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Monday, March 23, 2015

Do Philippine House Prices Have More Room to Run?

Philippine House Prices continued their relentless climb in the 4th quarter of 2014, climbing 1.03% over the third quarter. To date, prices have risen over 110.23% since the fourth quarter of 2004, outpacing inflation which has caused prices to climb by a corresponding 58.21% for the same period.

Given this substantial increase, do Philippine House Prices still have more room to run?

On the face of it, the answer is yes.  Why? Because House Price Cost per Sq. M. amounts to just US$ 3,084, well below the Asian average of US$ 8,257.  Out of 10 countries listed in the Global Property Guide, Philippine House Prices rank the third lowest in the region, just ahead of Cambodia (US$ 2,913) and just behind Thailand (US$ 3,952).

According to Global Property Guide, these prices are for residential properties in the center of the most important city of each country - either the administrative or financial capital of each country.

Source: Global Property Guide

But these prices ignore affordability.  Different countries have different income levels.  Therefore, countries that have a higher income on a per capita basis can afford pricier properties.

Unfortunately, there is a dearth of data when it comes to a city by city income statistics.  The closest and most widely available data is GDP per capita, the latest of which is for the year 2013.


Based on this data, the Philippines has the third lowest GDP per capita for 2013: US$ 2,765, ahead of India (US$ 1,499) but below Indonesia (US$ 3,475).  Naturally, both Singapore and Hong Kong boast of the highest incomes and therefore have the highest property prices.

Using GDP per capita as a proxy for income, on a house price to income ratio, the Philippines does not look so reasonably priced.  After India (764 times income) and Cambodia (289 times income), the Philippines house price to income ratio comes in at 112 times income.  This is higher even that bubblelicious China, which comes in at 102 times income.  The Philippine House Price to Income Ratio is double the regional average of 50 times income.

CountryHousing Cost Per Sq. M. in Prime CBD (in USD $)Cost of 100 Sq. M. Residential Condo in CBD (in USD $)2013 GDP Per Capita (Current USD $)Residential Price/GDP Per Capita (in USD $)
Hong Kong22,8142,281,40038,12460

Source:Global Property Guide

According to the Global Property Guide, Low Middle Income and Low Income countries like India and Cambodia generally have higher price to income ratios.

On a global basis, the Philippines has the third highest House Price to Income Ratio, behind India (764 times income), Cambodia (289 times income), Gambia (137 times income). It is tied with Madagascar (112 times income) and just ahead of Russia (108 times income).  Among the Lower Middle Income countries, the Philippines ranks second behind India and just ahead of Indonesia (80 times income).

CountryHousing Cost Per Sq. M. in Prime CBD (in USD $)Cost of 100 Sq. M. Residential Condo in CBD (in USD $)2013 GDP Per Capita (Current USD $)Residential Price/GDP Per Capita (in USD $)Income Class
Russia15,7721,577,18714,612108High Income
United Kingdom33,9933,399,33941,78881High Income
Hong Kong22,8142,281,40038,12460High Income
France18,1281,812,84842,50343High Income
USA18,4991,849,90053,04235High Income
Japan10,7841,078,40038,63428High Income
Singapore15,2511,525,10055,18328High Income
Israel9,511951,10036,05126High Income
Antigua3,501350,10013,34226High Income
St. Kitts and Nevis3,496349,60014,13325High Income
Italy7,882788,19535,92622High Income
Switzerland15,0281,502,75484,81518High Income
Chile2,749274,90015,73217High Income
Finland8,259825,94349,14717High Income
Bahamas3,632363,20022,31216High Income
Canada8,288828,80051,95816High Income
Uruguay2,562256,20016,35116High Income
Sweden9,292929,21960,43015High Income
Spain4,575457,49929,86315High Income
New Zealand5,611561,10041,55614High Income
Netherlands6,522652,22150,79313High Income
Trinidad & Tobago2,334233,40018,37313High Income
Germany5,420542,03346,26912High Income
United Arab Emirates5,037503,70043,04912High Income
Australia7,626762,60067,45811High Income
Ireland5,524552,40150,50311High Income
Denmark5,711571,14259,83210High Income
Puerto Rico1,365136,50028,5295High Income
China6,932693,2006,807102Upper Middle Income
Thailand3,952395,2005,77968Upper Middle Income
South Africa4,101410,1006,61862Upper Middle Income
Belize2,322232,2004,89447Upper Middle Income
Lebanon3,693369,3009,92837Upper Middle Income
Dominican Republic2,078207,8005,87935Upper Middle Income
Brazil3,751375,10011,20833Upper Middle Income
Colombia2,379237,9007,83130Upper Middle Income
Peru1,810181,0006,66227Upper Middle Income
Jamaica1,404140,4005,29027Upper Middle Income
Mexico2,635263,50010,30726Upper Middle Income
St. Lucia1,860186,0007,32825Upper Middle Income
Malaysia2,616261,60010,53825Upper Middle Income
Jordan1,282128,2005,21425Upper Middle Income
Ecuador1,278127,8006,00321Upper Middle Income
Argentina2,813281,30014,71519Upper Middle Income
Panama2,001200,10011,03718Upper Middle Income
Costa Rica1,642164,20010,18516Upper Middle Income
India11,4551,145,5001,499764Lower Middle Income
Philippines3,084308,4002,765112Lower Middle Income
Indonesia2,766276,6003,47580Lower Middle Income
Nicaragua1,342134,2001,85172Lower Middle Income
Morocco2,015201,5003,09365Lower Middle Income
Cape Verde1,300130,0003,76735Lower Middle Income
El Salvador1,193119,3003,82631Lower Middle Income
Egypt83183,1003,31525Lower Middle Income
Cambodia2,913291,3001,007289Low Income
Gambia66766,700489137Low Income
Madagascar52052,000463112Low Income
Tanzania70070,000695101Low Income
Kenya90090,0001,24672Low Income


So do Philippine Housing Prices still have more room to run?  Maybe so.  But the odds looked stacked against it.

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