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BSP to release new commercial property price index

The central bank’s Commercial Property Price Index (CPPI) is expected to be launched within the year and it will allow regulators to better monitor banks’ financial and real estate exposures, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.


The Monetary Board, chaired by Diokno, has yet to approve the new property price index. However, Department of Economic Statistics director Redentor Paolo M. Alegre Jr. said during the virtual “GBED Talks” that the CPPI will “hopefully” get approval by the fourth quarter this year.


“The publication of the property indices will be lagged by one quarter,” said Alegre, noting that similar with the Real Residential Estate Price Index (RREPI), the new property index will also report first quarter data in June as release schedule.


Last October 2020, the BSP has started requiring banks to submit a quarterly report on appraised commercial properties (QRACP) to be used for its price monitoring of commercial real estate. The QRACP is groundwork to generate a CPPI to complement the existing RREPI.


Diokno said the release of the CPPI is part of the BSP’s expanding surveillance on banks’ financial exposures, as well as price trends in the property sector.


“Together, these two indicators (RREPI and CPPI) may be used to monitor the developments in the Philippine property sector as a whole and their linkages with the other sectors in the economy,” said Diokno.


The RREPI first launched in 2016, uses bank data on the appraised values of new residential mortgages by housing type such as single attached/attached houses, condominium units, duplexes and townhouses. Basically it is an indicator of change in the prices of residential properties in the Philippines over a period of time.


“The growth rate of the index measures house price inflation,” said Diokno. “A rising Index denotes rising residential prices on average, while a declining Index indicates the reverse.”


With the RREPI, Diokno said the BSP “is able to measure and monitor the banking sector’s exposure to the residential property sector, monitor developing price and credit trends. With better and more accurate date, BSP is able to develop timely and appropriate policies, together with other regulatory agencies, if needed, to stem the rise of systemic risk, similar to what happened in the Philippine real estate market crash, following the 1997 Asian financial crisis.”


To generate a CPPI, a complementary indicator to the RREPI, the BSP said all banks will submit a QRACP to the BSP. It said the QRACP is “necessary to generate a CPPI on a quarterly basis and address the need for a more comprehensive measure of real property prices in the Philippines.” The collected information from banks based on the commercial property report will “serve as valuable inputs in the formulation of BSP policies.”


The QRACP covers all appraised commercial properties which include property accepted as collateral in lending transactions and acquired asset in the settlement of loans.


source: Manila Bulletin

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