Remittances seen growing despite ‘Trump volatilities’

Overseas Filipino workers’ (OFW) remittances are expected to grow despite a new US tax that took effect Jan. 1.

Maybank Investment Banking Group economist Azril Rosli on Tuesday said that while the bank remained “cautious of potential headwinds from tighter immigration policies and the new one-percent US remittance tax,” remittances were likely to weather “Trump’s volatilities as seen in Trump 1.0 (his first term)” with the support of a “growing share from the Middle East and other parts of Asia.”

The 1.0 percent tax applies to money sent from the US through cash, money orders and cashier’s checks, regardless of the sender’s citizenship. The tax does not apply to transfers made through US banks, US-issued debit or credit cards, or cash carried by hand.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the US remained the top source of cash remittances, accounting for 40 percent of the year-to-date total.

The central bank, however, has said that remittance data has its limits because money sent home by overseas Filipinos often passes through correspondent banks, most of which are based in the United States, and that remittances sent through couriers are also recorded under the country where the courier’s main office is located, again often the US.

Personal and cash remittances respectively rose by 3.2 percent to $35.7 billion and $32.11 billion as of end-November, latest BSP data showed, from $34.6 billion and $31.1 billion in January-November 2024.

The central bank expects remittances to hit $35.5 billion and $36.6 billion in 2025 and 2026, respectively.

Maybank expects remittances to grow to about $36.5 billion this year.

As for economic growth, the bank said this could remain subdued until next year due to domestic and global uncertainties.

“We continue to evaluate emerging risks from the external trade outlook, geopolitical tensions and tariff-related uncertainties that could impact economic growth and inflation,” Rosli said.

Maybank said growth could have slowed to 4.8 percent in 2025 from 2024’s 5.7 percent — below the government’s 5.5- to 6.5-percent target.

Growth is expected to rebound to 4.9 percent and 5.2 percent this year and in 2027, respectively, below the government’s downwardly revised 5.0- to 6.0-percent and 5.5- to 6.5-percent targets.

The impact of a flood control project scandal is not expected to be long-term, Rosli said, but this would also depend on whether the government takes concrete steps to address the issue.

“...I believe that the risk that it could influence the economic trajectory, it could be lesser if... the situation has been resolved by the government,” Rosli said.

“And I think the government has also been proactive to actually improve the situation and also given focus on the priorities of the budget funding, especially on the priorities for the people as well,” he added.

Moreover, the BSP’s “gradual easing of monetary policy” is expected to support the rebound in economic growth.

Rosli said the central bank could implement two more rate cuts this year — one 25-basis-point cut in the first half and another in the last six months of the year.

“This gradual approach reflects that the BSP needs to balance supporting modest GDP (gross domestic product) growth, while maintaining vigilance on emerging risks from the external trade outlook as well as geopolitical tensions and tariff-related uncertainties,” he said.

Source: Manila Times

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