Banks’ real estate loans climb to 19.8% in 2024

The exposure of Philippine banks and trust entities to the volatile property segment inched up to 19.8 percent of total loans in end-December 2024 amid the sustained expansion of property-related lending despite economic uncertainties.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that banks’ real estate exposure went up from 19.6 percent in end-September last year. It marked the highest level in two months or since the 19.9 percent as of end-June 2024.

Investments and loans extended by the banking industry to the property sector stood at P3.31 trillion in end-2024, 5.1 percent higher than the P3.15 trillion seen a year ago.

Lending rose by 7.7 percent to P2.95 trillion in 2024 from P2.74 trillion in 2023. Commercial real estate loans rose by 6.9 percent to P1.85 trillion, while residential real estate loans grew by 10 percent to P1.1 trillion.

Past due real estate loans inched up by four percent to P140.65 billion. This came after past due commercial real estate loans edged higher by 2.3 percent to P40.92 billion, while past due residential real estate loans increased by 4.7 percent to P99.73 billion.

The gross non-performing loans (NPLs) of banks from the real estate sector stood at P108.81 billion as of end-December last year, 0.4 percent higher than the P108.39 billion in the comparable year-ago period.

Despite the increase in NPLs, the gross non-performing loan real estate ratio went down to 3.68 percent in end-2024 from 3.96 percent a year ago.

Meanwhile, real estate investments in debt and equity securities fell by 13.8 percent to P353.81 billion from P410.65 billion the previous year.

To ensure that banks’ exposure to the property sector remains manageable, the BSP continues to maintain prudential measures, including the real estate limit.

These measures also include the heightened surveillance of banks’ real estate and project finance exposures, and the real estate stress test thresholds for universal and commercial banks as well as thrift banks.

At the height of the global health crisis, the BSP raised the real estate loan limit of big banks to 25 percent from 20 percent in August 2020 to free up P1.2 trillion in additional liquidity for lending amid the uncertainties brought about by the pandemic.

BSP data showed that the Residential Real Estate Price Index slipped by 2.3 percent to 163.9 in the third quarter from 167.7 in the same quarter last year. This was the first time the index contracted since the 9.4 percent decline in the second quarter of 2021.

Source: Philstar

Philippine homeownership dreams stifled by rising costs and stagnant wages

A 28-year-old Filipino entrepreneur, has been renting a condominium unit in Quezon City near the Philippine capital for two years now and doesn’t plan to buy his own house soon.

“Owning a home is one of the biggest financial decisions you can make,” he said.

“Outside of saving for a down payment, there are a number of factors I’d need to take into consideration before making a concrete decision.”

A study by PhilhealthCare, Inc. (PhilCare), a health maintenance organization, found that 39% of Generation Z (Gen Z) people — those born in the late 1990s to early 2000s — cited homeownership as one of their top worries.

“For a young working professional, it can be challenging to acquire a property right away, especially with the rising prices,” Roy Amado L. Golez, Jr., director of research and consultancy at Leechiu Property Consultants, said in an e-mailed reply to questions.

“If their only source of income is their salary, they need to set aside enough funds for a down payment and make sure they’re able to sustain installment payments,” he added.

Buying a house today has changed drastically from just a few decades earlier.

“Housing availability was already a major issue even decades ago,” Mr. Golez said. “There were not enough homes for the general population, and this caused terrible traffic even then.”

“During the time of our parents, buying a home in Metro Manila meant buying a house and lot or townhouse with a lot of space. Land prices in general were still affordable relative to household income,” he pointed out. 

An account director and freelancer owns a condo unit where she lives in some days, but for the most part, she still lives in her parents’ house.

“Given the current market and landscape for homeownership, it’s quite difficult to own and eventually maintain the fees for a home, whether it’s land tax or other association fees,” she said in an Instagram message.

While she has multiple income sources to help her sustain the ownership, she said she needs more to live comfortably especially once a family comes into the picture.

Owning a condo unit was much easier a few years ago, when financing for one that costs P2 million to P3 million was effortless, Joey Roi H. Bondoc, a director and head of research at Colliers Philippines, said.

“The required monthly income for you to be able to get a bank approval was much easier at that time,” he said. “But because of the increase in prices, the hurdles also got higher. That has eventually resulted in young people having a difficult time buying these condominium units.”

The average appraised value of new housing units in the Philippines stood at P86,417 per square meter in the third quarter of 2024, 31% higher than in 2020, according to data from the Philippine central bank.

Jet Yu, founder and chief executive officer at PRIME Philippines, said the property market has undergone a “significant transformation” in the past decades, with more people living in urban areas.

“This shift has driven increased demand for housing in metropolitan areas, pushing property prices higher and reshaping homeownership trends,” he said in an e-mailed reply to questions.

