Have Real Estate and Construction Loans Reached a Permanently High Plateau in December 2016?

Have Real Estate and Construction Loans as a percentage of the Total Loan Portfolio (TLP) in the Philippine Banking System reached a permanently high plateau?

It would appear so.  Sometime in 2011, these loans have rocketed past their historical range of 12.6% to 16.6% of TLP and have stayed there ever since.  As of December 2016, these loans have shown no sign of coming back down to their historical ranges.  Although that ratio peaked at 20.55% as of September 2013, the ratio remains substantially elevated at 19.83% as of December 2016.

Investment in Construction as a percentage of GDP also remains elevated and, in fact, is at an all time high. This ratio logged 12.22% as of 2016, the highest it has been in twenty-six years.



Philippine Real Estate and Construction Loans Are Out of Whack As of December 2015!

Philippine Real Estate and Construction Loans Are Even More Out of Whack As of September 2015!


Has the Philippine Real Estate Bubble Already Burst?

Is There a Real Estate Bubble in the Philippines?


Are Philippine Real Estate Loans Out of Whack?

Philippine Real Estate and Construction Loans Are Out of Whack As of December 2015!

It sure looks that way, judging from this chart:

It looks like Real Estate and Construction Loans as a percentage of Total Loan Portfolio (TLP) rocketed past its historical range of 12.6% to 16.6% of TLP sometime in 2011.  That ratio peaked at 20.55% as of September 2013 but has bottomed out at 18.61% of TLP as of December 2014. In 2015, this ratio has climbed back up to 19.59% as of December 2015.


Now, are we up to the levels of the previous real estate boom? (as in mid 1990s to 1997?) Honestly, we don't know.  BSP data only goes as far back as 1999 when the previous real estate bubble had already burst and the financial system was most likely deleveraging as evidenced in this chart.

Philippine Real Estate and Construction Loans Are Even More Out of Whack As of September 2015!


Has the Philippine Real Estate Bubble Already Burst?

Is There a Real Estate Bubble in the Philippines?


Are Philippine Real Estate Loans Out of Whack?

Philippine Real Estate and Construction Loans Are Even More Out of Whack As of September 2015!

It sure looks that way, judging from this chart:

It looks like Real Estate and Construction Loans as a percentage of Total Loan Portfolio (TLP) rocketed past its historical range of 12.6% to 16.6% of TLP sometime in 2011.  That ratio peaked at 20.55% as of September 2013 but has bottomed out at 18.61% of TLP as of December 2014. In the last nine months of the year, this ratio has climbed back up to 19.96% as of September 2015.

Now, are we up to the levels of the previous real estate boom? (as in mid 1990s to 1997?) Honestly, we don't know.  BSP data only goes as far back as 1999 when the previous real estate bubble had already burst and the financial system was most likely deleveraging as evidenced in this chart.

Construction Gross Value as a Percentage of GDP Has Is at a 25 Year High! - Updated as of 3rd Qtr. 2015

Has the Philippine Real Estate Bubble Already Burst?

Is There a Real Estate Bubble in the Philippines?

Are Philippine Real Estate Loans Out of Whack?

Construction Gross Value Added as a Percentage of GDP Has Now Surpassed Its Asian Financial Crisis Peak!

Last September 29, 2014, we noted that Construction Gross Value Added (Construction GVA) at 11.20% as of the 1st Semester of 2014 was already well above its historical average of 9.48% of GDP since 1990.  This ratio has run at an above average rate since 2009 and has already eaten away at the "cumulative underhang" or underinvestment in construction that has taken place since 2004, when the excessive investment in construction that took place in the mid to late 1990's was being absorbed.

As of year-end 2014, Construction GVA as a percentage of GDP now stands slightly higher at 11.21% of GDP.  But the real story is that Cumulative Construction GVA has gone well above equilibrium and now stands at 1.2% above equilibrium, a rise of 0.8% in just nine months.  Given all the planned new projects that are already at the execution stage, the momentum in Construction Investment will continue.