The Philippine property sector was handed a boost as the Bangko Sentral ng Pilipinas (BSP) announced it has increased the real estate loan limit for the country’s major banks. An additional PHP1.2 trillion is now available for real estate lending which the central bank hopes can support the reopening of the economy.
The move keeps the exposure of banks to the real estate sector in line with the BSP regulation that states financial institutions can have an exposure to the property sector of no more than 20 percent. PhilStar Global reported that the ratio of overall non-performing real estate loans is less than two percent.
Credit growth has been slow throughout 2020 even with the gradual reopening of the economy. This prompted the central bank to take more drastic action with BSP Governor Benjamin Diokno noting that economic activities are expected to pick up in the coming months.
Early this month, Diokno said the BSP was not concerned about property bubble is forming in the Philippines. Increased demand for condo units throughout the Philippines and a backlog of real estate buyers were among the reasons for that belief.
“While there is persistent demand for residential properties, it would not indicate an asset bubble,” The Manila Times reported Diokno as saying. “We see both developments in both equities and real estate sector as mainly driven by market fundamentals. We see the price movements in both areas is within the long-run trend. Per the latest staff analysis, house prices do not indicate overvaluation at the moment.”
The Philippine property sector may have already begun its turnaround with Ayala Land, Megaworld and SMDC all reporting an uptick in transactions recently. Most developers found that home prices in the country have remained stabled and share the BSP’s view that demand for property remains strong.
