Philippine c.bank approves new rules on property financing
MANILA Nov 30 (Reuters) - The Philippine central bank has approved new rules on mortgage loans as it intensifies oversight of real estate finance to prevent an asset bubble in one of fastest-growing sectors of the economy.
The Monetary Board called the new voluntary guidelines, developed largely by the banking industry, a "milestone" because they set uniform rules and recognise the risks involved in what was previously an unmonitored practice by property firms that signed contracts with homebuyers which they later on-sold to banks.
The practice has been instrumental in the current property boom which has seen mortgage loans rising 23 percent by value at the end of June to hit a four-year high, according to the latest central bank data.
Some property analysts have expressed concerns of a possible bubble in the middle-market segment of the residential condominium sector, amid an ongoing flurry of construction as developers compete for homebuyers confident of spending in an environment of strong growth and low interest rates.
Under the new rules, both real estate developers and their housing projects must first be accredited by banks before they can sell their receivables to the formal banking sector.
Homebuyers holding contracts from property firms can only be granted bank loans if they have paid at least 10 percent of the total home value, either through equity or downpayment.
"The BSP (Bangko Sentral ng Pilipinas) has been stepping up its oversight of real estate finance. The actions it has taken are designed to prevent excesses that may lead to financial crisis," it said in a statement.
"They are pro-active steps meant to mitigate any potential easing of banks' credit standards under a global regime of low interest rates."
In August, the central bank said it would tighten rules on banks' real estate exposure to address the financial system's vulnerability to asset bubbles. (Reporting by Karen Lema; Editing by Rosemarie Francisco and Eric Meijer)
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