Data from property developer DMCI Homes, Inc. showed that inquiries for rental and rent-to-own properties as well as units for purchase have been increasing steadily over the years.

“As thousands of new households are created each year, the need for housing, whether for lease or purchase, therefore remains strong,” Januel O. Venturanza, DMCI Homes vice-president for marketing said.

“The challenge is finding the right home and arrangement — whether for rent, rent-to-own or purchase — that suit the customer’s lifestyle and budget,” he said in an e-mailed response.

Mr. Yu said the interest in homeownership is prevalent among the younger generation.

“More financially independent and willing to take risks, many Millennials view condo ownership as a symbol of success,” he said, referring to people born between the 1980s and the late 1990s. “Similarly, Gen Z — also known as Zoomers — are entering the workforce, bringing with them a preference for condo living.”

Both Millennials and Gen Z — people born from 1997 to 2012 — are “shaping residential condo demand,” Mr. Yu said.

He noted that in recent years, there has been a noticeable shift toward renting, particularly among young professionals and small families. “The increasing popularity of rent-to-own schemes has provided flexibility for those not yet ready to commit to full ownership.”

Central bank data showed that the prices of condominium units fell 9.4% in the third quarter from a year earlier, reversing 10.6% growth in the previous quarter and 8.3% a year ago.

Filipinos preferred single-detached homes and land ownership a few decades ago, Mr. Yu said, but with rising land prices, horizontal residential developments have become scarce, particularly in Metro Manila. 

“As a result, vertical living — primarily through condominiums — has become the norm in major commercial business districts and is now widely accepted in key cities across the country,” he said. “With the median age of Filipinos at 25.34 years, a significant portion of the population will continue to drive condo sales and rentals in the coming years.”

Property developers have been cutting the sizes of units to a studio or one-bedroom type to cater to younger buyers, Mr. Yu said.

“Due to affordability issues, renting of homes by families has always been the practice,” Mr. Golez said. “This is especially true for single or starter families. Of course, owning your own home has always been the dream of every Filipino.”

But elevated real estate prices are the main barrier to homeownership.

“In general, the cost of construction, land and financing has grown faster than the salary levels of the population,” Mr. Golez said.

The House of Representatives in February approved on second reading a bill that seeks to give minimum wage workers a P200 daily increase. The Senate approved a counterpart proposal for a P100 daily wage increase for private-sector workers in February last year.

Labor groups have said these proposed increases are not enough amid spiraling prices especially of food.

Mr. Golez said inflation’s effect on building materials, labor, construction and financing costs, as well as the growing scarcity of land in Metro Manila would continue to push up property prices.

“There are potential buyers that have been commenting on how they find primary unit property prices are on the high side,” he said. “However, we don’t see a high possibility for developers to lower prices.”

Mr. Yu said elevated property prices are driven by sustained urbanization and steady demand for residential properties, particularly in key cities.

“A young population with a strong motivation to invest in condominiums continues to fuel this demand,” he added.

Condominium prices had been rising more than 10% annually before the COVID-19 pandemic, he pointed out.

“However, in the past year, there were quarters where condo prices slightly dipped,” he said. “Moving forward, price increases are expected to remain moderate, likely within the single-digit percentage range.”

Central bank data showed housing prices nationwide declined 2.3% in the third quarter, the first contraction in more than three years.

‘BUYER’S MARKET’

Analysts said homeownership prospects are possible for young professionals despite these hurdles.

“If there is one phrase to describe this market, it’s a buyer’s market at this point, meaning they can really haggle prices,” Mr. Bondoc said.

Colliers data showed that the vacancy in Metro Manila’s secondary market rose to an all-time high of 23.9% in 2024 as Chinese workers left the Philippines after a ban on Philippine offshore gaming operations.

“Now it’s a buyer’s market, and the market dynamics are shifting toward the preferences of young buyers, whether in terms of amenities, in terms of pricing, and even in terms of foreign exchange,” Mr. Bondoc added.

The Bangko Sentral ng Pilipinas (BSP) said real estate loans rose 7.9% in the third quarter of 2024 from 7.2% a quarter earlier and 5% a year ago.

“This shows sustained demand for real estate loans,” it said in an e-mailed statement. “Against this backdrop, property analysts remain positive about the strong demand for real estate loans in the country.”

It expects the continued supply of residential condominiums as developers offer more appealing payment terms for pre-selling and ready-for-occupancy projects.

It added that the industry growth would continue to be driven by urbanization, e-commerce, tourism recovery and evolving work models.

While owning a home may seem like an impossible goal, it is still achievable with the right financial habits, Mr. Venturanza said.

“Start preparing as early as possible, define and tenaciously pursue long-term goals, and do your research,” he said. “Look at developer track records, compare properties and identify which ones offer truly superior overall value.”

Mr. Golez said young professionals should start saving and investing as soon as they can.

