By Iris C. Gonzales Updated February 23, 2009 12:00 AM [ philstar.com ]
MANILA, Philippines - State-owned Home Guaranty Corp. (HGC) said the global financial turmoil could lead to an increase in payment defaults in the housing sector due to layoffs and retrenchments and a significant reduction in housing demand from overseas Filipino workers (OFWs).
HGC president Gonzalo Bongolan said that layoffs and lower private spending could limit borrowers’ capacity to pay for their housing loans.
Banks, he said are already tightening credit due to risk aversion.
A major threat to housing finance is a “possible reduction of liquidity and housing demand from OFWs and their remittances.”
The HGC chief also expects an increase in inventory of housing units - foreclosed, unoccupied and for sale—as a result of the financial crisis.
Furthermore, he said property developers may experience difficulty in selling high-rise and high-end properties given the difficult economic tide.
He also said that the development of shopping centers and commercial establishments may be put on hold at least while the global economy is still in a slowdown.
Nonetheless, Bongolan said there are opportunities in the housing sector despite the worldwide economic recession.
He said that property developers would continue to experience strong demand for commercial real estate projects especially from off-shoring business process outsourcing (BPO) companies.
Bongolan said that the government’s plan to boost infrastructure spending would also provide opportunities for land banking and development.
He also expects less restrictive lending schemes of government funders and improvement in sovereign guaranty for credit facilities and investments in the housing sector to ease the situation for borrowers.
HGC is optimistic this year despite the global recession. It expects to proceed with its plan to sell P5.5 billion in seven-year bonds by June to raise funds for its refinancing needs.
The agency expects strong investor appetite for the bonds, given the improving finances of the agency.
Bongolan said that the last time the agency offered bonds which was in 2007, there was strong market appetite. The agency offered only P7 billion worth of bonds then but was able to sell P8.2 billion, he noted.
In 2006, the agency sold P12 billion in bonds, Bongolan added.
Home Guaranty Corp. is a government-owned and controlled corporation mandated by law to extend guarantee cover to all bond issuances of other state-run firms.