BANKS hiked their exposure to the volatile property sector to breach the P2-trillion mark as of end-September as both real estate lending and investments surged, according to latest central bank data.

Total real estate exposure reached P2.006 trillion in the nine months to September, according to the Bangko Sentral ng Pilipinas (BSP). The amount is 17.9% more than the P1.702 trillion tallied in 2016’s comparable period and inched up from the P1.924 trillion recorded as of end-June.

Banks gave out more loans for home purchases and property development at P1.71 trillion, up from P1.451 trillion last year.

Lending for commercial property increased by a fifth to P1.124 trillion in the same periods, compared to a 15.6% increase in home loans to P585.51 billion, data showed.

House prices dropped by 4.6% between April and June — the first time in two years that property prices slid — according to results of the central bank’s latest residential real estate price index.

Central bank officials have noted that property prices remain “volatile” even as they assured that current levels, thus far, have not been alarming.

Despite the double-digit increases in borrowings, non-performing loans for real property were little changed at P29.436 billion, just 4.9% more than the P28.074 billion left unpaid at least a month after due date a year ago.

Still, the increase in real estate lending is slightly slower than the 19.6% increase in total loans granted by banks, which reached P8.39 trillion as of September.

Despite the growth in property lending, its share relative to banks’ total loan portfolio settled at 19.28%, down from the 20.79% ratio posted in end-June and a 21% share in the comparable year-ago period.

The BSP requires all banks to keep their real estate exposures to a maximum of 20% of total loans, as part of a risk management arsenal. The central bank has been closely monitoring the property market since the 1997 and the 2008 global economic crises, as mortgage delinquencies triggered a global recession following a correction in housing prices abroad.

Investments in property-related assets and securities also posted a 17.9% growth in September to reach P295.816 billion, coming from P250.903 billion a year ago.

Placements in debt instruments accounted for roughly two-thirds of banks’ total property exposure at P184.382 billion, while bets on property and developer-related shares totalled P111.434 billion, the BSP said.

Economists and property developers have allayed fears of a bubble in the Philippines, saying actual buoyant demand for both residential and commercial space — rather than mere speculation — has been driving prices up. — Melissa Luz T. Lopez

FRANKFURT — Three central banks, meeting on both sides of the Atlantic, will highlight the diverging fortunes of the world’s biggest economies as they head into 2018 after an exceptionally tranquil year.

While the growth cycle in the United States may be close to peaking, the euro zone is just getting comfortable with its economic run and Britain is weighed down by Brexit uncertainty, suggesting that their monetary policies will be out of sync for years to come.

Indeed, the US Federal Reserve is all but certain to raise rates on Wednesday — likely predicting three more hikes for next year — even as the European Central Bank (ECB) pledges on Thursday to maintain super-low borrowing costs and the Bank of England (BoE) promises only very gradual increases over the coming years.

The US economy will start the new year in the perfect spot but that would suggest that the only way is down, and a range of issues from uncertainty over tax cuts to midterm elections and high turnover atop the Fed, cloud the outlook.

“The music will keep playing for another year or so, but be wary of what is next,” BNP Paribas said.

“In 2018, we think the US economy will see its best year in terms of economic activity since 2005 with the unemployment rate dropping to its lowest level since 1969,” it added.

“The turn of the cycle is in sight. We see the recovery as long in the tooth and believe that cycles do die of old age.”

Indeed, the economy is likely to face capacity constraints as the labor market tightens, pushing core inflation to the Fed’s target and raising prospects of overheating if a tax proposal, now in Congress, substantially increases deficit spending.

A big tax cut under discussion would — potentially — boost growth, and likely push the Fed to tighten more quickly.

“Better growth would increase downward pressure on the unemployment rate and upward pressure on inflation,” Bank of America Merrill Lynch said.

“Hence the Fed would respond with a modestly steeper path of monetary policy.”

The euro zone economy is in a similarly sweet spot but the growth cycle is still relatively young and only now beginning to broaden out so the ECB will remain reluctant to give up support.

“The ECB faces the best of the possible outlooks in years: the moderate expansion phase is set to continue in 2018 and 2019, with limited risks of a setback, absent signs of excesses in demand wages dynamics and in leverage,” Intesa Sanpaolo said in a research note.

The ECB is not in a hurry to alter communication both on asset purchases and interest rates,” it added. Indeed, after an October stimulus cut that actually loosened rather than tightened financial conditions, the ECB will likely say it is content with the reaction, suggesting it will not revisit its stance for some time.

It will also unveil initial 2020 inflation projections, which will likely show price growth at or just below target, rising only gradually over the coming three years, another argument not to take support away just yet.

Meanwhile, the BoE will have to tread a fine line between sounding like more rate hikes are coming and not squashing growth that economists think may slow to around 1.3% next year from 1.5% in 2017. Uncertainty over Brexit, low wage growth and weak productivity are weighing on the economy but the BoE is not keen to see the pound weaken and add to an inflation rate that is expected to exceed its two percent target over the next three years. While Britain appears to have cleared a key hurdle in Brexit talks and focus can now move to a discussion of a trade agreement, slow progress so far suggests that uncertainty will remain high and even if an eventual deal is likely, its terms will not be clear for some time.

“For the doves, there has been no shortage of weak data since November, particularly related to the consumer sector and housing market,” HSBC said in a note.

“The MPC seems minded to make another (hike), based more on weak supply growth than rising demand growth,” it added of BoE’s Monetary Policy Committee.

“After that, we expect a long pause while it assesses the impact of its policy moves and given our expectation that activity growth will stay soft and wage growth weak.” — Reuters