By LEE C. CHIPONGIAN
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the heavily-monitored real estate sector is not at risk against Philippine online gaming operators (POGOs) based on the BSP’s many stress tests.
“I don’t think that POGO poses such a big risk (to the property sector) but of course there’s a risk (but it will) not upset the growth of the economy,” Diokno told reporters Friday.
Diokno said property developers and real estate builders are cautious particularly since they have the BSP breathing down their collective necks.
“But real estate (companies) – the big ones – are most conservative,” he said, and these companies will ensure there are safety nets when dealing or conducting business with POGOs.
“In the case of POGOs they ask for one year advance payments so there will be no abrupt change (or reaction that will have an impact),” said Diokno.
BSP Managing Director Lyn I. Javier of the Policy and Specialized Supervision Sub-Sector, said the BSP is employing stability indicators to ensure the real estate sector is properly monitored.
The Residential Real Estate Price Index (RREPI), for example, is one of the stability indicators. There is also an expanded reporting on real estate and project finance exposures.
“What’s important is that lending (to) real estate companies are anchored on sound credit underwriting,” said Javier. The BSP’s stress testing and other prudential limits help in assessing and monitoring the property sector, especially property price trends.
So far, according to Javier, “we are satisfied with the results of these stress test results.”
There was a report from Fitch Ratings last week that warned that what it called a “sustained surge in Philippine property prices” in the last three quarters are putting the banking sector at risk and it noted “speculative activity that could affect market stability if unchecked.”
“To the extent that the increase in prices has been driven by a boom in the POGO sector, it may also expose banks and the property industry to greater policy risk,” according to Fitch.
Fitch reiterated that the national residential real-estate prices have risen by 10 percent year-on-year in the third quarter 2019, and as reported by the BSP, with condominium prices increasing by as much as 34 percent in the National Capital Region.
“The surge partly reflects a 75 basis points decline in Philippine policy interest rates since April 2019, but also strong demand from the POGO sector, which anecdotal reports suggest has accounted for around 30 percent of Metro Manila office demand over 2018 (third quarter),” noted Fitch which believes that this activity is likely to have had spillover effects on nearby residential property prices.”