Real estate players say no glut after BSP tightens bank exposure ...

By: Krista Angela M. Montealegre, InterAksyon.com
September 2, 2012 12:29 PM

InterAksyon.com
The online news portal of TV5

MANILA - Developers brushed aside concerns of a glut in the property sector after the Bangko Sentral ng Pilipinas moved to tighten banks' real estate exposure.

Filinvest Land Inc. and Vista Land & Lifescapes Inc. said there is no glut as demand for their residential products remains strong.

"I do not think there is a glut in housing and the BSP action is not a problem with Vista Land," said Ricardo Tan, the property firm?s chief financial officer.

The BSP ?just wants banks to report their exposure, including in real estate companies? bonds and equity. No, there is no glut in low-cost housing," said Annabelle Arceo, FLI investor relations officer.

Karlo Pobre, research analyst at Colliers Philippines, considers the BSP action as a "safety measure" to prevent an asset bubble.

"Everyone may just be overwhelmed with the number of condominiums being put up, but we continue to see that the take up is still very high. The BSP is just cautious now," said Pobre.

Colliers Philippines cited BSP data showing real estate loans growing 20 percent year-on-year to P524 billion, whereas non-performing loans slipping to 5.11 percent as against 6 percent in first quarter of 2010.

"The BSP move should not be a worry to the real estate industry as we?re seeing the strongest market and best fundamentals in the last 20 years. The Philippines will experience a continued robust demand across all sectors, especially the BPO sector," said Rick Santos, CBRE Philippines chairman and founder, referring to the business process outsourcing industry.

The BSP recently announced that it would expand the definition of real estate exposure by including not only loans to the sector, but also investments in debt and equity securities, the proceeds of which will be used to finance property ventures.

The expanded definition of loans also includes credits granted to individuals for the purchase or construction of residential real estate and to developers for socialized or low-cost housing projects.

Furthermore, the BSP expanded the definition of real estate activities to include not only construction or development of property projects, but also buy-and-sell, rental and management of properties.

In line with the expanded coverage of real estate exposure, the central bank also required lenders to peg their real estate exposure to adjusted capital, similar to that required under the single borrower's limit rule.

"It's just a lesson from the crisis in 1997 and 2009. Everyone is taking safety measures and again in terms of real estate loans, it's being capped at 20 percent. It has been stable at 14 to 16 percent so it's really not that alarming," said Pobre.

He said overseas remittances continue to be a major driver in fuelling demand for residential products. As of June, money sent home by overseas Filipinos reached $10.1 billion.

Interest rates are also at their lowest levels with lending rates hovering between 5-8 percent in contrast to a range of 12-15 percent over a decade ago.

"It doesn't always mean that there's the expansion cycle, the hyper-expansion cycle and eventually there's the bubble. Most of the time, it doesn't happen that way. It's more of an equilibrium, as long as the supply is taken up. It's a different story altogether. It's a mix and play of inflation rate and other factors," Pobre said.

Overall, the backlog in the residential sector of 3.7 million units in 2010 was mainly composed of demand for socialized and economic housing, Colliers said.

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Source: http://www.interaksyon.com/article/42093/real-estate-players-say-no-glut-after-bsp-tightens-bank-exposure

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