Colliers says housing prices may have recovered in Q4

Residential property prices may have picked up in the fourth quarter after the slump a quarter earlier, Colliers Philippines said.

“Similar to what we have seen previously, the fourth quarter is traditionally a strong quarter for residential take-up whether within or outside Metro Manila, whether it’s condominiums or horizontal,” Joey Roi H. Bondoc, director and head of research at Colliers Philippines, said.

The Bangko Sentral ng Pilipinas (BSP) Residential Property Price Index indicated that housing prices nationwide posted its weakest growth ever in the third quarter at 1.9%.

This was a sharp slowdown from the 7.5% growth posted in the three months to June and the year-earlier 7.6%.

The BSP also reported that lower real estate investment brought banks and trust entities’ real estate exposure down to 19.54% at the end of September from 19.61% at the end of June and 19.55% a year earlier.

Real estate loans climbed 8.9% year on year to P3.096 trillion at the end of September, but real estate investment slipped 5.75% to P354.749 billion.

Mr. Bondoc said yearend bonuses and inflows of remittances from overseas Filipino workers could have spurred demand for residential property in the fourth quarter.

He also noted that the peso’s recent weakness may prompt migrants, especially those from North America, to send more money home.

The peso has been trading between P58 to P59 to the dollar since October, hitting a fresh record low of P59.22 on Dec. 9.

However, Mr. Bondoc said elevated mortgage rates may still continue to dampen housing price growth in the near term, but any potential rate reduction could help property take up and price growth by this quarter next year.

“I think we need to watch out for the… possible reduction in mortgage rates, given that there has been a substantial decline in basic policy rates by the central bank,” he added.

“And if that happens, that will provide a better impetus for a spike in residential demand, and therefore residential prices, starting (in the) first quarter of 2026.”

The BSP ended the year with a fifth straight 25 basis-point (bp) cut on Dec. 11, bringing its total reductions on key borrowing costs to 200 bps since August 2024. The benchmark policy rate is currently at an over three-year low of 4.5%. 

Mr. Bondoc said lowering the mortgage rate between 6% and 6.5% from the current 7.8% could help the property industry by raising confidence among buyers.

“But the concern is that they have not been lowering their mortgage rates,” he added. “If they start doing that next year, 2026, I think (that will be) a very good sign that demand and then prices might recover faster because of this lower mortgage rate.”

Source: Business World

Banks’ real estate exposure slips

Philippine banks and trust entities’ exposure to the property sector slipped at the end of September, amid a decline in real estate investments, Bangko Sentral ng Pilipinas (BSP) data showed.

The industry’s real estate exposure ratio stood at 19.54% as of end-September, falling from 19.61% at end-June and 19.55% in the same period a year ago.

The BSP monitors lenders’ exposure to the real estate industry as part of its mandate to maintain financial stability.

Philippine banks and trust departments have extended P3.451 trillion in total investments and loans to the real estate sector as of the third quarter, up by 7.19% from P3.22 trillion in the previous year.

Based on central bank data, real estate loans climbed by an annual 8.9% to P3.096 trillion as of September from P2.843 trillion a year ago.

Broken down, residential real estate loans rose by 11.4% to P1.188 trillion, while commercial real estate loans grew by 7.41% to P1.909 trillion.

Past due real estate loans reached P158.619 billion at end-September, 7.06% higher than the P148.157 billion seen a year earlier.

Past due residential real estate loans edged up by 5.16% to P110.379 billion, while past due commercial real estate loans increased by 11.7% to P48.24 billion.

Meanwhile, gross nonperforming real estate loans amounted to P116.086 billion in the nine-month period, up 4.06% from P111.554 billion a year ago.

This brought the gross nonperforming real estate loan ratio down to 3.75% as of September from 3.92% in the comparable year-ago period.

BSP data also showed that the banking sector’s real estate investments stood at P354.749 billion at end-September, 5.75% lower than the P376.406 billion recorded last year.

This, as debt securities slipped by 5.51% year on year to P232.496 billion, while equity securities went down by 6.22% to P122.253 billion.

“Banks’ real estate exposure eased to 19.54% at end-September from 19.61% in June, reflecting lower investments in property-linked securities, muted project launches, and cautious lending amid elevated NPLs (nonperforming loans) and high borrowing costs,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said weak property demand may have weigned on the industry’s real estate exposure ratio last quarter. 

“Banks are rationalizing their real estate exposure because non-performing loans are rising and developers are slowing launches amid weak demand,” he said via Viber. “The BSP’s tighter oversight adds to the caution.”

However, Joey Roi H. Bondoc, director and head of research at Colliers Philippines, noted that bank lending to the real estate sector typically slows in the third quarter. He noted the recent drop in lending was “not significant.”

“We have yet to see a substantial take-up in (the) Metro Manila condominium market, especially in the pre-selling sector,” he told BusinessWorld in a phone interview. “And it only means that banks are still wary to lend to the real estate sector, to the condominium sector at this point. So that’s why, if you look at the exposure of banks to real estate, it’s not a significant increase or decrease. It’s almost (flat), almost the same.”

