Banks’ real estate exposure rises as credit demand remains strong
BANKS LENT OUT more funds to the volatile real estate sector by a fifth during the third quarter, marked by increases for both consumers and property developers, preliminary central bank data showed.
Real estate loans granted by local banks grew to P1.191 trillion at end- September, up by 19.2% from the P999.46 billion handed out during the same period last year, data on the central bank’s Web site showed. This is a tad slower than the 19.8% climb posted during the previous quarter, which saw total credits hit P1.138 trillion.
The property loans make up 19.4% of the banks’ total loan portfolio, which stood at P6.145 trillion at end- September. Under the rules imposed by the Bangko Sentral ng Pilipinas (BSP), banks can allot a maximum of 20% of their total loan portfolio for real property lending.
Some 75% of the total borrowings went to commercial players and developers totalling P893.77 billion, 18.8% higher than the P752.17- billion loans they secured during the same period in 2015.
Loans extended to land developers and construction firms reached P477.88 billion, with 40% allotted for building residential units at P191.98 billion or 14.3% higher than the P167.94 billion incurred in September 2015.
Lending to construct office buildings and condominiums also rose by 20.7% to P31.77 billion against P26.33 billion borrowed a year ago, according to BSP data.
Other corporate borrowers also increased the amounts they borrowed for real property by 14.1% to P415.89 billion from P364.65 billion previously.
Meanwhile, funds lent to individual borrowers also posted a 20.4% growth as of end- September, rising to P297.67 billion from the P247.29 billion yearago level.
Loans for socialized and lowcost housing grew by 7.5% to P65.22 billion, slower than the 8.9% climb posted the previous quarter.
Other residential debt jumped by 24.6% to P232.46 billion, surging from P186.6 billion last year and from P214.19 billion seen at end-June.
Prices of residential units went up by 11.3% during the April-June period, outpacing the 9.4% pace clocked in during the first quarter to log the fastest clip in over a year, based on the results of the BSP’s residential real estate price index released in October.
Still, central bank officials said the Philippines is far from seeing a property bubble. BSP Deputy Governor Diwa C. Guinigundo said the double-digit rate should not be alarming, as it simply
reflects “solid real gross domestic product growth” and rising employment which drive greater demand for homes.
In a Sept. 30 press briefing, BSP Governor Amando M. Tetangco, Jr. said the Philippines is far from seeing an asset bubble, with increasing demand rather than an oversupply of both residential and commercial space driving up property prices.
In particular, the central bank chief pointed to a change in lifestyles that saw some workers buying condominiums near Metro Manila business districts to serve as their homes during weekdays, alongside continued demand for office space with the booming business process outsourcing industry.
An asset bubble forms due to a perceived rising demand in housing units that drive developers to build more, and is said to “burst” as demand stagnates, which will lead to an abrupt drop in property prices.
There remains an estimated 5.7-million backlog for low-cost homes in the Philippines, according to officials from the National Housing Mortgage Finance Corp.