Cooling prices, lower rates drive housing loan surge
Home prices in the Philippines climbed in the second quarter, though at their weakest pace in more than a year, as an oversupply of condominium units dragged on the housing market and pushed developers to offer steep discounts.
In turn, the slower rise in home prices, together with falling interest rates, appeared to have encouraged banks to expand their exposure to residential real estate.
The Residential Real Estate Price Index (RPPI), a benchmark tracked by the Bangko Sentral ng Pilipinas (BSP), rose 7.5 percent in the three months through June from a year earlier, the central bank said on Friday. That was the weakest annual gain since early last year, when the index advanced 7.4 percent.
On a quarterly basis, the RPPI gained 4.2 percent, up from 2.6 percent in the first quarter. But the improvement masked sharp divergences between property types.
Condo prices fell 0.2 percent from a year earlier, reversing a 10.6-percent surge in the previous quarter amid the oversupply.
In Metro Manila, where the glut is most acute, condo prices dropped 2.2 percent, in contrast to a 6.2-percent increase in areas outside the capital.
Developers have leaned heavily on promotions to reduce vacancies, according to Colliers Philippines, a property consultancy.
In a July briefing, Colliers noted that some firms were offering discounts of up to 50 percent for spot cash payments—far steeper than the typical 10 percent markdowns seen before the condominium glut.
Houses, meanwhile, provided the lift. Prices jumped 13.1 percent in the second quarter, compared with 4.5 percent in the first. Gains were broad-based, with costs climbing 14.3 percent in Metro Manila and 12.6 percent elsewhere.
More loans
Meanwhile, home loans grew 14.7 percent in the second quarter from a year earlier, the BSP said, ending four straight quarters of contraction. The increase was in line with the central bank’s consumer expectations survey, which found more households viewing the period as a favorable time to buy property.
Amid aggressive marketing and steep promotions, lending for condominium purchases surged nearly 40 percent nationwide, a sharp increase from just 2.6 percent growth in the first quarter.
Loans for house buyers rose 2.7 percent, modest but still an improvement from a 4.4 percent decline in the previous quarter.
As it is, the BSP has entered the final phase of its interest rate-cutting run—a campaign that reduced the benchmark rate that banks use as a guide when pricing loans to a “Goldilocks” level of 5 percent.
Reaching the neutral level took a total of 1.5 percentage points cut to the policy rate during the current easing cycle. Governor Eli Remolona Jr. had said the central bank could keep its policy rate unchanged through the end of the year if inflation remains subdued and demand holds up.
