Even if the Philippine banking system remains resilient, the International Monetary Fund (IMF) says risks and consumer credit in the real estate sector still need to be monitored more closely and may prompt central banks to intervene.
“Financial stability risks are still included. The banking system is sufficient Liquidity and capital buffers and not executedING Loan (NPL) is very low. An IMF spokesperson told BusinessWorld In the email.
The latest data from Bangkok Sentral NG Pilipinas (BSP) shows that the banking industry's bad attitude ratio fell to a three-month low of 3.3% in March.
“However, vacancies continue to be high in parts of the commercial real estate sector and rents are falling, and the bad situation of housing loans is still rising,” the IMF said.
Real estate consultant Philippine Senior Coal Company expects vacancy rates for residential properties in Metro Manila to reach 26%, whilefThe ice vacancy is expected to be 22% this year as apartments are oversupply and unsold units.
BSP notes “continuous growth in the real estate sector” in its latest financial stability report.
As of September 2024, the NPL ratio for residential real estate was 6.82%, while the NPL for commercial real estate was 2.18%. The large (62.5%) of the real estate loan portfolio consists primarily of commercial loans.
BSP also said earlier that accounting for a large portion of residential real estate loans and the low-cost housing sector has driven the rise in NPL.
The IMF says consumer lending is also another area that BSPs need to focus on.
“Although a small portion of bank assets, the rapid growth of consumer credit deserves close monitoring,” it said.
BSP data shows that outstanding loans from General Bank and Commercial Banks rose 11.8% to 13.19 trillion in March from a year ago.
Consumer loans to residents rose 23.6% to P1.64 trillion in March, mainly due to a 28.8% increase in credit card loans to Rs 95,943 crore.
Multilateral institutions say central banks must also be prepared to step in if necessary.
“BSPs should be prepared to adjust macroprudential policies based on developments in the financial cycle to seize The IMF said.
In the same financial stability report, BSP said that the financial system's real estate loan exposure will require “more careful monitoring in an evolving market situation”.
As of the end of December, the bank's real estate exposure rate rose from 19.55% to 19.75%.
This is due to the 5% increase in total investment and loans extended by the Philippine banking and trust sectors to the real estate sector to reach P3.31 trillion, from P3.15 trillion at the end of December 2023.
BSP monitors lenders’ engagement with the real estate industry as part of its mission to maintain financial stability. – Luisa Maria Jacinta C. Jocson
