The exposure of Philippine banks and trust entities to the property sector eased to 20.17% as of end-December last year, from 20.55% at end-September 2023, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Preliminary BSP data also showed this was lower than the 20.98% ratio at the end of December 2022.
Investments and loans extended by Philippine banks to the real estate sector increased by 4.3% to P3.15 trillion as of end-December from P3.02 trillion as of end-December 2022.
“This may have to do with the expanding base of total loans that mathematically led to a smaller share of real estate loans to total loans,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The ratio also eased amid the need for banks to comply with limits on real estate loans, investments, and other related exposures, as a matter of prudence to address concentration risks on the industry,” he added.
Central bank data showed that real estate loans rose by an annual 5.8% to P2.74 trillion as of end-December from P2.59 trillion as of December 2022.
Broken down, commercial real estate loans went up by an annual 5.5% to P1.73 trillion, while residential real estate loans increased by 6.7% to P1 trillion.
Meanwhile, past due real estate loans jumped by 2.4% to P135.261 billion.
This as past due commercial real estate loans rose by 4.4% to P39.987 billion, while past due residential real estate loans edged higher by 1.5% to P95.274 billion.
Gross nonperforming real estate loans inched up by 0.5% year on year to P108.389 billion.
This brought the gross nonperforming real estate loan ratio to 3.96% as of end-December from 4.17% as of end-2022.
Meanwhile, real estate investments in debt and equity securities declined by 5.9% to P410.653 billion in the period ending December 2023.
Mr. Ricafort also noted that higher borrowing costs may have reduced the demand for new real estate loans.
“Since real estate development and purchases by buyers require relatively larger amount of capital and financing, (it’s more) sensitive to higher interest rates.”
From May 2022 to October 2023, the central bank raised rates by a cumulative 450 basis points (bps) to bring the benchmark rate to a 17-year high of 6.5%.
The BSP monitors lenders’ exposure to the real estate industry as part of its mandate to guide financial stability.
In 2020, the central bank raised the real estate loan limit of banks to 25% of their total loan portfolio from 20% previously to free up additional liquidity as part of its relief measure during the pandemic.
Separate BSP data showed that housing prices rose at a slower pace in the fourth quarter of 2023. The Residential Real Estate Price Index rose by 6.5% in the fourth quarter, much slower than the 12.9% expansion in the third quarter and the 7.7% growth in the same period a year ago.
Source: Business World
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