THE PHILIPPINE central bank delayed the release of its updated Residential Real Estate Price Index (RREPI) and the launch of its first Commercial Property Price Index (CPPI) to accommodate recommendations from the International Monetary Fund (IMF).
The IMF said in a report released on Tuesday that it recommended further improvements to the methods used for the property price indices. This follows the IMF’s technical assistance mission between May 16 and June 17 last year.
“Some further improvements to the methods should be implemented, including amending the level at which the weights are applied in the aggregation process. The BSP decided to delay the launch of the updated RREPI and new CPPI to implement these changes,” it said. The IMF added that changes should be “fully tested.”
The central bank initially planned its first CPPI release in 2021, as it further monitors the commercial property sector. The bank currently published quarterly reports on RREPI. The reports monitor changes in the prices of residential properties in the Philippines, giving the BSP insight to the property market. Bank exposure in this market is currently regulated.
The IMF noted that reliable property price indices and other indicators of real estate markets are among the “critical ingredients” for financial stability policy analysis, which could be used by policy makers to design macroprudential policies, inform monetary policy and target inflation.
The IMF recommends continued development of the statistical methodology in the interim. According to the IMF, this should be done by “by introducing hedonic regression for quality adjustment within the strata.” It further adds that “the information to begin developing hedonic models are available as part of the existing data collection from the commercial banks.”
Further recommendations include capacity building through training courses and further technical assistance. The report also mentioned the central bank’s commitment to increase the coverage of the statistics to include both cash purchases as week as other forms of non-bank lending.
“The BSP are in the early stages of researching new data sources for their property price statistics. The recommended approach devised during the mission are only initial steps. It will take time and resources to realize the goal of moving to new administration data sources,” the IMF said.
To this end, the BSP is planning to establish an interagency working group on property price statistics. The group will be composed of members from the BSP, Philippine Statistics Authority, the Land Registry Authority, and other agencies.
Information on residential property advertisements from real estate websites can also be collected to provide additional supporting data, according to the IMF.
BSP estimates that 48% of residential property transactions used bank lending while 23% were cash purchases or direct financing from real estate developers. Government-backed loans for social housing, mostly from the Home Development Mutual Fund, contribute 29%.
The RREPI increased by 6.5% year over year in the third quarter of last year, according to the most recent figures from the central bank. This is quicker than both the second quarter’s 2.6% growth and the 6.3% increase in the July to September period of 2021.
