BSP keeps close watch on real estate loans

The Bangko Sentral ng Pilipinas said Monday it was now keenly monitoring real-estate lending by banks following concerns that the recent spike in loans could trigger a price bubble, especially in middle-income housing market.

BSP Deputy Governor Nestor Espenilla Jr. said current levels of real-estate lending so far did not clearly indicate that an asset price bubble was starting. However, he said the trend of rising loans called for a close monitoring.

In fact, Espenilla said the central bank was mulling over what potential measures to implement to control bank lending in a manner that would avoid price bubble.

The BSP earlier reported that the exposure of the banking industry to the real-estate sector reached its highest level at the end of the first quarter due mainly to record-high loans extended by the banks to support purchases of residential and commercial real properties.

Documents from the central bank showed that at the end of March, outstanding real-estate loans extended by thrift and universal and commercial banks amounted to a record high of P524 billion. This was 21 percent up from P433.05 billion as of the same period last year. Of the latest outstanding real-estate loans, 5.11 percent were non-performing. Loans become non-performing if these remain unpaid for at least 30 days from the due date.

Regulators said the non-performing loans (NPL) ratio for real-estate loans could still be considered comfortable, but this was higher than the average NPL ratio for all types of loans, which was only 2.3 percent as of end-April, according to central bank data. This indicated that defaults on real-estate loans were more rampant than those on other types of loans.

Of the outstanding real-estate loans as of end-March, P232.57 billion was accounted for by loans supporting purchases of residential properties. This level was up 21 percent from P192 billion as of the same period last year.

Demand for real properties is being supported by the continued increase in remittances from overseas Filipinos. Supply of credit is also robust because banks remain awash with cash. This liquidity is being boosted largely by growing deposits from the public.