AN AERIAL VIEW shows the Ortigas business district in Pasig City, June 10, 2022. — REUTERS

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) after recommendations made by the International Monetary Fund (IMF).

In a report released on Tuesday, the IMF said it recommended further improvements to the methods used for the property price indices, after it conducted a 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, adding that changes should be “fully tested.”

The BSP had planned to release its first CPPI in 2021, as it broadens its watch on the commercial property sector.

It currently releases quarterly reports on RREPI, which monitors the changes in the prices of residential properties in the country. This gives the BSP insights into the property market where bank exposure is regulated.   

The IMF noted that reliable property price indices and other indicators of real estate markets are “critical ingredients” for financial stability policy analysis. Policy makers can use these indices to design macroprudential policies, and to inform monetary policy and inflation targeting.

“In the medium term, the BSP should continue to develop the statistical methodology by introducing hedonic regression for quality adjustment within the strata. The information to begin developing hedonic models are available as part of the existing data collection from the commercial banks,” the IMF said.   

The BSP should also expand the capacity of the team through training courses and further technical assistance, it added.

The IMF said the central bank also “committed to increasing the coverage of the statistics to include both cash purchases and other forms of nonbank lending.”

To access new data sources, the IMF said the central bank is also planning to convene an interagency working group on property price statistics, composed of members from the BSP, Philippine Statistics Authority, the Land Registry Authority and other agencies.   

At present, the BSP uses quarterly reports from the commercial banks for its property price statistics.

“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.

Citing BSP estimates, the IMF said lending by the banking sector accounts for about 48% of residential property transactions.     

Cash purchases or direct lending by property developers account for 23% of transactions while government-backed lending for social housing purposes, mainly by the Home Development Mutual Fund, account for 29%.    

“In the short term, the BSP could consider collecting information on residential property advertisements from real estate websites. Some examples of websites in the Philippines are Lamudi, Zipmatch, Dot Property, Craigslist and Carousell,” the IMF said, adding this can provide additional data to support the statistics.

Based on the latest data from the central bank, the RREPI rose by 6.5% year on year in the third quarter last year. This is faster than the 2.6% growth in the second quarter, and the 6.3% expansion in July-to-September period in 2021. — Keisha B. Ta-asan