By Katherine K. Chan, Reporter
PHILIPPINE BANKS and trust entities’ exposure to the property sector inched up in the primary quarter amid improving market sentiment, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Banks’ real estate exposure ratio climbed to 19.07% in the primary quarter from the seven-year low of 18.93% at end-December.
Yr on yr, nonetheless, it slipped from 19.41% seen at end-March last yr.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said banks’ exposure to the property industry went up on a quarterly basis as sentiment began to get well and real estate projects resumed.
Nonetheless, lending to other industries could have outpaced those prolonged to the property sector, which could explain the year-on-year drop in banks’ real estate exposure, he noted.
“The slight year-on-year decline in banks’ real estate exposure reflects faster expansion in non-property lending alongside more measured credit allocation to the sector amid tighter financial conditions last yr,” Mr. Asuncion said in a Viber message.
“The quarter-on-quarter uptick likely indicates a modest rebound in lending activity initially of 2026, supported by improving sentiment and project resumption,” he added.
Sustained lending for ongoing development projects and the marginally higher demand for property-related loans could have also led to the quarterly improvement in banks’ real estate exposure, said Dino M. Palanca, director for marketing and research at real estate firm Savills Philippines.
“While overall market conditions remain selective, developers proceed to attract on committed credit facilities for projects already within the pipeline, particularly within the residential, industrial, and logistics sectors,” he told BusinessWorld via Viber.
“The rise, nonetheless, stays relatively measured, suggesting that banks proceed to keep up prudent underwriting standards amid a still-evolving market environment,” he added.
Meanwhile, Mr. Palanca noted that the annual decline was likely driven by market normalization relatively than weaker sentiment within the property sector, with developers becoming “more disciplined” and banks practicing selective lending.
“While softer property market sentiment over parts of 2025 likely contributed to more cautious borrowing and investment decisions. The decline mustn’t necessarily be interpreted as an indication of broad weakness within the property sector,” he said. “Somewhat, it reflects a market that has been undergoing a period of normalization following several years of adjustment.”
Mr. Palanca said developers at the moment are more disciplined in launching latest projects, specializing in absorption rates, project completion, and inventory management.
“Banks, likewise, have remained selective in extending credit, particularly toward projects with strong fundamentals and demonstrated demand,” he said.
The BSP monitors lenders’ exposure to the actual estate industry as a part of its mandate to keep up financial stability.
In the primary quarter, Philippine banks and trust departments granted P3.556 trillion price of loans and investments to the actual estate sector. This was 6.48% higher than the P3.34 trillion it prolonged a yr ago.
Of the whole, P3.204 trillion was real estate loans, rising by 7.97% from P2.968 trillion the industry lent a yr earlier.
This got here as residential real estate loans grew by 8.48% to P1.229 trillion from P1.133 trillion last yr, while business real estate loans were up by an annual 7.91% to P1.975 trillion from P1.83 trillion a yr ago.
Based on central bank data, late real estate loans amounted to P164.072 billion within the January-to-March period, climbing by 9.73% from P149.518 billion within the previous yr.
Broken down, late residential real estate loans inched up by 0.87% yr on yr to P108.555 billion, while late business real estate loans jumped by 32.51% to P55.517 billion.
This brought the late real estate loan ratio to five.12%, higher than 4.79% at end-December and 5.04% in the primary quarter of last yr.
Meanwhile, gross nonperforming real estate loans reached P119.819 billion in the primary quarter, up by 7.68% from the P111.272 billion recorded as of end-March 2025.
The rise was driven by gross nonperforming residential real estate loans, which rose 4.22% yr on yr to P75.309 billion, and gross nonperforming business real estate loans, which climbed 14.09% to P44.51 billion.
With this, the gross nonperforming real estate loan ratio went as much as 3.74% in the primary quarter from 3.53% 1 / 4 ago but barely eased from 3.75% within the prior yr.
Then again, the sector’s real estate investments amounted to P352.184 billion as of end-March, down by 2.54% yr on yr from P361.37 billion.
Debt securities fell by 7.94% annually to P235.712 billion, while equity securities nudged 0.1% higher to P116.473 billion.
The annual decline of banks’ real estate exposure signals “strategic caution,” in keeping with Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co.
“Until we see clearer signs of sustained demand recovery, stable rates, and improving occupancy, real estate will likely stay range-bound in bank portfolios, not a significant growth driver,” he added in a Viber message.
Meanwhile, Mr. Asuncion expects lending and investment to the actual estate sector to be sustained in the approaching months as banks step up property-related lending.
“Moving forward, we expect real estate exposure to stay elevated but broadly stable, as a gradual pickup in property-related lending is balanced by banks’ efforts to diversify portfolios,” he said. “Importantly, institutions are prone to proceed managing exposures prudently to remain inside regulatory ceilings.”
For Mr. Palanca, financing demand from the actual estate sector within the months ahead will likely be driven by projects in industrial and logistics, data centers, in addition to developments in chosen residential segments and offices.
Potential rate of interest cuts and increased liquidity could also support developers and property buyers, he said.
“Nonetheless, banks are expected to proceed prioritizing asset quality and risk management, which suggests capital will likely flow toward projects with clear demand drivers, strong sponsorship, and sustainable money flow prospects,” Mr. Palanca added.