The Philippines Real Estate Surge up to 10.2 %
The exposure of banks operating in the Philippines to the real estate sector posted a double-digit growth of 10.2 percent last year but the ratio of real estate loans to the banking industry’s total loan portfolio fell within the limits set by the Bangko Sentral ng Pilipinas (BSP).
Data released by the BSP yesterday showed that the total real estate exposure of universal, commercial, and thrift banks reached P433.6 billion in 2010. The amount was 14.6 percent of the industry’s total loan portfolio of P2.96 trillion. In 2009, the sector’s total exposure amounted to P393.6 billion or 14.4 percent of the P2.72 trillion loan portfolio.
The real estate exposure of universal and commercial banks increased by 11.4 percent to P318.1 billion from P285.6 billion and accounted for 73 percent of the industry’s total real estate exposure while that of thrift banks inched up by seven percent to P115.5 billion from P107.9 billion for a 27 percent share.
The BSP said real estate loans extended by universal, commercial, and thrift banks went up by 9.9 percent to P421.7 billion as of end-December last year from P383.7 billion as of end-December 2009. Of the total real estate loans, about 93 percent or P392.1 billion are current while seven percent or P28.5 billion are non-performing.
Real estate loans extended by universal and commercial banks for residential and commercial purposes posted a double-digit expansion of 11 percent to P306.1 billion from 275.7 billion while loans extended by thrift banks to finance the acquisition, construction, and improvement of residential units as well as construction of properties for commercial purposes increased by seven percent to P115.5 billion from P107.9 billion.
The BSP first decided to limit the banking sector’s exposure in real estate following the collapse of the property sector in 1997 that left banks holding large amounts of non-performing assets that the industry is still trying to unload to date.
Monetary authorities imposed a single 20-percent overall limit on the real estate lending of universal and commercial banks in 1997 primarily as a prudential safeguard against over-concentration of credit to commercial lending.
However, the BSP eased the restrictions on banks’ exposure in the real estate sector in 2008 by excluding private housing and public infrastructure construction loans from the 20 percent ceiling.
Until now, the BSP continues to monitor the exposure of banks to the real estate sector for indications of either an asset bubble or a breakdown in asset quality.
The BSP reported yesterday that exposure of universal and commercial banks in real estate investments surged 19.8 percent to P11.89 billion last year from P9.92 billion in 2009. Real estate investments in the form of debt securities jumped 28.4 percent to P8.78 billion while those in the form of equities were steady at P3.1 billion from P3 billion.
Last month, BSP Governor Amando Tetangco Jr. said there are no signs of asset price bubble in the Philippines.
“I also believe that asset valuations in the Philippines have not reached bubble-like proportions,” Tetangco stressed.
