominium’s role in Metro Manila as a symbol of urban life is set to endure and shape the future landscape of Philippine real estate.

Source: Business World