The exposure of banks to the real estate sector, particularly in the form of extension of property loans and investments in bonds issued by property firms, rose by nearly 20 percent in 2011 to a new record high of over half a trillion pesos.
The Bangko Sentral ng Pilipinas said the increase in the banks’ exposure to real estate came on the back of higher household incomes and increased economic activity that led to more demand for residential and commercial properties.
Data from the BSP showed that the exposure of banks—both universal/commercial and thrift banks—to the real estate sector totaled P518.6 billion by the end of 2011, rising by 19.6 percent from the P433.6 billion reported during the same period the previous year.
The latest amount was also higher by 6.8 percent from the P485.6 billion seen in September 2011.
“The combined exposure to the real estate sector of universal and commercial banks, and thrift banks breached the half a trillion mark and reached the highest level [in 2011],” the BSP said in a statement Friday.
Rise in loans for residential properties was attributed largely to growth in remittances from overseas Filipino workers. Growing household incomes, supported by remittances, allowed many Filipino households to feel confident about buying homes with the help of bank loans.
On the other hand, rise in demand for commercial properties was partly credited to sustained investments by business process outsourcing (BPO) firms.
Data showed that loans to individual and corporate borrowers to support purchases of residential and commercial properties accounted for bulk of the banks’ exposure, or P506 billion.
The small remainder came from banks’ investments in bonds issued by property firms.
Also, universal and commercial banks accounted for P398 billion of the total, having catered to large corporate borrowers.
Although banks extended more real estate loans, the BSP said, their exposure to bad debts had in fact declined.
Nonperforming real estate loans ratio—the share of soured real estate loans to total real estate loans—improved to 5 percent by the end of 2011 from the 6.8 percent of the same period the previous year, and the 5.5 percent of September 2011.
Soured loans or bad debts are those that have remained unpaid at least 30 days upon maturity.
The growth in bank loans to the real estate sector earlier elicited concerns over potential asset price bubbles, similar to what had happened in the late 1990s. But the BSP shrugged this off.
Unlike in the late 1990s when demand for properties was mostly speculative in nature, recent purchases of real estate were fueled by actual demand from households and enterprises that were in need of assets for expanded operations, the BSP explained.
business.inquirer.net
Lunes, Marso 26, 2012
Now Available: Philippines Real Estate Report Q2 2012
The Philippines real estate sector is generally considered to have outperformed in 2011. Almost 300,000 square metres (m2) of Grade A office space came to market across Metro Manila. The booming offshoring and outsourcing industry boosted office rents, while positive investor sentiment buoyed capital values. Remittances continued to provide local Filipinos with the spending power to drive the retail market, which saw the entry of new local and international retailers, such as Emporio Armani, LeSportSac, Paris Hilton Bags, HTC and Jamba Juice, enhancing the demand for retail space.
Despite the weak global economy constraining demand for Philippine exports, the local economy is fundamentally stable, though underperforming. While little can be done to prevent the exogenous factors affecting the Philippines, it may
Despite the weak global economy constraining demand for Philippine exports, the local economy is fundamentally stable, though underperforming. While little can be done to prevent the exogenous factors affecting the Philippines, it may
be said that the government could have done better in 2011. Weak government and private spending was little offset by resilient private consumption. Public spending targets were missed throughout the year, with Philippine President Benigno Aquino III's US$1.7bn stimulus package in Q411 having a relatively mute effect on the quarter's GDP growth. Private sector participation has also been hampered by Manila's inability to enact coherent investment policies, emblematic of which has been the government's highly touted Private-Public Partnership programme, under which not one project made it into fruition in 2011. Private consumption, which comprises 70% of total GDP, slowed from Q2 to Q3 but still posted year-on-year (y-o-y) growth of 7.1% for the quarter.
Full Report Details at
- www.fastmr.com/prod/335701_philippines_real_estate_report_q2_201 ..
Overseas remittances play a large role in household expenditure and managed to keep private consumption buoyant amid the weakening wider economy. However, this is not expected to continue as BMI forecasts that private consumption will be limited to 4.3% in 2012 following a 5.8% performance in 2011.
A recent pledge by the Philippine government to boost infrastructure spending in 2012, as well as improve monetary conditions, suggests that a recovery in construction activity is on the cards. As a result, we are revising up our forecasts for the Philippine construction sector, with real growth expected to reach 6.5% in 2012 (from 5.7%). Beyond 2012, we believe that construction activity in the Philippines could improve further, with real growth for the sector forecast to average 7.5% per annum between 2013 and 2016.
