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

PH property sector’s 2026 outlook mixed

Expect a “mix of headwinds and tailwinds“ in the Philippine property sector in 2026, said Joey Roi Bondoc, director and head of research at real estate services and investment management firm Colliers Philippines.

On the upside, the Metro Manila office market is showing signs of recovery and will improve next year, Bondoc pointed out, noting the recovery will be driven by IT-BPM firms and traditional corporate occupiers.

Other forecasts, according to Bondoc:

From 2026 to 2028, about 350,000 sq m of new office space will be delivered — significantly lower than pre-pandemic levels, but ensuring manageable supply.

Prime central business districts (CBDs) such as Makati and Bonifacio Global City will lead rental recovery, while flexible workspaces will expand aggressively in Cebu, Pampanga, and Iloilo, supporting decentralization and business continuity strategies.

Unsold houses

On the downside, as of the third quarter, the Metro Manila residential sector had over 30,000 unsold, ready-for-occupancy units for which real estate developers offered promos such as extended payment terms and rent-to-own schemes to increase mid-income sales amid elevated mortgage rates.

However, the C5 Corridor and Katipunan areas continue to draw buyers, with take-up rates reaching up to 100 percent for select projects.

Industrial estate, hotel markets

Central Luzon is seen to dominate the industrial estate market. Colliers projects 870 hectares of industrial land to be delivered from 2026 to 2028, quadruple the pipeline of Southern Luzon.

Despite low foreign visitors, the country’s hotel market benefits from domestic tourism and various meetings, incentives, conferences, and exhibitions (MICE).

Over 3,000 new hotel rooms are to be completed in 2026 in Makati and the Manila Bay Area, Bondoc said.

The retail property trends remain strong, with Metro Manila vacancy to fall below 10 percent by end-2026. Foreign brands and aggressive mall refurbishments are driving demand, while developers expand outside Metro Manila into Cebu, Bacolod, and Davao.

To achieve growth, developers must embrace diversification, invest in emerging growth corridors, and leverage technology-driven solutions to stay competitive amid shifting demand patterns, Bondoc advised.

“To thrive in this cyclical market, developers must future-proof strategies — diversify portfolios, invest in suburban growth corridors, leverage industrial expansion, and embrace flexible workspace solutions. Capitalizing on retail refurbishments and innovative residential promos will be key to staying competitive in the evolving Philippine real estate market,“ Bondoc said.

Source: Manila Times

Lackluster GDP to impede property’s recovery

The third quarter gross domestic product (GDP) growth of the Philippines was a disappointing 4% — due mainly to tempered household consumption as well as constricted government infrastructure spending. The third quarter (Q3) 2025 GDP growth was the weakest quarterly economic expansion recorded since the third quarter of 2011, a period that also saw slower spending due to corruption allegations involving public projects.

While Q3 is historically a slow quarter, the sharp slowdown was worse than what economists projected. Average GDP growth for 9M 2025 is now at 5%, even lower than the 5.5% to 6.5% estimate of the country’s economic managers. Hence, it is no longer surprising to see credit rating agencies and multilateral aid agencies also downgrading their growth forecast for the Philippines for 2025.

Colliers Philippines is still hoping for a strong finish for the property sector. Fourth quarter is traditionally a strong period for retail spending due to higher remittances and disbursement of holiday bonuses for public and private sector employees.

Greater purchasing power supported by attractive ready for occupancy (RFO) promos should also help lift demand for residential units, especially mid-income (P3.6 million to P12 million a unit) condominiums primarily targeted by developers’ “renter to owner” schemes.

The office market has so far surpassed initial projections for 2025, but stakeholders are on the lookout for anti-outsourcing measures that might impede the Philippine business process outsourcing (BPO) sector’s growth beyond 2025.

SLOWEST QUARTERLY GROWTH SINCE Q3 2011

In Q3 2025, the Philippine economy expanded by 4%, the slowest since the 3.8% contraction in Q3 2011. As of 9M 2025, average GDP reached 5%, lower than the government’s full year target of between 5.5% and 6.5%. The country remains one of the fastest growing economies in Southeast Asia in 9M 2025, next to Vietnam’s 7.7%.

Steady GDP expansion is essential for the country to generate decent jobs and ensure growth in individual incomes. Improving workers’ purchasing power is crucial in fueling residential demand.

CENTRAL BANK EASES RATES FURTHER, INFLATION HOLDS STEADY

The Bangko Sentral ng Pilipinas (BSP) or central bank cut its policy rate for the fourth straight meeting, reducing the benchmark rate by another 25-basis points (bps) to 4.75% in October, the lowest since September 2022.

The central bank noted that inflation outlook remains within the target range of 2% to 4% but highlighted the weaker economic outlook and the decline in business confidence as key reasons for further rate cuts.

Since August 2024, the central bank has cut a total of 175 bps.

Inflation reached 1.7% in October 2025, an easing from 2.3% a year ago. As of 10M 2025, average inflation reached 1.7%, below the government’s 2%-4% target range.

SHIFTING GEARS BEYOND 2025

The office and residential markets are now starting to move sideways in the property cycle. With substantial correction in office rents at the height of the pandemic, Colliers is hopeful that recent tailwinds in the office market will result in gradual recovery in lease rates within and outside Metro Manila.

It appears that property developers have finally accepted what needs to be done to revive the Metro Manila vertical market, especially the mid-income segment which is now the focal point of developers’ RFO promos. The retail segment continues its aggressive recovery post-covid, with strong absorption and limited new retail space resulting in drop in vacancy and rise in rents.

The Q3 results point to a need for massive pump-priming from the government. Continued slowdown in government’s infrastructure program will likely result in a Philippine economy grinding to a halt — so it is crucial that private personal consumption expenditures in Q4 are supported by ramped up public sector spending.

With the current market dynamics, it’s obvious that the Philippine economy and property are still moving, but not sprinting. Until we see sweeping governance reforms and an eventual return of private investor confidence, we’re bound to see property opportunities not exactly shouting, but whispering.

Source: Business World