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Tighter credit standards for comm’l real estate loans

By Mary Grace Padin (The Philippine Star) | Updated April 24, 2017 - 12:00am

The results of the BSP’s Senior Bank Loan Officers’ Survey showed that credit standards for commercial real estate loans registered a net tightening for the fifth consecutive quarter using the diffusion index approach. File

MANILA, Philippines -  Banks continued to tighten their credit standards for real estate loans to companies, while maintained those for housing loans of individuals during the first quarter, the Bangko Sentral ng Pilipinas (BSP) reported.

The results of the BSP’s Senior Bank Loan Officers’ Survey showed that credit standards for commercial real estate loans registered a net tightening for the fifth consecutive quarter using the diffusion index approach.

“The tighter overall credit standards for commercial real estate loans reflected respondent bank’s wider loan margins, reduced credit line sizes, and increased use of interest rate floors,” the BSP said in a statement.

Results of the survey also indicated that some banks saw increased demand for real estate loan from enterprises in the first quarter on the back of increased working capital and accounts receivable financing needs, higher investment in plant and equipment of borrowers, and clients’ improved economic outlook.

Some banks anticipate this demand for commercial real estate loans to continue to increase over the next quarter.

On the other hand, results based on the diffusion index approach also showed that credit requirements for housing loans of individuals remained unchanged during the first three months.

“The unchanged credit standards for housing loans was attributed by respondent banks largely to their sustained tolerance for risk and steady profile of borrowers, as well as stable economic outlook,” the BSP said.

For the second quarter, credit standards for individual housing loans are expected to register a net easing as banks anticipate an improvement in the profitability and liquidity in their portfolio, an increase in their tolerance for risk, and less strict financial system regulations.

Banks said they experienced an increased demand for housing loans in the first quarter, and expects this momentum to persist over the next three months.

Meanwhile, results of the survey using the modal approach showed that credit standards both for commercial and individual real estate loans were maintained during the first quarter. Demand was also unchanged, and is seen to continue being at the same level over the next quarter.

Real estate price growth slows

By Melissa Luz T. Lopez, Senior Reporter
Posted on April 03, 2017 [ ]

HOUSING PRICES stood barely changed by the end of 2016, with lower costs tallied within Metro Manila against minimal upticks recorded in the provinces during the fourth quarter, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

Residential property prices went up by a mere 0.3% between October and December 2016 from a year ago, which is the slowest pace ever seen under the central bank’s residential real estate price index (RREPI). The rate slowed down from a 2.2% increase in the third quarter and a 5.2% uptick during the comparable year-ago period, and is the slowest since the earliest available data from the second quarter of 2015.

The RREPI is the BSP’s tool that measures the average change in the home prices across building types and locations, allowing regulators to assess overall real estate and market conditions and monitor any looming bubbles in the property sector.

It was cheaper to acquire housing units within Metro Manila during the last three months of 2016 with average prices down by 1.1% from the previous year, edging lower than a 0.2% decline posted during the third quarter.

This was partially offset by a 1.7% increase in the cost to acquire homes in the provinces, even as it also slowed down from a 4.9% rise logged during the third quarter.

By structure type, duplex units sustained a drop in prices for the second straight quarter as it slipped by 12.3%, coming from a 5.1% decline seen during the July-September period and a 5.8% slide during the last three months of 2015.

Duplex prices dropped by 8.8% within Metro Manila, against a 5.5% rise recorded in other regions, according to BSP data.

Price tags on single detached and attached houses also went down by 1% from a year ago, reversing from a 2.4% increase in the third quarter and an 8.2% jump seen during the comparable period in 2015 as prices within Metro Manila and the provinces dropped by 8.6% and 0.2%, respectively.

Meanwhile, rates for townhouses rose by 6.2% nationwide, led by a 16.3% jump in the provinces where it is considered as the most popular option, the BSP said in a statement. Townhouse prices stood steady within Metro Manila, clocking in a mere 0.1% increase from the past year.

Condominium units also saw a small increase in prices by 1.8%. It posted a mere 1.3% climb in Metro Manila -- where it is the most common purchase -- against a 6.4% jump in rates outside the capital.

BSP Deputy Governor Diwa C. Guinigundo said the movements in housing prices largely reflected growing demand, allaying fears that a property bubble is in the offing.

“There is a strong domestic demand in the Philippines for both residential and commercial properties. We have a large shortage of housing units supported by a big base of young, employed people especially in the services sector. As the economy continues to grow, demand for commercial space will be sustained,” Mr. Guinigundo said in a text message to reporters, while pointing out that real estate developers have grown more “prudent” in building new projects in the aftermath of the Asian financial crisis.

A bubble forms due to a perceived rising demand in housing units that drive developers to build more, and is said to “burst” as demand stagnates, which will lead to an abrupt drop in property prices that could potentially jolt the banking system.

Mr. Guinigundo added that provinces like Cagayan de Oro and Iloilo are seeing a construction boom, which stand as “very strong signs” of economic growth.

By location, Metro Manila accounted for over half of the property loans during the quarter, followed by Calabarzon with 25.6% of the total. Other regions with the biggest share are Central Luzon (5.8%), Central Visayas (4.7%), and Western Visayas (3.9%).

Meanwhile, about 70.5% of property loans booked in the fourth quarter were incurred to buy new housing units, the central bank said. Nearly half of the debts were used for condominium purchases, followed by single detached units at 43.9%. Townhouses took a 7.6% share, although the BSP said that loans across all housing types grew from a year ago.

Philippine banks granted P529.904 billion in total home loans in 2016, nearly a fifth higher from a year ago and accounted for 34.9% of the approved property loans.

The BSP collects RREPI data from the mandatory reports submitted by banks, which cover the amounts and profiles of the home loans which they hand out every quarter.

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