Fitch: No bubble in PH property market despite price upswing

Debt watcher Fitch Ratings believes the Philippines’ real estate industry is not overheating despite rising property prices and robust lending from banks.

“Data released showed brisk but not excessive property price growth, suggesting that robust real estate activity over the last few years has not led to significant overheating in the property market,” Fitch said in a statement, citing data from the recently released residential real estate price indices (RREPI) of the Bangko Sentral ng Pilipinas. Data showed real property prices rose 9.2 percent during the first three months of 2016, faster than the growth rate of 5.1 percent a quarter ago.

“Loans for real estate purposes, which make up about 19 percent of total loans, have increased rapidly since 2010, raising questions around potential overheating in the property market,” Fitch said. It said lending growth remained at a high 17 percent during the mid-2014 to end-2015 period despite tighter regulations introduced two years ago, including a 60-percent cap on property collateral values and real estate stress test.

Still, the debt watcher said bank lending to real estate remained at manageable levels. “Fitch assesses that rated banks in the Philippines have mostly managed their property risks prudently amid rapid lending growth, with adequate risk controls and lending standards in place. Notably too, the increases in the price index … do not appear untenable alongside continued strong economic growth.”