By Luz Wendy T. Noble
THE Philippine real estate sector may become more “active” next year, as the economy is anticipated to bounce back after the pandemic subsides.
“Our view is that the recovery of the property sector in 2021 hinges on the pace of expansion of Philippine and global economies. Given a strong rebound of Philippine growth in 2021, a more active property sector is also expected,” Lyn I. Javier, BSP managing director for policy and specialized supervision, said in an e-mailed response to BusinessWorld earlier this month.
Ms. Javier cited historical data from property consultancy firm Colliers International Philippines that showed demand for segments, particularly office and residential, usually wane in the wake of an economic crisis.
Colliers International has said land values in the National Capital Region may decline by 5-15% in the fourth quarter of the year, as rental rates and selling prices plummet. Take-up rates across property segments are also seen to slump.
“Following the lower projections of real gross domestic product (GDP) growth in 2020, it is expected that impact across all segments, depending how long the crisis will be resolved, could be seen,” Ms. Javier said.
The country’s economic output shrank by 0.2% in the first quarter of 2020, the first contraction since the fourth quarter of 1998 during the Asian financial crisis.
Ms. Javier said the country’s banking industry is armed with a “strong position” to weather the crisis, including risks that may arise from the property segment.
“Banks have sufficient capital and liquidity buffers to withstand potential loan losses and liquidity constraints posed by the current ECQ (enhanced community quarantine),” she said.
The banking industry as a whole, Ms. Javier said, has maintained key metrics beyond regulatory minimum, including the capital adequacy ratio of 15.4%, a liquidity coverage ratio of big banks at 169.9%, among others.
“This is reflective of the sound underwriting practices of banks,” Ms. Javier said.
“Preliminary assessment disclosed that the expected rise in their NPLs (nonperforming loans) could be readily covered by their loan-loss provisions and capital buffers,” she added.