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RP banks get ‘negative’ credit outlook

Source: Philippine Star
Philippine Star reports that Moody’s Investors Service has declared its credit outlook for the Philippine banking system is “negative”, but the main property news here is its statement reflecting expectations on our Real Estate Philippines Sector:
”With the economy softening, Lung said the real estate market is not expected to be as robust as in recent years. This slowdown could in turn impact the rates of return the banks are expecting to achieve on joint-venture projects with property firms to redevelop their ROPA.”
Lung here refers to Richard Lung, a VP and senior analyst at Moody’s, which happens to be one the world’s top credit raters of the big companies worldwide. ROPA is the acronym for Real and Other Properties Acquired of banks – the foreclosed properties where their loaners couldn’t pay their housing loans anymore, so the bank seized the property being loaned for to cover the expense of their loan.
Because of the boom in Real Estate Philippines in the past 3 to 5 years, some banks engaged in joint-venture projects to develop their ROPA assets into marketable projects and gain more profits. An example of this is Eton Properties, which used it’s ROPA’s to develop some of its current projects like Eton Residences Greenbelt, One Archers De La Salle, Belton Place, Eton Emerald Lofts, and 68 Roces Townhomes.
But with this statement, Moody’s just clarifies their outlook towards Philippine banks with a concrete example: fearful, cautious, and pessimistic.
Still, all is not lost, they have also mentioned that we are in better shape to weather the storm due to our much stronger reserves compared to the 1997 Asian Crisis.
Only time will tell if the Philippine banks’ decisions to go into Philippine Properties using their own lands will prove to be a success or a failure. I mentioned before that our population growth is our main driver for property demand here. But do the Filipino people still have purchasing power to buy their dream home?
OFW remittances are slowing down, and so are exports and employment in many foreign companies. But, we are not as damaged as the Americans, so most of us are still living comfortably. Many have the money to buy property but are hesitant to invest in these times. The real answer now lies on how we Filipinos react to the current situation. Let us indeed be prudent on how we spend our money, and buy property not based on speculation but based on your real housing needs – providing shelter to your family and loved ones. In this way, we can spend wisely.

This entry was posted on Tuesday, March 24th, 2009 at 4:21 pm and is filed under Real Estate Philippines News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.