A recent Colliers Philippines report showed that residential take-up soared by 108% in the third quarter, equivalent to 5,900 units from 2,800 units in the previous quarter. This was the highest take-up since the second quarter of 2023.

For the fourth quarter, Mr. Asuncion said the banking industry will likely grant more loans to the real estate sector following the central bank’s recent rate cuts and increasing demand for residential properties and leasing.

“Exposure ratios should remain broadly stable, with banks balancing growth opportunities against regulatory limits,” he added.

The BSP last week reduced borrowing costs by another 25 basis points (bps), bringing the key rate to its lowest in over three years at 4.5%. It has so far delivered 200 bps in cuts since August last year.

However, Mr. Bondoc said that still-high mortgage rates are offsetting the supposed boost from lower benchmark interest rates.

“But the problem is… the central bank has been cutting interest rates but there is no corresponding decline in mortgage rates by the banks, which again indicates that banks are still a little hesitant to lend to this market,” he said.

Still, Mr. Bondoc noted that holiday bonuses, higher remittances and the peso depreciation will likely spur demand in the domestic residential market.

“Q4 is a strong quarter for condominium take-up because of bonuses for local employees and remittances from the Philippines. And then peso’s depreciating, so it might be a good opportunity for OFWs (overseas Filipino workers) to send home more money and then finally, for example, reserve a condominium unit or buy a house and lot unit in their home provinces,” Mr. Bondoc said.

The peso hit the P59-a-dollar level several times in November and slumped to a fresh low of P59.22 against the greenback on Dec. 4.

Source: Business World

Growth slump may drag until 2027

The Philippines’ economic slowdown may extend through 2027, raising the odds of deeper monetary easing by the Bangko Sentral ng Pilipinas (BSP), according to Deutsche Bank Research.

In a report, it said the widening corruption scandal in the Department of Public Works and Highways — involving alleged fund diversion and irregularities in flood control projects — is likely to weigh on public and private investment for several years. It warned that the fallout could suppress growth and push the central bank to cut policy rates more aggressively.

“The public works corruption scandal is likely to be a drag on growth, as it reduces public and private capex (capital expenditure),” Deutsche Bank economists Vaninder Singh and Joey Chung said in the report released on Thursday. “BSP is likely to cut twice more, with risks of an even deeper easing cycle.”

The BSP has lowered borrowing rates by 175 basis points (bps) since August 2024, including a fourth straight 25-bp cut in October that brought the benchmark rate to a three-year low of 4.75%.

BSP Governor Eli M. Remolona, Jr. this week signaled that a fifth cut is possible at the Monetary Board’s December meeting, citing expectations that full-year growth will fall well below target. “Baby steps” of 25 bps remain the most likely pace, he added, ruling out larger cuts.

Mr. Remolona has said the economy might expand by only 4-5% this year, compared with the government’s 5.5-6.5% goal — a target he acknowledged is now out of reach.

The economy grew 4% in the third quarter as consumer and investor sentiment weakened amid the budget scandal, pulling the nine-month average to 5%.

Deutsche Bank expects growth to remain subdued next year, projecting a 5.1% expansion in 2026, well below the government’s 6-7% goal. It sees a modest improvement to 6% in 2027 as investment conditions stabilize.

Its baseline view is for 50 bps of additional easing, bringing the policy rate to a terminal 4.25% by mid-2026.

“DB Economics expects two further rate cuts in response to a deeper negative output gap that will last longer, likely well into 2027,” according to the report. “The risk is, if anything, for an even deeper easing cycle.”

Meanwhile, ING Think also sees room for more easing next year, anchored on its expectation that inflation across major Asian economies including the Philippines will stay within target in 2026.

“In 2026, inflation is unlikely to rise above the central bank targets in any of the Asian economies under our coverage, and we still expect rate cuts in… the Philippines,” it said in a separate report.

Philippine inflation averaged 1.7% in the first 10 months of the year, matching the BSP’s full-year forecast. The central bank expects inflation to settle at 3.1% in 2026 and 2.8% in 2027.

Deutsche Bank also flagged risks to the peso, warning that the currency could temporarily weaken past P60 a dollar next year if corporate sentiment deteriorates further.

It expects a recovery later in the year as import demand eases and the current account deficit narrows.

“Poor corporate sentiment is showing through not just in potential capex decisions but also in views on the currency,” it said, citing conversations with onshore clients.

“We suspect this will play out in phases over the course of 2026 — a possible peso weakness first, followed by some recovery as the current account deficit shrinks due to the infrastructure and capex factors,” it added.

It also noted that while stretched short-peso positions could push the currency beyond P60, the exchange rate should eventually return to P57-P58 or firmer if the dollar softens.

The peso fell to P59.17 a dollar on Nov. 12, its weakest on record.

Source: Business World