BSP assures asset price pressure is manageable, closely watching property sector

Published June 17, 2021, 6:22 PM

by Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno continued to assure the market that asset prices are manageable and that the BSP is closely watching the property sector.

“Asset price pressure remains manageable even as domestic liquidity continues to be ample,” said Diokno during his weekly online press briefing.

“Property prices, for instance, remain broadly in line with market fundamentals and within historical range. The likelihood of asset price inflation due to a credit boom is also reduced by weak economic activity and banks’ risk aversion as these tend to dampen asset price movements and lending activity, respectively,” he said Thursday.

Diokno also said that the BSP’s surveillance and monitoring of the real estate market “has been sharpened” and that it has strong and efficient “macroprudential tools to monitor and contain the potential buildup of risk arising from banks’ exposure to the property sector.”

The BSP imposes a cap on loan-to-value ratio, it has limits on real estate loans, and closely monitor banks’ real estate exposures. In addition, the BSP has a reliable real estate stress test limit.

In a separate forum, Diokno said the BSP is always on the lookout for emerging risks to financial stability, including the buildup of imbalances in asset markets. “Various macroprudential measures and monitoring tools remain in place to help safeguard against excessive risk-taking behavior,” he said.

Part of enhanced property sector monitoring is the BSP’s Commercial Property Price Index (CPPI) which is expected to be launched within the year. The new index will allow regulators to better monitor banks’ financial and real estate exposures and it will complement the existing Real Residential Estate Price Index (RREPI).

Last October 2020, the BSP has started requiring banks to submit a quarterly report on appraised commercial properties (QRACP) to be used for its price monitoring of commercial real estate. The QRACP is groundwork to generate a CPPI.