Banks Careful on Real Estate Loans Amid Increasing Condo Sales

Rising Condo Sales, and Yet Banks Are Cautious Regarding Real Estate Loans

Despite the recovery of the condominium market in Metro Manila, Philippine banks remain cautious in approving loans for real estate borrowers. In fact, during this year’s Q3, exposure of banks to the industry eased slightly amid the signs of rising condominium sales in NCR. Let’s dive into the latest data on the trust units of banks, specifically their exposure to real estate loans, in this article.

Banks and Real Estate Loans

The Bangko Sentral ng Pilipinas released figures for Philippine banks’ trust units, showing their exposure to the real estate industry. In terms of the total real estate loan book of banks at the end of September, they settled at 19.54% trust units. That means a marginal decline, with 19.55% in the previous year and 19.61% during the second quarter.

In September, it recorded a 9.2% increase in total real estate loans, that’s PHP 3.1 trillion from PHP 2.84 trillion last year on the same period - this means a 2.3% growth from the last quarter. On the other hand, investments in real properties decreased by 5.8% to PHP 354.7 billion. The data from the BSP showed that investment decline was due to the 5.5% decrease in debt securities to PHP 232.5 billion and a 6.2% slide in equity securities to PHP 122.3 billion.

With structural changes happening in the real estate market, this shift affects how banks offer financing services. With the exposure easing slightly, it only shows that they become more cautious in lending money despite the oversupply in residential properties and higher condo vacancy rates, especially in buildings once occupied by Philippine offshore gaming operators. It can be remembered that in 2024, the government banned POGOs in the country.
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As POGOs left the country, residential unit loans rose to 11.2% to PHP 1.19 trillion, while commercial financing increased by 7.3% to PHP 1.91 trillion. Meanwhile, real estate loans from Philippine banks peaked at PHP 3.09 trillion, higher by 8.8% from 2024. Direct real estate investments, however, went down by almost 14% to PHP 90.2 billion. This easing of bank exposure contradicts the uptick in NCR’s pre-selling market.

​Condo Demand Exceeding Expectations

Colliers Philippines, a real estate brokerage company, released a statement that condominium demand exceeded expectations for two consecutive quarters. Furthermore, the decline in buyer backout apparently showed a steadier recovery for the property market. They also reported that condos worth PHP 2.5 million to PHP 12 million comprised the 90% of net take-up during the previous year’s first 9 months.

Final Thoughts

With the rising demand for condominium units in the Philippines, banks remain guarded when it comes to property loans. Promotions by developers for condo units continued to strengthen investors’ confidence, including OFWs and local workers. If you’re looking for a new investment, go to REALS.PH and see our exclusive listings of luxury condominiums in Baguio City and other properties for sale nationwide.