BSP to come up with official property price index
2013-07-26
BSP to come up with official property price index
By Diane Claire J. Jiao, Sub-Editor
THE BANGKO SENTRAL ng Pilipinas (BSP) is working on creating an official real estate price index, officials said, with a target of debuting it within the year. “We are working with the National Statistics Office (NSO) to come up with a real estate price index. It will monitor prices of houses, condominium units, office space and the like,” central bank Governor Amando M. Tetangco, Jr. said last Friday.
While the BSP currently monitors property prices, there is no index that allows it to track averages and compare these across time periods, locations and market segments.
It also relies on other indicators to assess the expansion of the real estate industry, such as price-to-earnings ratios, which measure developers’ valuations, and price-to-income ratios, which indicate affordability of property.
The NSO, said Mr. Tetangco, will collect data for the real estate price index, similar to how it produces the consumer price index that is used to measure inflation.
“My hope is that we can have it by this year,” he added.
The International Monetary Fund (IMF) has long called for the creation of a real estate price index in the Philippines. While it maintains that there is no property bubble in the country despite the industry boom, it also believes an index will help show whether price increases are still healthy or are becoming speculative.
“Publishing more information on the real estate market is very much welcome. The BSP has already been monitoring prices. It’s good that they’re thinking of formalizing it,” IMF Resident Representative Shanaka Jayanath Peiris said last Friday.
While some property firms have their own indices, their information is partial and unofficial, he noted.
“You just want a series that is consistent and fairly representative. What’s important is to have an index that is broad-based and accepted by the markets,” Mr. Peiris said.
He said much of the work in managing financial markets was about public communication and that the central bank would be able better to send signals with an official price index.
“[The index] will create a benchmark. [As a market participant,] you will understand the movement of prices and the deviations,” Mr. Peiris said.
He also urged the government to be clear in what the index will measure and how it is broken down so the market can adjust to it.
Central bank Deputy Governor Diwa C. Gunigundo, for his part, said in a text message: “The idea [of the index] is to base it on actual transaction prices.”
Julius M. Guevara, associate director of property consultancy Colliers International Philippines, said the accuracy of the data collected would be crucial and that the central bank was on the right track by focusing on actual transaction prices.
“An actual transaction is the true measure of a value since a buyer and a seller have come to terms to determine a market price,” he said in a text message.
“[This] should be the basis and not appraisal data which is based on opinions of value and, by nature, is subjective.”
One problem, though, is the availability and accuracy of data.
A survey of appraisals may be conducted more easily but is less reliable, Mr. Guevara said, adding that it is more difficult to track actual transaction prices over a period of time. He also said actual transaction prices would likely be based on deeds of sale, which can show undervaluations when buyers and sellers want to bring down their tax obligations.
