Crafting Better Policies Through Dynamic Statistics

Monday, April 3, 2017
 
The Bangko Sentral ng Pilipinas (BSP) recently spearheaded initiatives that are consistent with its mandate in bringing about a stable and inclusive financial system: the Consumer Finance Survey (CFS) and the Residential Real Estate Price Index (RREPI). The CFS provides new information on household finances that allows policy makers to investigate further into the financial stability as well as the state of financial inclusion of Filipinos in general. Meanwhile, the construction of RREPI is regarded as a valuable tool in assessing the movements in property prices that are necessary for promoting price stability. It could also be used in determining the real estate and credit market conditions in the country that could also help BSP in identifying and monitoring potential sources of systemic risk in the financial system.
 
The CFS is the only survey in the Philippines that provides and generates comprehensive information on the financial conditions of Filipino households. The quantitative micro-level data of the CFS about the financial and economic conditions of households complement the qualitative information derived from the quarterly surveys on consumer and business expectations. The CFS generates data on household wealth, in particular their financial and non-financial assets, sources of credit and level of indebtedness, work and income, and retirement insurance coverage. Moreover, the survey also provides information on household behavior and preferences with respect to risk attitude, beliefs as well as time discounting.

Following the inaugural 2009 CFS published in 2012, the BSP released the results of the 2014 CFS in Q1 2017. The second quadrennial CFS, which was conducted during the period July 2014 until end-January 2015, had a sample size of 18,000 households covering all regions in the country, except Leyte province (excluded due to typhoon Yolanda) and the Autonomous Region in Muslim Mindanao (ARMM).
 
The CFS provides deeper insight into the sentiment and conditions of Filipino households. The 2014 CFS results showed that the biggest asset of most Filipino households is their home or dwelling unit. Among the highlights of the 2014 CFS results were: (1) three for every four households reported owning their residence; (2) ninety percent of households also own various types of appliances such as TV sets, cellphones and electric fans; and (3) more than a quarter own motor vehicles. However, 86 percent remains unbanked. This is a major challenge in wealth creation for households that is identified by the CFS. In a study based on the inaugural CFS in 2009 and again on the results of the 2014 CFS, financial inclusion could be hastened by: (1) expanding government retirement programs/policies to cover more working and non-working Filipinos; (2) encouraging the micro, small and medium enterprises (MSMEs) to help provide their employees with ATM deposit accounts; and (3) expanding and intensifying the financial education campaigns on the importance of savings and in opening deposit accounts among employers and employees in MSMEs and the self-employed/workers with no permanent employment in the lagging sectors such as those in agriculture, hunting and forestry, fishing, and construction.
 
The CFS results validated the key policy direction that the BSP has pursued in recent years towards building a more inclusive financial system.The survey results also helped BSP to re-evaluate the changing market needs and capacities of the unbanked. Furthermore, the CFS results underscored the importance of the BSP's advocacy for an inclusive and proactive economic and financial education among MSMEs and private households and the need to institutionalize financial education in the country's school system from elementary to college.

The proactive dissemination of results of the CFS nationwide is currently underway. Multi-sectoral briefings on the results of the 2014 CFS conducted in Davao City, Tagaytay City and Cebu City in Ql 2Q17 were met with enthusiasm by attendees from different sectors supporting the recommendations cited above. This will be followed by similar rollout activities in Tuguegarao City, Legazpi City, lloilo City, San Fernando City, Cagayan De Ora City, General Santos City, and Zamboanga.City in Q2 2017.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) launched the Residential Real Estate Price Index (RREPI) on 6 June 2016 as part of the global initiative to address data gaps on property prices. It is likewise a first in assessing real estate and credit market conditions in the country.
 
The RREPI could be a valuable indicator of an impending housing bubble as it tracks the movements of property prices. The RREPI measures the average changes in prices of different types of housing units over a period of time across different geographical regions. The growth rate of the index provides a measure of house price inflation. The RREPI is computed as the weighted chain-linked index based on the average appraised value per square meter weighted by the share of floor area of new housing units. In addition to a national index, price indices are available by area (i.e., National Capital Region and Areas Outside the National Capital Region) and by type of housing unit (i.e., single detached unit, duplex, townhouse, and condominium unit). The RREPI is published starting from Q2 2015 and updated every quarter.
 

The RREPI provides a clear picture of the current status of the real estate and credit markets. The Q3 2016 results showed that residential real estate prices grew by 2.2 percent year-on-year. Townhouses posted the highest growth in prices (4.9 percent) followed by condominium units (3.1 percent) and single detached housing units (2.4 percent). Residential real property prices rose in AONCR by 4.9 percent but declined marginally in NCR by 0.2 percent in Q3 2016.
 
Based on total loans granted by universal/commercial (U/KBs) and thrift banks in Q3 2016, about seven in ten real estate loans were for the purchase of new housing units (69.2 percent). By type of housing unit, about 48 percent of residential property loans were for single detached units, followed by condominium units (44.3 percent) and townhouses (7.6 percent). Condominium units were the most common house purchases in the NCR while single detached houses were mostly acquired in AONCR. By region, NCR accounted for 46.3 percent of the total number of residential real estate loans granted during the quarter, followed by Calabarzon (29.6 percent), Central Luzon (6.1 percent), Central Visayas (4.7 percent), Western Visayas (4.5 percent), Davao Region (3.4 percent) and Northern Mindanao (1.7 percent). Together, these seven regions accounted for 96.3 percent of total housing loans granted by banks.