Real estate loans ratio falls below 20% in Q3

MANILA, Philippines — The exposure of Philippine banks to the real estate sector finally eased in the third quarter after staying above 20 percent for the past nine quarters, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The BSP said real estate loans went up 17.9 percent to P1.71 trillion in the first nine months of the year from P1.45 trillion in the same period last year amid steady demand.

Residential loans increased 15.6 percent to P561.31 billion from P506.29 billion while commercial real estate loans jumped 19 percent P1.12 trillion from P944.43 billion.

However, the share of real estate exposure from the banks’ total loan portfolio eased to 19.28 percent in end-September this year from 21 percent in end-September 2016 and 20.79 percent in end-June this year.

The total loan portfolio of Philippine banks surged 21.1 percent to P6.76 trillion in end-September this year from P5.58 trillion last year.

The real estate exposure of Philippine banks stayed above 20 percent since the second quarter of 2015 as housing prices remained steady amid sustained demand. It last stayed below the 20 percent level in the first quarter of 2015 at 19.54 percent.

On the other hand, real estate investments in debt securities and equities increased 17.9 percent to P295.82 billion in end-September from P233.33 billion in the same period last year.

The BSP monitors the real estate exposures of universal, commercial and thrift banks as part of its broader role of assessing the quality of bank exposures to the different sectors of the economy.

Last September, the BSP’s Monetary Board placed the real estate and project finance exposures of Philippine banks under tight watch as debt watchers and multilateral lending agencies raised the red flag over a possible overheating of the economy.

The regulator approved enhancements to the prudential reporting requirements in order to strengthen oversight of banks’ real estate and project finance exposures.

The reportorial enhancements form part of BSP’s macroprudential tool kit and are being deployed to sharpen the central bank’s assessment of banking system exposures to the property sector.

Debt watchers led by Moody’s Investor Service, Fitch Ratings, multilateral lender International Monetary Fund (IMF) as well as investment banks warned the Philippines is now showing signs of overheating.

As early as 2012, the BSP stepped up its watch over the real estate sector by ordering banks to disclose more comprehensive reports on their exposures to property industry. It has set the cap on real estate loans at 20 percent of the bank’s total loan portfolio.

Authorities downplayed concerns of a property bubble as the latest Residential Real Estate Price Index (RREPI) showed housing prices nationwide dropped 4.6 percent in the second quarter after inching up 1.2 percent in the first quarter.