By Katherine K. Chan
PHILIPPINE BANKS and trust Corporate exposure to the real estate sector decreased at the end of September, amid a slowdown in housing investment, Bangko Sentral ng Pilipinas (BSP) data showed.
The average exposure to industrial properties stood at 19.54% as of the end of September, down from 19.61% at the end of June and 19.55% in the same period last year.
The BSP monitors lenders’ exposure to the real estate industry as part of its responsibility to maintain financial stability.
Philippine banks and credit unions extended P3.451 trillion in total investments and loans to the real estate industry as of the third quarter, up 7.19% from P3.22 trillion last year.
Based on central bank data, real estate loans rose 8.9% to P3.096 trillion as of September from P2.843 trillion last year.
Building, residential mortgage loans increased by 11.4% to P1.188 trillion, while real estate loans grew by 7.41% to P1.909 trillion.
Past loans reached P158.619 billion at the end of September, 7.06% higher than the P148.157 billion seen last year.
Residential mortgage loans increased by 5.16% to P110.379 billion, while real estate loans increased by 11.7% to P48.24 billion.
Meanwhile, total non-performing mortgage loans reached P116.086 billion in the nine-month period, an increase of 4.06%. from P111.554 billion last year.
This lowered the ratio of gross non-performing loans to 3.75% as of September from 3.92% in the comparable period last year.
BSP data also showed that the banking sector’s real estate investment stood at P354.749 billion at the end of September, which is 5.75% lower than the P376.406 billion recorded last year.
This, as debt securities decreased by 5.51% year-on-year to P232.496 billion, while equity securities decreased by 6.22% to P122.253 billion.
“Banks’ real estate exposure decreased to 19.54% at the end of September from 19.61% in June, reflecting lower investment in real estate-linked securities, muted project launches, and cautious lending amid high NPLs (non-performing loans) and higher borrowing costs,” said Union Bank of the Philippines Chief Economist O.
Jonathan L. Ravelas, senior consultant at Reyes Tacandong & Co., said weak real estate demand may have been the focus of the industry’s housing and real estate exposure ratio last quarter.
“Banks are limiting their real estate exposure because non-performing loans are rising and developers are reducing launches amid weak demand,” he said via Viber. “BSP’s strong oversight adds vigilance.”
However, Joey Roi H. Bondoc, director and head of research at Colliers Philippines, noted that bank lending to the real estate industry generally declines in the third quarter. He called the recent drop in lending “not significant.”
“We have yet to see a big improvement in (the) Metro Manila condominium market, especially in the pre-sale sector,” he said. BusinessWorld in a telephone interview. “And it only means that the banks are still wary of lending to the real estate industry, the condominium sector at this time. So, that’s why, if you look at the exposure of the banks to the residential area, it’s not a significant increase or decrease. It’s almost (flat), it’s almost the same.”
The latest report by Colliers Philippines showed that housing take-up increased by 108% in the third quarter, amounting to 5,900 units from 2,800 units in the previous quarter. This was the highest intake since the second quarter of 2023.
In the fourth quarter, Mr. Asuncion said the banking industry may provide more loans to the real estate sector following the central bank’s recent rate cuts and increased demand for resi.deential properties and leases.
“Exposure ratios should remain stable, with banks balancing growth opportunities against regulatory limits,” he added.
The BSP last week cut borrowing costs by another 25 basis points (bps), making the key rate the lowest in three years at 4.5%. It has so far delivered 200 bps in cuts since August last year.
However, Mr. Bondoc said mortgage rates are still high offsetting a perceived boost from lower benchmark interest rates.
“But the problem is … the central bank has been reducing interest rates but there has been no reduction in bank loan rates, which also shows that banks are still reluctant to lend to this market,” he said.
However, Mr. Bondoc noted that holiday bonuses, higher outflows and the devaluation of the peso may cause demand in the housing market.
“Q4 is a strong quarter for condominium acquisitions due to the bonuses of local workers and remittances from the Philippines. Then the peso depreciation, so it may be a good opportunity for OFWs (overseas Filipino workers) to send home more money and eventually, for example, keep a condominium unit or buy a house unit and lot in their provinces,” said Mr. Bondo.
The peso hit the P59-a-dollar level several times in November and dropped to a new low of P59.22 against the greenback on Dec. 4.
