BSP: Real estate sector 'far from asset price bubble'

Asset prices in the real estate sector are far from “bubble” conditions, the Bangko Sentral ng Pilipinas (BSP) said Friday in reaction to concerns expressed during the 45^th annual meeting of the board of the governors of the Asian Development Bank.   BSP Deputy Governor Diwa Guinigundo said the country has been able to manage surges in capital flows. He pointed to “very stable inflation, as well as the stability and competitiveness of the peso, as indicators   “Normally when you have large capital inflows, people—in search of yields— would go to different asset markets, including real estate. (T)he real estate industry in the Philippines is far from suffering an asset price boom,” the ranking BSP official explained.   Metro Manila CBD land values   The latest Philippine Property Market research and forecast report of Colliers International said that in the first quarter of this year, “implied land values in the Makati commercial business district (CBD) appreciated by 2.26 percent to an average of P284,130 per square meter.”   By the same quarter next year, Colliers expects these values to rise by 6 percent and “may reach P300,000 per square meter—higher than its historic peak in early 2009.”   “In Ortigas Center, land values grew by 1.5 percent to P130,783 per sq m and are expected to grow by 4 percent by the end of the first quarter next year,” Colliers also said.   Land value growth was fastest in the Fort Bonifacio Global City, where it was at 28 percent year-on-year “driven by the continuous interest in developable land and properties.”   Colliers said Fort Bonifacio land values were at P189,000 per square meter in the first quarter of 2012 and “projected to grow by 17 percent over the next twelve months.”   Banks’ exposure to the real estate sector growing   In an interview with GMA News Online on the sidelines of the ADB annual meeting, International Monetary Fund (IMF) deputy managing director Naoyuki Shinohara said local banks’ exposure to the real estate sector is an aspect  financial sector supervision authorities  “may want to look into carefully.”   Shinohara said there are some large real estate companies wherein some banks have “relatively large” exposure.   BSP data showed bank lending in February to the real estate, renting and business services sector jumped by 26.4 percent.   “As of end-December 2011, the combined exposure to the real estate sector of universal and commercial banks (U/KBs) and thrift banks (TBs) breached the half trillion mark and reached the highest level at P518.6 billion…up by 6.8 percent from previous quarter’s P485.6 billion and by 19.6 percent from last year’s P433.6 billion,” the BSP said in another disclosure.   The BSP noted that despite the increasing level of real estate loans (RELs), the ratio of RELs to total loan portfolio, exclusive of interbank loans slightly declined to 14.5 percent from last quarter’s 14.6 percent.   “Further breakdown of RELs by industry showed that the RELs of U/KBs were concentrated for commercial purposes at 67.8 percent (P261.0 billion) while the remaining 32.2 percent (P123.9 billion) were for residential purposes,” the BSP said.   The non-performing RELs ratio of u/KBs was at 5.1 percent—higher than the 4.7 percent of TBs—indicating that thrift banks had better quality real estate loans and portfolios than the larger banks. — ELR, GMA News