THE BANGKO SENTRAL ng Pilipinas (BSP) is
working on a residential real estate price index, which it wants to use
as a means of responding preemptively to emerging threats.
Central bank Deputy Governor Diwa C.
Guinigundo said the “surveillance tool” was being developed with the
National Statistics Office.
“With the index, you are distilling everything in one indicator so that
would mean a better monitoring of the real estate sector,” he added.
While monetary authorities currently monitor property prices, there is
no index that allows them to track averages and compare these across
time periods, locations and market segments. The central bank also
relies on other indicators, such as price-to-earnings and
price-to-income ratios, to assess the expansion of the real estate
industry.
The residential real estate price index could be rolled out “this year,”
Mr. Guinigundo said, noting that it will initially focus on residential
prices and eventually “add commercial real estate prices...”.
David T. Leechiu, Jones Lang LaSalle country head, said: “Having the
index is a welcome development. It gives more transparency because our
investment climate is opaque.”
“It will serve as a guide and be a reference point for present and
prospective investors. They will know whether the market is looking
healthy or not and they will have better confidence in investing in the
Philippines,” Mr. Leechiu added.
“Though there is no any sense of danger in the real estate market at
present because there is no oversupply, we would need this index sooner
than later because it would present more opportunities for the
Philippines.”
Neighboring Singapore has a real estate index, which calculates price
changes that take into account factors such as the property’s distance
to a top school or a metro station.
The creation of a Philippine version is in line with the BSP’s move to
improve its monitoring of banks’ real estate exposure. In 2012 the
central bank, among others required banks to report not only their loans
to the real estate sector but also their investments in debt and equity
securities issued by real estate companies.
Banks’ real estate exposure amounted to P900.1 billion as of June last
year, 6.82% higher than the P842.6 billion recorded as of March. This
accounted for 21.7% of the banking system’s total loan portfolio of P4.2
trillion, the BSP said, exceeding the 20% cap.
The central bank stressed that this was not a cause for alarm as the
breach was due to changes it made on the definition of banks’ real
estate exposure. -- ARRG
source: Businessworld
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