Lenders’ exposure to real estate declines by the end of September.

Lenders’ exposure to real estate declines by the end of September.
Several buildings are seen in the middle of the sunset in Metro Manila. – PHILIPPINE STAR / MICHAEL VARCAS

LOCAL BANKS and trust entities experienced a decrease in their exposure to the real estate industry at the end of the third quarter of 2021, based on data from Bangko Sentral ng Pilipinas (BSP).

Banks and trust departments have a cumulative exposure of 22.18% to the real estate market at the end of September, well within the 25% limit set by the central bank. It declined from the record-high 22.2% exposure seen in late June.

“I think [this level of exposure] is not very worrying because we are still struggling with the pandemic and it is only in the fourth quarter that much of the demand [in the sector] has returned, ”said UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion in a Viber announcement.

“The omicron threat can again dampen aggregate demand and may ultimately affect demand for real estate at least in the short term, “he added, referring to the more communicable coronavirus disease 2019 (COVID-19) variant that is driving a new rise in infections.

Divided, the Philippine banks’ property exposure increased up to 22.24% at the end of September. from 22.21% at the end of June.

Meanwhile, trust departments’ exposure to the real estate sector fell to 14.69% at the end of September from 21.16% at the end of June.

BSP data showed that loans and investments to the real estate industry reached P2.76 billion at the end of September, higher by 8.3% from P2.548 billion seen in the same period of 2020.

Lending to the real estate sector reached P2.367 billion, an increase of 6.9% from P2.214 billion a year ago. Distributed, the banks disbursed credit worth P2.356 billion, while the trust department extended loans for P11.5 billion.

Gross defaulted property loans hit P122.812 billion, an increase of 32% from P92.991 billion. at the end of September 2020. This brought the ratio to 5.19%, an increase from the 5.15% also seen at the end of the second quarter. as the 4.2% the year before.

Meanwhile, overdue mortgages amounted to P152.186 billion at the end of September, an increase of 6.11% from P143.411 billion a year earlier. These loans accounted for 6.43% of the credit to the sector, rising from 6.41% in June but lower than the 6.48% seen at the end of September 2020.

Real estate investments in debt and securities amounted to P394,476 billion at the end of September, up 18% from P334,256 billion a year earlier. Investments from banks amounted to P104.969 billion, while P289,506 billion came from trust departments.

BSP monitors lenders’ exposure to the real estate industry as part of its mandate to provide guidance befinancial stability.

As part of its emergency pandemic measures, in August 2020 the central bank raised the banks’ property loan limit to 25% of their total loan portfolio from the previous 20%. The move was made to release liquidity to the sector during the crisis.

Housing prices in the third quarter of 2021 rose by 7.3% year-on-year, ending two consecutive quarters with annual declines, based on data released by BSP last month. The higher prices were attributed to the increase in demand for condominiums and townhouses. – Luz Wendy T. Noble

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