Continued growth in real estate loans seen

MANILA, Philippines – Lending to the real estate sector is expected to continue to grow despite the tighter rules imposed by the Bangko Sentral ng Pilipinas (BSP) in measuring the exposure of banks to the sector, officials of a consultancy firm said.

Karlo Pobre, research analyst at Collier’s International said in an interview with reporters that a slowdown in real estate loans is not likely even as the BSP recently issued rules which expanded the definition of real estate exposure of banks to include not just loans for construction and development but also funds extended to individuals for the purchase of houses.

The expanded definition also covers investments in equities and securities with proceeds to be used to finance real estate activities.

Pobre noted that loans are seen to continue to rise amid a favorable economic environment.

“It (loans) will increase.…On a quarter-to-quarter to basis, it grew by (an average of) about 3.5 percent since first quarter of 2010,” he said.

On the other hand, non-performing real estate loans, have decreased to five percent from six percent in the first quarter of last year.

“We see that trend to continue because it has already established that downward trend since last year. Everything is on the rosy side right now,” Pobre said.

He said they welcome the move of the BSP because it shows that the central bank is taking a proactive approach in monitoring the exposure of banks to the real estate sector given the number of residential condominium units being put up.

“I guess, people are just overwhelmed and even BSP because, five to 10 years ago, we did not see this number of condo units being built... Everyone is just taking safety measures,” he said.

He added that there is no possibility of an occurrence of a property bubble right now.

Julius Guevara, associate director for advisory services at Colliers International said he also sees the recent development as a positive move by the BSP.

“I think the BSP has been very proactive in trying to just monitor how exposed the developers are. I guess it is because of the fear of the repeat of the Asian crisis back in the 1990s. I think it’s a good sign that the central bank is watching over this...so this is a bit of good news,” he said.

According to BSP data, banks’ property exposure was at 14.52 percent ending 2011.

The BSP said that while the figure is below the 20-percent cap, it would continue to monitor developments in real estate lending.

Meanwhile, Colliers International said in its Philippine Real Estate Market report that total office stock is projected to reach 7 million square meters by 2014, over 20 percent higher than the previous year as strong demand from offshore and out sourcing sectors ramp up construction.

For the residential sector, over 46,000 units of high-rise condominiums were tracked last year and about 5,500 units are seen to be completed annually to leading to a 30 percent growth in total stock by 2014.

“Take-up remains consistently strong despite the substantial number of supply in the pipeline,” Colliers said.