Banks’ exposure to real estate lowest in 7 years

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April 7, 2026 | 12:00am

MANILA, Philippines — The exposure of Philippine banks and trust entities to the volatile property sector dropped to a seven-year low of 18.93 percent in 2025, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The latest figure was lower than the 19.54 percent as of end-September 2025 and the 19.75 percent posted in end-September 2024, even as banks continued to grow their lending and investments in real estate.

It also marked the lowest ratio in seven years or since the 18.65 percent seen in December 2018.

Based on BSP data, total investments and loans extended by the banking industry to the property sector rose by six percent to P3.51 trillion as of end-2025 from P3.31 trillion as of end-2024.

Real estate lending accounted for the bulk of the exposure, climbing by 6.8 percent to P3.15 trillion last year from P2.95 trillion in the comparable year-ago period.

Commercial real estate loans increased by 5.4 percent to P1.95 trillion from P1.85 trillion, while residential real estate loans grew at a faster pace of 9.1 percent to P1.2 trillion as of end-December from P1.1 trillion a year earlier.

Past due real estate loans, however, also edged higher, rising by 7.2 percent to P150.8 billion from P140.65 billion a year ago. This came as past due commercial real estate loans inched up by 4.2 percent to P42.62 billion from P40.92 billion, while past due residential real estate loans jumped by 8.5 percent to P108.18 billion from P99.73 billion.

Gross non-performing loans (NPLs) of Philippine banks from the real estate sector reached P111.22 billion from January to December, 2.2 percent higher than the P108.81 billion recorded in the same period in 2024.

Despite the pickup in soured loans, asset quality indicators showed improvement. The gross NPL ratio declined to 3.53 percent as of end-December from 3.75 percent at end-September and 3.68 percent a year earlier.

Meanwhile, real estate investments in debt and equity securities went up by 1.7 percent to P359.84 billion from P353.81 billion in the previous year.

Banks need to closely monitor their exposure to the property sector, as heavy lending to real estate can increase risks to the financial system if property prices fall or borrowers start to default.

Based on separate BSP data, residential property prices in the Philippines posted their slowest increase in more than six years in the fourth quarter of 2025.

The Residential Property Price Index rose by 1.6 percent year-on-year in the October to December period last year, easing from 1.9 percent in the third quarter of 2025. It marked the slowest pace of increase since the first quarter of 2019.