House prices overvalued by 10% in richest nations, Oxford economics says

House prices in the richest nations may be overvalued by about 10 per cent after a decade-long boom that’s one of the strongest since 1900, Oxford Economics says.

The British research firm identified the Netherlands, Canada, Sweden, Germany and France as the most risky property markets, basing its findings on long-term trends and price-to-rent ratios. It estimated that values across 14 advanced economies have rise 43 per cent in 10 years.

The current boom is on course to become the second-longest and third-largest in terms of price rises in 120 years, rivaled mainly by the last peak in 2006 right before the global financial crisis.

American homes in April saw the biggest price jump in more than 30 years, while U.K. properties in the same month rose the most in nearly two decades. In both markets, low mortgage rates, strong demand for larger properties in the suburbs and supply shortages have been among the drivers.

Despite smaller growth in the last two months, U.K. average house prices are projected to jump 21 per cent over the next four years, long outlasting a tax break on new property purchases phased out from July, according to real estate broker Savills published earlier this year.

High valuations and continued price inflation raise the prospect of a “big price reversal” further down the line, though slower rises in mortgage credit compared with the lead up to the financial crisis suggests much lower risks of bust, said Adam Slater, an economist at Oxford.

“A key issue for the coming years will be how real rates behave given opposing influences such as demographics, the savings glut, and the possibility of higher inflation,” the report said.

Source: Bloomberg

Construction materials price growth slows in March

The wholesale price growth of construction materials in Metro Manila slowed down in March compared to last year's rate due to the lower annual increase in electrical works, according to the Philippine Statistics Authority (PSA).

Data from the government showed that the average growth of construction materials wholesale price index (CMWPI) in the National Capital Region slowed to 0.8 percent last month from 7.5 percent in March 2023.

On a monthly basis, it was also slower from February's 1.0-percent growth rate.

"The deceleration in the annual growth rate of CMWPI was mainly caused by the lower annual increase of electrical works at 1.8 percent in March 2024 from 2.7 percent in February 2024," the PSA said in its latest report.

Structural steel also posted a 1.6 percent year-on-year growth during the month, slower from 2.5 percent in the previous month.

In addition, five commodity groups registered slower annual increases in March compared to the previous month.

Hardware posted a 3.4-percent growth in March from 4.8 percent in February; plywood with a 1.3-percent growth from 2.3 percent in the previous month; GI (galvanized iron) sheets registered a 3.2-percent growth rate from 3.6 percent; metal products, 0.8 percent from 1.1 percent; and painting works which posted a 2.3-percent growth from 4.1 percent.

Annual decreases, meanwhile, were recorded in the indices of cement at 1.7 percent in March 2024 from a 1.3 percent annual decline in February 2024, and reinforced steel, which recorded a 1.1 percent drop from a 0.9 percent decline a month earlier.

On the other hand, commodities such as sand and gravel posted higher annual growth rates at 1.3 percent in March from 1.2 percent in February 2024; PVC pipes at 0.8 percent from 0.4 percent; and fuels and lubricants at 8.7 percent from 8.0 percent.

Increase was also noted in the wholesale price of tileworks at 0.1 percent in March 2024 from an annual decline of 2.7 percent in the previous month.

"The indices of the rest of the commodity groups either retained their respective February 2024 annual rates or had zero percent annual rate during the month," said the PSA.

Source: Manila Times

NCR construction material retail price growth slowest in over four years

Retail price growth of construction materials in Metro Manila eased in March, the slowest pace in over four years, the Philippine Statistics Authority (PSA) reported on Monday.

Preliminary data from the PSA showed that the construction materials retail price index (CMRPI) slowed to 0.6% year on year in March, slower than the 1.1% recorded in February and 4.1% in March last year.

Growth in the CMRPI in the National Capital Region (NCR) was the weakest since 0.1% in December 2019.

Analysts attributed the slowdown in CMRPI to the slower demand in construction amid elevated interest rates.

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said in a Viber message that there is not much activity in the construction sector due to a cautious expansion plan amid high inflation and higher interest rates.

As of April 2024, the Bangko Sentral ng Pilipinas (BSP) kept policy rates unchanged at 6.5% for a fourth straight meeting as inflation is expected to accelerate in the coming months.

Inflation accelerated for a second month in March to 3.7% from 3.4% in February. Despite the quicker growth, March was the fourth consecutive month that headline inflation was within the BSP’s 2-4% target range.

“With interest rates remaining elevated, consumer propensity to spend on big-ticket items, including commercial and residential structures, is also constrained,” John Paolo R. Rivera, president and chief economist at Oikonomia Advisory & Research, Inc., said in a Viber message.

From May 2022 to October 2023, the BSP hiked borrowing costs by a cumulative 450 basis points (bps) to tame inflation.

CMRPI in NCR averaged 1.1% in the first quarter, significantly slower than the 5% in the first three months of 2023.

By commodity, the PSA said the slower annual increment in the heavily weighted index of tinsmithry materials was the primary driver of the slower growth of CMRPI.

Tinsmithry eased to 2.4% in March from 3.1% the previous month.

This was followed by masonry materials, which declined to 0.2%, a reversal from 0.4% in February; miscellaneous construction materials (-1.5% from -1.0%); plumbing materials (-0.2% from 0.3%); painting and related compounds (2.0% from 2.1%); and electrical materials (0.9% from 1.0%).

Only carpentry materials inched up to 0.2% in March from 0.1% last month.

Mr. Rivera said the slowdown in CMRPI may continue as there is still no clear indication of interest rates being relaxed in the coming months.

Mr. Ravelas said that a rebound is expected during the dry season, which is good for construction.

“However, higher costs could be the caveat,” he added.

Source: Business World