Philippines’ Housing Market in Free-fall
The Philippines’ decade-long housing market boom is over, with a severe coronavirus-induced economic recession. The government’s failed pandemic response has made things even worse.
The average price of a luxury 3-bedroom condominium unit in Makati central business district (CBD) plummeted by a whopping 20.2% during the year to Q1 2021 to PHP 196,410 (US$4,042) per square metre (sq. m.), according to Colliers International. This was in sharp contrast to a 0.8% rise in Q1 2020 and its biggest y-o-y fall ever recorded. In fact, when adjusted for inflation, prices declined even more by 23.6% y-o-y in Q1 2021. On a quarterly basis, condominium prices in Makati CBD fell by 2.5% (3.8% inflation-adjusted) in Q1 2021.
Nationwide, the house price decline is less severe. During the year to Q1 2021, the nationwide residential real estate price index fell by 4.2% (-8.3% inflation-adjusted), according to the BangkoSentral ng Pilipinas (BSP), the country’s central bank. Quarter-on-quarter, the index dropped 1.6% (-2.9% inflation-adjusted) in Q1 2021. The residential real estate price index, published every quarter, is based on bank reports on residential real estate loans.
With continued global uncertainties brought by the COVID-19 crisis and rising political instability associated with the 2022 national elections, the housing market is expected to remain depressed this year, as potential homebuyers are expected to take a “wait-and-see” approach in the short term.
The Philippine economy continues to struggle in Q1 2021, with real GDP shrinking by 4.2%, marking its fifth consecutive quarter of y-o-y economic decline, according to the Philippine Statistics Authority (PSA). The reimposition of quarantine restrictions amidst the surge in infections hampered business and consumer activity.
In current price terms, both rental rates and property values are already far above 1997 levels. Yet in 2019 before the coronavirus outbreak, residential property prices were still about 10% below pre-Asian Financial Crisis levels in real, inflation-adjusted terms. Worse, the pandemic quickly offset most of the gains in recent years, causing real prices in Q1 2021 to fall back to almost 30% below pre-Asian Crisis values.