“Create an emergency fund of six to 12 months of personal overhead. Do your research on the property you want to purchase and look at other options available to you,” he said.

“The more information you have, the better armed you will be in deciding on your housing investment. Always have the habit of setting aside a portion of what you earn today. You’ll eventually have enough to start buying your own home,” he added.

Mr. Venturanza said a good portion of DMCI customers are below 35 years old.

“Property prices continue to increase, so developers are trying to find ways to address this issue of affordability,” he said.

He added that they are looking to offer flexible and friendlier payment terms.

“Young professionals and families are a significant part of our target market, and we recognize their evolving needs when it comes to housing,” he said.

For example, DMCI Homes offers amenities that cater to younger buyers, such as coworking spaces and fitness facilities.

“Developers need to be more creative and implement out-of-the-box strategies to really attract the young market at this point,” Mr. Bondoc said.

A 23-year-old web developer and entrepreneur based in Manila, sees the opportunities of owning a home even if it’s not an easy task.

“It’s the best time in history to acquire wealth,” she said. “Everybody has a shot at building their own wealth through many platforms and spaces of opportunity. This can be done through resourcefulness and skill, in addition to plain grit.”

“I have been looking into owning a home recently, but it likely won’t be tomorrow,” she added.

Source: Business World

The need for gender equality in corporate boards

Since March is Women's Month, it's timely to talk about gender equality and women representation in corporate boards.

Gender equality is one of the sustainability goals of the United Nations. Ending all discrimination against women is not only a basic human right, but a necessary foundation for a peaceful, prosperous and sustainable world. It is proven that empowering women helps economic growth and development (United Nations Development Program, Goal 5, available at https://www.undp.org/sustainable-development-goals/gender-equality).

There is also a push for general equality or diversity in corporate boards. Under the Revised Corporation Code, the board of directors shall exercise the corporate powers, conduct all business and control all properties of the corporation.

The Organization for Economic Cooperation and Development has recognized that the ability of the board to ensure strategic guidance of the company depends, in part, on its composition, which should include directors with the right mix of background and competencies. There is research that suggests that gender diversity on boards has positive spillover effects on board dynamics and governance

In a diversity tracker or study conducted by Egon Zehnder in 2024, it was reported that 96 percent of corporate boards have a least one woman director, and on average, women accounted for 34.9 percent of new board appointments in 2024. The study found that despite more women joining boards globally, setbacks in new board appointments and slower advancement to leadership roles highlight the need for more intentional board succession planning (The Progress of Board Diversity: Slow Advancement Amid Waves of Change, available at https://www.egonzehnder.com/global-board-diversity-tracker).

A study conducted by the Philippine Women's Economic Network showed that women comprise only 17 percent of directors in Philippine publicly listed companies or PLCs.

Gender parity

According to the World Economic Forum, gender parity in the workforce can be advanced through both formal measures like quotas and policies, as well as through informal factors such as professional networks.

Norway, Spain, France and Iceland have laws requiring that women comprise at least 40 percent of boards in publicly listed companies. Six countries require between 20 and 35 percent, and four countries — India, Israel, Korea and Malaysia — require "at least one" female director. Malaysia is the first Southeast Asian country to impose a one-female director quota.

It is still debatable if a quota will be good for the Philippines, which has historically been in the top 10 of the World Economic Forum Global Gender Gap Report until 2018. But we slid to No. 25 in 2024, dropping nine slots from its 16th place 2023 ranking. (It was said the slide was due to losses in economic parity and a reduction in the share of women ministers).

Other than quota, LinkedIn data suggests that gender gaps in online professional networks lead to men typically having larger networks and stronger networks than women. Stronger networks are associated with increased probability of career progression and receive more recruiter outreach.

However, one silver lining is that women have more "weak" ties, which have been linked to better career outcomes (Global Gender Gap Report 2024, Insight Report, June 2024, available at https://www.weforum.org/publications/global-gender-gap-report-2024/digest/).

It is thus important that women corporate directors be in strong networks worldwide, including the Philippines.

Here at home, NextGen Organization of Women Corporate Director (NOWCD) is pushing for more women directors in Philippine PLCs and boards. NOWCD is an organization of women directors in the boards of highly esteemed and reputable publicly listed companies or companies vested with public interest. It is the Philippine affiliate of Women Corporate Directors, the world's largest community of women corporate board of directors.

From its inception in 2021, NOWCD has made its mission to develop highly qualified women directors to become drivers of visionary and effective boards. Its goal is to help increase the representation of women in leadership positions of public and private company boards in the Philippines. The organization believes that diversity is key to bringing about balance and success to the future of any corporation.

The Institute of Corporate Directors provides directors with multifaceted learning forums to advance their governance knowledge and build the necessary skills to enhance their contributions in the boardroom.

Source: Business World