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No real estate bubble yet – BSP

By Kathleen A. Martin (The Philippine Star) | Updated October 30, 2014 - 12:00am

MANILA, Philippines - There is still no property bubble in the economy, although the Bangko Sentral ng Pilipinas chief said there may be some segments in the real estate sector seeing a faster increase in prices.

“There are certain segments in the entire sector where prices or valuations may be rising too fast but overall, if you look at the entire sector, you don’t see any clear evidence of a real estate bubble,” BSP Governor Amando M. Tetangco Jr. said yesterday.

Banks’ exposure to the property sector rose 22 percent to P1.097 trillion in June from the same period last year. This was driven by a 21-percent climb in real estate loans to P924.317 billion and a 26-percent growth in investments in housing securities to P172.907 billion.

The BSP in July required banks to undergo a separate stress test in order to assess the impact of their exposure to the property sector once borrowers fail to service their loans.

In 2012, the central bank tightened regulations in monitoring banks’ exposure to the property sector. Aside from loans, banks have been required to report their investments in real estate securities.

“We adopted measures mentioned, and assess if they are sufficient. At this point in time, there is no plan to put in place more measures,” Tetangco said.

“Prudential measures are not just sector specific regulations.

Regulations implemented over the past one or two years, including Basel 3 capital adequacy requirements, and recent credit risk management framework, this also signal banks have to be prudent in their lending operations,” he added.

Banks have also tightened lending standards for real estate credit as its latest Senior Loan Officers Survey showed, “a positive sign of ensuring health of the financial system,” Tetangco said.

Tetangco recounted that amid an increasing demand for housing and office space, major developers have been taking measures so as not to see a repeat of the 1997 Asian Financial Crisis.

“Instead of all four towers being started at the same time like what was done in the 1990s, construction is more demand-dependent. They would construct one tower first, sell all of that, once they achieve an acceptable level of sales, and there’s new demand, they would start building the second tower,” Tetangco said.

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