No risk of crisis despite surge in Philippine property loans
No risk of crisis despite surge in Philippine property loans
75 percent of H1 property loans went to developers and contractors
Real estate loans released by financial institutions in the Philippines reached PHP1.138 trillion (USD23.6 billion) in the first six months of this year, an almost 20 percent jump from the same period last year, data released Friday by the Bangko Sentral ng Pilipinas (BSP) showed. Despite the surge in lending, however, analysts are not worried about a bubble encapsulating the property market.
While the increase is an “obvious area of concern,” loans to the property sector accounts for only 20 percent of total lending, according to Capital Economics, as cited by The Manila Times. “We don’t think the Philippines is at imminent risk of a crisis,” the property consultancy noted. “Rapid credit growth in a fast-growing country like the Philippines is less of a concern than in a country like, for example, Japan where nominal GDP is barely growing.”
In the central bank report, around PHP279 billion (USD5.8 billion) in loans went to residential projects, PHP65 billion (USD1.3 billion) of which were lent to low-cost or socialised housing projects. On the other hand, PHP858.59 billion (USD17.8 billion) consisted of commercial loans.
Banks offered PHP443.08 (USDS9.2 billion) or 75 percent of loans to developers and contractors. About PHP198 billion of these loans have been used on residential units.
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Borrowers last year amassed a total of PHP949.88 billion (USD19.7 billion) in loans in H1.
The total amount of real estate loans verged on the 20 percent cap set by the central bank on real property lending. Property loans made up 19.2 percent of institutions’ total loan portfolio in H1.
Property values rose 9.2 percent year-on-year in the first quarter of 2016, according to the central bank’s maiden residential real estate property index (RREPI).
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Source: Property Report