Fitch Ratings cites need for real estate price index for PHL

By Joann Santiago

MANILA, Sept. 25 (PNA) — Lack of data on property prices and affordability indicators hinders Fitch Ratings to properly assess credit growth on real estate but cited that central bank’s efforts to guard against any risks is a plus.

In a statement, the debt rater noted that private sector credit growth has slowed to 14.1 percent in the first half of 2015 but it remains strong from the end-December’s 19.9 percent.

Citing data from Collier’s International, Fitch said average land values in Makati City’s Central Business District (CBD) rose by over 50 percent since end-2012.

It, however, said that vacancy rate was low and growth of rents were still robust, which it said “suggest some fundamental support for current price levels.”

Amidst the lack of data, which the debt rater said it needs to assess impact of credit growth in real estate, it is hopeful for the eventual release of a residential real estate price index (RREPI) that the Bangko Sentral ng Pilipinas (BSP) is scheduled to release in the latter part of this year.

“The proactive supervision and regulation of the BSP, particularly on the introduction of real estate stress tests and caps on mortgage loan values relative to collateral, may help to contain risks,” it added.

Meanwhile, BSP Deputy Governor Diwa Guinigundo said the data cited by the credit rater “could be true but at best anecdotal.”

“We need a statistical index like RREPI to make a general characterization of the real estate sector and the likely path of property prices,” it said.

He also cited the need “to produce a decomposition into residential and commercial property prices which are driven by different dynamics.”

He even pointed out that supply for residential housing continued to face a huge backlog because of increasing number of Filipinos who worked overseas or in the business process outsourcing (BPO) as well as those who got higher paying jobs.

Construction of commercial buildings, which is demanded by the continued robust domestic growth, continues to grow but the central bank official said developers and property builders had become risk-conscious and more responsible.

Guinigundo said “the various macroprudential measures and careful monetary stance of the BSP have helped support the sustainability of this segment.”

He also said that banks that have real estate exposure have been advised to strengthen their capital base.

With these efforts, Guinigundo reiterated that asset bubble remains far from happening in the domestic economy.

“The risks of asset price inflation appear manageable and have in fact been addressed by a number of macroprudential measures,” he added. (PNA)