Some of the key opportunities in the real estate market are:
* The Philippines is one of the fastest-urbanising countries in East Asia. With an English-speaking and relatively low-cost workforce, it is ideally placed to participate in high-demand services such as business process outsourcing.
* Many residents of cities in the Philippines continue to experience poverty, environmental degradation and live in slums or other inadequate housing arrangements. Economic development has created rural-to-urban migration.
Some key risks to the real estate market are:
* Political unrest in the Middle East and North Africa causing a decline in overseas remittances.
Full Report Details at
- www.fastmr.com/prod/335701_philippines_real_estate_report_q2_201 ..
Overseas remittances play a large role in household expenditure and managed to keep private consumption buoyant amid the weakening wider economy. However, this is not expected to continue as BMI forecasts that private consumption will be limited to 4.3% in 2012 following a 5.8% performance in 2011.
A recent pledge by the Philippine government to boost infrastructure spending in 2012, as well as improve monetary conditions, suggests that a recovery in construction activity is on the cards. As a result, we are revising up our forecasts for the Philippine construction sector, with real growth expected to reach 6.5% in 2012 (from 5.7%). Beyond 2012, we believe that construction activity in the Philippines could improve further, with real growth for the sector forecast to average 7.5% per annum between 2013 and 2016.
Some of the key opportunities in the real estate market are:
* The Philippines is one of the fastest-urbanising countries in East Asia. With an English-speaking and relatively low-cost workforce, it is ideally placed to participate in high-demand services such as business process outsourcing.
* Many residents of cities in the Philippines continue to experience poverty, environmental degradation and live in slums or other inadequate housing arrangements. Economic development has created rural-to-urban migration.
Some key risks to the real estate market are:
* Political unrest in the Middle East and North Africa causing a decline in overseas remittances.
* Economic difficulties in the US and eurozone, and commodity price fluctuations, pose risks to private consumption growth.
* Despite President Benigno Aquino III's pro-foreign direct investment (FDI) policies, the changes in the law affecting REITs mean developers that had planned to set trusts up have stopped. In August 2011, mall developer SM Prime Holdings dropped its plans to raise US$500mn via a REIT and Ayala Land dropped its plans to raise US$400mn following the tax rises by the BIR and the tax agency.
* Despite President Benigno Aquino III's pro-foreign direct investment (FDI) policies, the changes in the law affecting REITs mean developers that had planned to set trusts up have stopped. In August 2011, mall developer SM Prime Holdings dropped its plans to raise US$500mn via a REIT and Ayala Land dropped its plans to raise US$400mn following the tax rises by the BIR and the tax agency.
Debt watcher retains top rating for ALI bonds
A DEBT WATCHER yesterday announced it was keeping its top rating for proposed and outstanding bonds from Ayala Land, Inc. (ALI) due to the company’s reportedly well diversified nature and strong capitalization.
The interior of the Tower One & Exchange Plaza in Makati City, headquarters of Ayala Land, Inc. is seen from the lower floors. Philippine Ratings Service Corp. has retained its top rating for the listed developer’s proposed and outstanding bond issuances. -- Photo By Jonathan L. Cellona
Following a recent review, local credit ratings agency Philippine Ratings Service Corp. (PhilRatings) retained its outstanding “Prs Aaa” score for Ayala Land’s proposed P5-billion bond issuance, as well as its outstanding bonds worth P4 billion, the press statement showed.
“The ratings reflect the following factors: Ayala Land’s well-diversified portfolio complemented by solid brand equity and a highly-experienced management team; sound profitability coupled with strong cash flow generation and cash reserves, and conservative capitalization with ample room for additional debt,” PhilRatings said.
Last month, the real estate firm said it was issuing the multi-year bonds worth P10 billion in order to fund general capital expenses. This comes on top of an earlier P4-billion bond issue first issued back in 2008.
In the meantime, the company announced last week that it was earmarking as much as P60 billion -- its biggest investment in a single area yet -- to develop six districts within Makati City, the country’s so-called financial capital.
Ayala Land has allotted a record P37 billion in capital expenditures this year alone to fund new residential and leasing projects, as well as for the acquisition of new properties moving forward.
This amount will be partially sourced from seven- and 10-year corporate bonds worth P15 billion that were issued last month, earlier reports said.
Ayala Land hiked its net income for 2011 to a record P7.14 billion versus P5.46 billion it generated in 2010, while total consolidated revenues rose by 17% to P44.21 billion from P37.8 billion two years ago.
Total expenses last year grew by 12% to P33.50 billion in 2011 from P29.95 billion, year on year.
“Indications are strong that the growth in profitability will continue in the medium-term given the current favorable industry and general economic environment,” PhilRatings noted.
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