New index to gauge banks’ exposure to property – BSP


The central bank said on Friday the first results of a new residential real estate price index, due out possibly early next year, should provide an overall picture of the Philippine property industry and help it gauge commercial banks’ exposure to the sector.

The RREPI is an initiative of the Bangko Sentral ng Pilipinas (BSP) to ensure that the banks’ property exposure remains manageable.

The index will also allow the BSP to track property prices, initially in Metro Manila and neighboring provinces, and eventually across the country.

It is also useful to produce a breakdown of prices into residential and commercial property, which are driven by different dynamics, BSP Deputy Governor Diwa Guinigundo said in an email to reporters.

The BSP issued the statement after global debt watcher Fitch Ratings said in its credit opinion on the Philippines released on Thursday that a lack of data on local property prices and affordability indicators were key constraints in determining the real status of the country’s real estate market.

At present, there is limited clarity over macro-prudential risks stemming from the domestic real estate market, Fitch said, adding that such data is necessary to enable it to assess the effect of credit growth on that market.

The BSP had announced that the results of its RREPI survey are likely to be out by the first quarter of 2016. The central bank is currently working to cover not just Metro Manila but all the provinces across the country.

A nationwide coverage by the survey, which will also consider housing demand indicators using data on banks’ approved housing loans, is also underway, the BSP said.

What has been constructed at this point is a preliminary real estate price index based on such features, workshops and a survey dry run with universal, commercial and thrift banks.

The latest available data, which covers the fourth quarter of 2014, had shown that Philippine banks’ exposure to real estate rose 21.4 percent year-on-year, with loans to the sector accounting for the bulk of the total, though marking a drop in the bad loans ratio.

The real estate exposure (REE) of universal, commercial and thrift banks in the country stood at P1.221 trillion as of end-December 2014, up by P215 billion from the P1.006 trillion exposure recorded a year earlier, and higher by 5.4 percent from P1.159 trillion at end-September last year.

Real estate loans made up 85.4 percent of the REE in the fourth quarter, while securities investments account for the remaining 14.6 percent.


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