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.

Source: www.worldbank.org


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.

Country	Housing 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 $)
Cambodia	2,913	291,300	1,007	289
China	6,932	693,200	6,807	102
Hong Kong	22,814	2,281,400	38,124	60
India	11,455	1,145,500	1,499	764
Indonesia	2,766	276,600	3,475	80
Japan	10,784	1,078,400	38,634	28
Malaysia	2,616	261,600	10,538	25
Philippines	3,084	308,400	2,765	112
Singapore	15,251	1,525,100	55,183	28
Thailand	3,952	395,200	5,779	68
Average	8,257	825,670	16,381	50
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).

Country	Housing 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
Russia	15,772	1,577,187	14,612	108	High Income
United Kingdom	33,993	3,399,339	41,788	81	High Income
Hong Kong	22,814	2,281,400	38,124	60	High Income
France	18,128	1,812,848	42,503	43	High Income
USA	18,499	1,849,900	53,042	35	High Income
Japan	10,784	1,078,400	38,634	28	High Income
Singapore	15,251	1,525,100	55,183	28	High Income
Israel	9,511	951,100	36,051	26	High Income
Antigua	3,501	350,100	13,342	26	High Income
St. Kitts and Nevis	3,496	349,600	14,133	25	High Income
Italy	7,882	788,195	35,926	22	High Income
Switzerland	15,028	1,502,754	84,815	18	High Income
Chile	2,749	274,900	15,732	17	High Income
Finland	8,259	825,943	49,147	17	High Income
Bahamas	3,632	363,200	22,312	16	High Income
Canada	8,288	828,800	51,958	16	High Income
Uruguay	2,562	256,200	16,351	16	High Income
Sweden	9,292	929,219	60,430	15	High Income
Spain	4,575	457,499	29,863	15	High Income
New Zealand	5,611	561,100	41,556	14	High Income
Netherlands	6,522	652,221	50,793	13	High Income
Trinidad & Tobago	2,334	233,400	18,373	13	High Income
Germany	5,420	542,033	46,269	12	High Income
United Arab Emirates	5,037	503,700	43,049	12	High Income
Australia	7,626	762,600	67,458	11	High Income
Ireland	5,524	552,401	50,503	11	High Income
Denmark	5,711	571,142	59,832	10	High Income
Puerto Rico	1,365	136,500	28,529	5	High Income
China	6,932	693,200	6,807	102	Upper Middle Income
Thailand	3,952	395,200	5,779	68	Upper Middle Income
South Africa	4,101	410,100	6,618	62	Upper Middle Income
Belize	2,322	232,200	4,894	47	Upper Middle Income
Lebanon	3,693	369,300	9,928	37	Upper Middle Income
Dominican Republic	2,078	207,800	5,879	35	Upper Middle Income
Brazil	3,751	375,100	11,208	33	Upper Middle Income
Colombia	2,379	237,900	7,831	30	Upper Middle Income
Peru	1,810	181,000	6,662	27	Upper Middle Income
Jamaica	1,404	140,400	5,290	27	Upper Middle Income
Mexico	2,635	263,500	10,307	26	Upper Middle Income
St. Lucia	1,860	186,000	7,328	25	Upper Middle Income
Malaysia	2,616	261,600	10,538	25	Upper Middle Income
Jordan	1,282	128,200	5,214	25	Upper Middle Income
Ecuador	1,278	127,800	6,003	21	Upper Middle Income
Argentina	2,813	281,300	14,715	19	Upper Middle Income
Panama	2,001	200,100	11,037	18	Upper Middle Income
Costa Rica	1,642	164,200	10,185	16	Upper Middle Income
India	11,455	1,145,500	1,499	764	Lower Middle Income
Philippines	3,084	308,400	2,765	112	Lower Middle Income
Indonesia	2,766	276,600	3,475	80	Lower Middle Income
Nicaragua	1,342	134,200	1,851	72	Lower Middle Income
Morocco	2,015	201,500	3,093	65	Lower Middle Income
Cape Verde	1,300	130,000	3,767	35	Lower Middle Income
El Salvador	1,193	119,300	3,826	31	Lower Middle Income
Egypt	831	83,100	3,315	25	Lower Middle Income
Cambodia	2,913	291,300	1,007	289	Low Income
Gambia	667	66,700	489	137	Low Income
Madagascar	520	52,000	463	112	Low Income
Tanzania	700	70,000	695	101	Low Income
Kenya	900	90,000	1,246	72	Low Income

Source: www.worldbank.org

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

Singapore, Malaysia, and Thailand Post Flat to Declining Housing Prices, Can the Philippines and Indonesia be Not Far Behind? - 3rd Qtr 2014

Almost all countries discussed in this blog post, with the exception of Thailand, have been experiencing rapid growth in home prices that have outstripped inflation by a wide margin.  The gap between home prices and their inflation adjusted levels are at the widest ever, particularly in Singapore and the Philippines.


