BSP to release new real estate price index before end 2015

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BSP to release new real estate price index before end 2015
The index is meant to aid the BSP in monitoring property prices in Metro Manila and nearby provinces

MANILA, Philippines – After a series of delays, the Bangko Sentral ng Pilipinas (BSP) is looking at releasing a new residential real estate price index (RRPI) before the end of the year.

BSP Deputy Governor Diwa Guinigundo said the central bank will be collating data on the cost of construction materials, types of houses being constructed and the composition of construction materials.

“We’re refining it and also extending the coverage. Initially in will cover Metro Manila plus cost of construction materials, and other bank data,” he added.

The price index would aid the BSP in monitoring the real estate sector.

As early as 2014, the BSP started considering launching the index that would track property prices in Metro Manila and nearby provinces.

The monitoring would be expanded to cover other key cities in the country.

The RRPI would help the central bank in addressing concerns of a “bubble” in the country’s booming residential real estate sector brought about by the improving purchasing power of Filipinos.

Heightened watch

Data from BSP showed banks’ exposure to real estate increased 17.3% to P797.67 billion ($17.04 billion) in end-July this year from P685.38 billion ($14.65 billion) in end-July 2014.

The BSP stepped up its watch over the real estate sector as early as 2012 by ordering banks to disclose more comprehensive reports on their exposures to property industry.

In June 2014, the BSP introduced stricter rules on banks’ real estate exposure to ensure that lenders have enough capital to absorb any potential losses. (READ: BSP strengthens guideline on real estate loans

The Monetary Board approved measure required stress tests for banks to determine if their capital will be enough to absorb credit risk that may arise from their exposure to the property sector.

The BSP explained that universal, commercial, and thrift banks would need to meet a capital adequacy ratio of 10% of their qualifying capital following the stress test results.

Universal and commercial banks, along with their thrift bank subsidiaries will also need to keep a Common Equity Tier 1 level of at least 6% of their qualifying capital.

Standalone thrift banks, meanwhile, are required to maintain a Tier 1 ratio of 6% of their qualifying capital. 

Banks that fail to comply with this will have to explain formally to the BSP why they should not be given any remedial action. –

$1 = P46.80

House builder image from Shutterstock

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