By Melissa Luz T. Lopez, Reporter

Banks’ real estate exposure up

Posted on July 04, 2016

LOCAL BANKS hiked their exposure to the volatile property sector by more than a fifth during the first quarter as both home buyers and developers secured more loans from a year ago, central bank data showed.

The total real estate exposure of universal, commercial, and thrift banks hit P1.554 trillion as of end-March, rising by 22.1% from the P1.273 trillion posted a year ago on the back of higher property loans and investments poured in by households and property firms, according to the Bangko Sentral ng Pilipinas (BSP).

Bulk of the total exposure went to real estate loans at P1.331 trillion, 21.8% higher than the P1.093 trillion posted during the first quarter of 2015. This was led by a 27.8% increase in lending for commercial space to P869.008 billion.

Meanwhile, home loans hit P462.396 billion for the first three months, up by 11.9% from last year’s P413.212 billion, data showed.

The higher credit extended by banks drove a higher share of real property loans to 20.79% of banks’ total loan portfolio, coming from 19.54% posted at end-March 2015.

Despite the higher real property debts granted by banks, the share of bad loans went down to just 2.13%, improving from a 2.57% ratio recorded a year ago as the amount of non-performing credit -- or those which stood unsettled at least 30 days past due date -- stood barely unchanged at P28.388 billion.

In comparison, real estate investments rose by nearly a fourth to P222.563 billion from P180.111 billion previously, with marked increases in debt securities at P138.362 billion and equity investments worth P84.2 billion.

The central bank has been closely monitoring on the property market since the 1997 Asian financial and the 2008 global economic crises.

Last month, the central bank said results of its first residential real estate property index showed that local housing sector is far from seeing an asset bubble, as the industry remains “vibrant” with strong demand -- rather than an oversupply -- driving the increase in property prices.

The index, which is now used by the BSP in tracking asset prices nationwide, showed an overall rise in housing costs at 9.2% from January to March from the comparable year-ago period.

Costs to acquire homes rose slightly faster within Metro Manila at 9.7%, against a 9.4% annualized increase seen among units in areas outside the National Capital Region.

Housing prices, as monitored by the central bank, are seen to be a measure of financial soundness.