BSP seeks to bridge real-estate information gap, price index in PH

After consulting with experts and industry leaders, the central bank on November 16 finally issued and published a circular ordering all universal, commercial and thrift banks to submit a quarterly report on real-estate loans, which is necessary for the generation of data under the residential real-estate price index (RREPI). This is part of a broader program to bridge a so-called real-estate information gap in the country. The full disclosure applies on all residential real-estate loan transactions granted beginning April this year.

This is in recognition of the need for timely and accurate information on real-estate transactions and have required all lenders to report in greater detail such purchases from now on. Thus, for each residential real-estate loan granted, respondent financial institutions will be required to provide the following data to the BSP in their quarterly report: month of loan granted/booked, location of property, type of property, type of housing unit, appraised value of housing unit per square meter, floor area of the housing unit, number of floors and number of bedrooms.

The effective age of the housing unit, its appraised value of lot per square meter, total area of lot, total appraised value of property, housing segment, acquisition cost and name of developer should also be provided.

All 15 details, the BSP said, are obligatory on the part of banks from the National Capital Region (NCR) and areas outside NCR.

Real-Estate sector is vulnerable to price bubbles

Talks about the creation of the RREPI started last year as part of an initiative seen helping regulators and real-estate practitioners alike to monitor price movements and prevent so-called  real estate price misalignments.

“The construction of RREPI based on banks’ approved housing loan applications is a first in the Philippines and is expected to provide a valuable tool in assessing the real estate and credit market conditions in the country,” the BSP said in a statement.

The index is said to be a function of both the supply and demand. In terms of supply, the RREPI factors in the cost of materials, construction and permits. Meanwhile, in terms of demand, the index should also help gauge the number of applications of residential real-estate permits, among others.

The BSP said the information gathered from banks would provide information for the actualization and generation of the RREPI in the country. While the banking sector has yet to react to the newly released mandate, the industry is known to tighten its lending standards once they feel the regulators are more vigilant than at any other time.

In the central bank’s senior loan officers’ survey, the central bank said the banks indicated a net tightening of their overall credit standards for commercial real-estate loans in the July-to-September quarter.

This was the 13th consecutive quarter that the banks indicated a net tightening of standards in real-estate lending under the diffusion index approach.

“The net tightening of overall credit standards for commercial real-estate loans was attributed by respondent banks largely to perceived stricter oversight of banks’ real-estate exposure,” the central bank said.