IMF sees no indications of real estate bubble in Phl By Kathleen A. Martin

MANILA, Philippines - Despite rising credit to the property sector, there has been no indications yet of an asset-price bubble forming in the country’s real estate market, an official of the International Monetary Fund said.

“One of the issues of the central bank is to produce a real estate price index and that is still in development,” Rachel van Elkan, IMF’s mission chief to the Philippines, said in a briefing.

“But the indication that we have is there is no evidence of a bubble,” she added.

Van Elkan made the comment following a two-week visit to the country to assess the economy.

Van Elkan said policymakers should continue keeping a vigilant watch over credit to the real estate sector as borrowings continue to rise.

“What we do see is a significant amount of activities happening in sector credit so this bears watching,” Van Elkan said.

Latest Bangko Sentral ng Pilipinas data showed local banks’ exposure to the property sector amounted to P900.1 billion as of end-June last year, up seven percent from the first quarter of 2013.

Real estate loans climbed seven percent to P762.5 billion, while investments in real estate securities increasedd eight percent to P137.7 billion.

The central bank in February hinted it may implement stricter guidelines on banks’ exposure to the property market, almost two years after it implemented tougher regulations on monitoring bank credit and investments in the real estate sector.

BSP Governor Amando M. Tetangco Jr. said that further streamlining rules on banks’ exposure to the real estate sector may include reforms in contract to sell financing, a review of concentration limits, forms of exposure haircuts, and a review of risk weights.

Current reporting covers loans to developers of socialized and low-cost housing, and to individuals, and credit supported by non-risk collaterals or Home Guarantee Corp. guarantee.

At the same time, banks are required to report investments in debt and equity securities that finance real estate activities.