Singapore


Singapore's home prices slid for four straight quarters, which, according to Bloomberg, is the longest losing streak in five years.  Home prices are still  81% above their year end 2004 levels. Overall prices levels, as measured by inflation have just increased by 30.37% since year end 2004.  In other words, for the past ten years, Singaporean home prices have outpaced inflation by more than 50 percentage points.

Malaysia


Neighboring Malaysia's House Price Index actually topped out at 135.44% in the second quarter of 2011 and has posted a 3.37% decline since then to 130.87% as of the fourth quarter of 2013.  In the first quarter of 2014, home prices rebounded to 133.03% and have continued to march higher to 134.22% as of the third quarter 2014, reducing the overall decline from the peak to just 1.02%.  Home prices are just 34.22% above their year end 2004 levels.  General price levels are only around six percentage points lower, at 28.26% above their year end 2004 levels.

Thailand



In Thailand, which has been experiencing political turmoil for some time, home prices have remained essentially flat since the end of 2004. Home Prices ended 2013 with the index at 100.54%, just 054% higher than the end of 2004, but showing a substantial recovery since the recent low of 74.08% posted in the third quarter of 2009. In the third quarter of 2014, home prices have rebounded to 106.23%, or 6.23% higher than its year-end 2004 levels, way below its expected inflation adjusted levels. General Price levels are 34.68% above their year end 2004 levels.

Indonesia


Meanwhile in Indonesia, home prices have showed no signs of slowing down their upward trajectory.  In fact, prices seem to have gone parabolic, climbing 4.63% in the last quarter of 2013, from a base of 121.49% as of the third quarter of 2013 to 127.11% as of year end 2013.  In the third quarter of 2014, home prices have climbed an additional 6.64% to reach 133.75%.  Since the first quarter of 2007, home prices have risen 33.75%. Indonesian Home Prices, like Thailand, have lagged inflation since 2007.

Philippines


Philippine house price index stands at 208.08% at the end of the third quarter 2014 or over 108.08% above their year-end 2004 levels.  Philippine home prices have posted the largest 10 year gains among all the countries considered in this blog post.  Like Singapore, Philippine home prices have outstripped inflation by more than fifty percentage points.  Like Indonesia, Philippine home prices have so far no signs of slowing down their upward trajectory for the foreseeable future.   The question is, is this momentum sustainable?  Or will the Philippines and Indonesia follow its ASEAN neighbors, Singapore, Malaysia, and Thailand, in exhibiting plateauing or declining house prices?  That remains to be seen.

Source: Global Property Guide, World Bank, Trading Economics

Singapore, Malaysia, and Thailand Post Flat to Declining Housing Prices, Can the Philippines and Indonesia be Not Far Behind? - 1st Qtr 2014

Almost all countries discussed in this blog post, with the exception of Thailand, have been experiencing rapid growth in home prices that have outstripped inflation by a wide margin.  The gap between home prices and their inflation adjusted levels are at the widest ever, particularly in Singapore and the Philippines. 

Singapore

Singapore's home prices slid for a second straight quarter, which, according to Bloomberg, is the longest losing streak in five years.  Home prices are still  84% above their year end 2004 levels.


Malaysia

Neighboring Malaysia's House Price Index actually topped out at 135.44% in the second quarter of 2011 and has posted a 3.37% decline since then to 130.87% as of the fourth quarter of 2013.  In the first quarter of 2014, home prices rebounded to 133.03%, reducing the decline from the peak to just 1.78%.  Home prices are just 33.03% above their year end 2004 levels.


Thailand

In Thailand, which has been experiencing political turmoil for some time, home prices have remained essentially flat since the end of 2004. Home Prices ended 2013 with the index at 100.54%, just 054% higher than the end of 2004, but showing a substantial recovery since the recent low of 74.08% posted in the third quarter of 2009. In the first quarter of 2014, home prices have rebounded to 102.13%, or 2.13% higher than its year-end 2004 levels, way below its expected inflation adjusted levels.

Indonesia

Meanwhile in Indonesia, home prices have showed no signs of slowing down their upward trajectory.  In fact, prices seem to have gone parabolic, climbing 4.63% in the last quarter of 2013, from a base of 121.49% as of the third quarter of 2013 to 127.11% as of year end 2013.  In the first quarter of 2014, home prices have climbed an additional 2.56% to reach 130.36%.  Since the first quarter of 2007, home prices have risen 30.36%. Indonesian Home Prices, like Thailand, have lagged inflation since 2007.

Philippines

Philippine house price index stands at 199.50% at the end of the first quarter 2014 or almost 100.00% above their year-end 2004 levels.  Philippine home prices have posted the largest 10 year gains among all the countries considered in this blog post.  Like Indonesia, home prices have so far no signs of slowing down their upward trajectory for the foreseeable future.   The question is, is this momentum sustainable?  Or will the Philippines and Indonesia follow its ASEAN neighbors, Singapore, Malaysia, and Thailand, in exhibiting plateauing or declining house prices?  That remains to be seen.