By CenSEI / Special to the BusinessMirror
IF leading developers are mixing up residential buildings with office and retail developments, one good business reason to do so is the declining sales of condominiums in the past three years.
Condo sales in Metro Manila’s major business districts have come down from the peak of 52,000 units in 2012 to some 39,600 units last year, according to Colliers International’s Research & Forecast Report for the fourth quarter of 2014. The international property firm characterized the softening sales as “normalized to more rational levels.”
Meanwhile, Colliers’s report for the first quarter of 2015 indicates a 48-percent year-on-year drop in property licenses issued by the Housing and Land Use Regulatory Board, including a 44-percent drop in high-rise residential licenses, from 19,738 to 10,820.
At the same time, there was a 271-percent increase in licenses for commercial subdivisions, from 17 to 63.
According to the update, from January to March, four residential condominium projects were completed in the Metro Manila business districts, adding 1,649 new units to the supply. Colliers predicts a total of 8,253 units will be delivered by year-end.
Colliers previously estimated, in its fourth-quarter 2014 report, that 30,935 units were scheduled to be turned over between 2015 and 2018, with 40-percent scheduled for completion in 2015.
In its first-quarter 2015 report, it now notes that “concerns of a possible oversupply in the condominium market led developers to delay completion of their projects,” and has moved its 40-percent completion estimate from 2015 to 2016.
Keeping an eye on Mr. Bubble
All the activity in the local real-estate market over the last few years has not gone unnoticed at the Bangko Sentral ng Pilipinas (BSP), the country’s monetary authority and banking regulator.
As reported in another news outlet last October, the BSP tightened
regulations in 2012 to monitor local banks’ exposure to the property sector, requiring them to include not just housing loans but also investments in stocks and bonds of property firms.
According to the report, local banks’ exposure to the real-estate sector stood at P1.097 trillion as of June 2014, a 22-percent increase from the year before. Of that total, housing loans comprised P924.317 billion, a 21-percent increase, while investments in property firms’ securities totaled P172.907 billion, a 26-percent increase.
According to BSP Governor Amando M. Tetangco Jr., local banks’ exposure to the real-estate sector stood at 21 percent to 22 percent of their total loan portfolios, while remaining below the regulatory limit of 20 percent using the traditional measure.
Later that month, it was reported elsewhere that the BSP announced that it would require local banks to limit their real-estate loans to a maximum of 60 percent of a property’s collateral value, down from the average 80 percent. The aims is to make local banks focus more on a developer’s ability to pay than on the perceived value of the collateral.
Last month it was reported that based on a BSP survey of banks’ senior loan officers, lenders tightened credit standards for commercial real-estate loans in the first quarter of 2015, the 11th straight quarter of net tightening. The BSP also reported that in the next quarter, more banks expected to tighten their credit standards than banks expecting to do the opposite.
Plainly, from moderating condo sales to tighter lending benchmarks, rationality seems to be taking hold. And that view also applies to the more diversified and risk-spreading township-development strategy.