Real estate lending posted double-digit growth in the second quarter, the Bangko Sentral ng Pilipinas reported on Monday, with commercial developments accounting for the bulk of loans approved by universal and commercial banks.
At P1.37 trillion as of end-June 2017, real estate loans were up 20.3 percent from a year earlier and accounted for 19.3 percent of the big banks’ loan portfolio of P7.08 trillion, which includes interbank loan receivables (IBL).
This was slightly below the 20-percent cap set by the Bangko Sentral.
Minus the IBL, however, real estate loans took up 20 percent of a total loan portfolio of P6.86 trillion.
Over 75 percent or P1.03 trillion of the real estate loans was extended to land developers, construction companies and other commercial borrowers. The remaining P338.21 billion consisted of residential loans.
Emilio Neri Jr., vice-president at Bank of the Philippine Islands, said: “Hefty growth in lending to property sector simply means the banks are responding to growing demand given the improving overall incomes throughout the country and anticipation that lower income tax rates will expand the base of mortgage borrowers after the tax reform is signed by the President next year.”
The first package of the government’s Comprehensive Tax Reform Program includes the lowering of personal income taxes. The House of Representatives approved its version earlier this year and the Senate is currently considering its own measure.
University of Asia and the Pacific economist Victor Abola, meanwhile, said the growth in real estate lending could pose a risk to the economy.
“This will be a more serious threat if those commitments are with BPOs (business process outsourcing) which may not necessarily be long-term occupants, given the global competition in this space,” he added.
The International Monetary Fund statement has said that macroprudential policies should address systemic risks to financial stability such as rising leverage in some parts of the corporate sector and build on the results of real estate stress tests and enhanced monitoring.
In 2012, the BSP ordered banks to disclose more comprehensive reports on their exposure to the property industry.
A Residential Real Estate Price Index was also introduced, which the BSP said would serve as a measure to assess trends in real estate and credit market conditions.
In the first quarter of 2017, Philippine residential property values grew by 1.1 percent from a year earlier, led by prices in Metro Manila and nearby areas.
By the type of housing units, condominiums posted the highest year-on-year increase at 2.7 percent, followed by townhouses at 1.3 percent and single detached/attached housing at 0.4 percent. Prices of duplexes dipped by 20.5 percent.
By region, Metro Manila accounted for 44.8 percent of the residential real estate loans, followed by Calabarzon (29.3 percent), Central Luzon (6.7 percent), Central Visayas (5.7 percent), Western Visayas (5.1 percent), Davao Region (3.2 percent) and Northern Mindanao (1.5 percent).
The index also showed that about seven out of 10 residential real estate loans granted were for the purchase of new housing units.
By the type of housing units, about 48.4 percent of residential property loans were for condominiums, followed by single detached units (43.3 percent) and townhouses (7.9 percent).
By area, condominium units were the most common house purchases in Metro Manila.