PROPERTY DEVELOPERS in the Philippines are expected to see increased buyer demand and more affordable financing options for projects as borrowing costs decline, according to consulting firms.
“As key policy rates go down, borrowing costs will also go down for both the developers and the buyers,” Sharon R. Saclolo, head of research at Leechiu Property Consultants, Inc., said in an e-mail interview on Aug. 27.
“This should have a positive impact on the real estate market because it will increase liquidity, meaning more money can be spent to invest in real estate,” she added.
The residential property sector saw a slight decline in total residential real estate loans (RRELs) in the first quarter of the year.
The total granted RREL fell 9% to 9,064 for the first quarter of 2024 from 9,975 loans in the fourth quarter of 2023, according to Leechiu, citing Bangko Sentral ng Pilipinas (BSP) data.
This month, the BSP lowered benchmark interest rates for the first time in nearly four years, citing an improving inflation outlook and strengthening economic conditions, with its governor indicating that at least one more rate cut could occur before the end of the year.
The Monetary Board lowered its target reverse repurchase rate by 25 basis points (bps) to 6.25%, a move anticipated by nine out of 16 analysts in a BusinessWorld poll. BSP Governor Eli M. Remolona, Jr. has indicated that another rate cut of 25 bps could be implemented within the year. The remaining policy-setting meetings of the Monetary Board for 2024 are scheduled for Oct. 17 and Dec. 19.
With the BSP signaling the possibility of an additional rate cut before the end of the year, prospective homeowners may be more inclined to enter the market sooner rather than later, anticipating more favorable borrowing conditions, according to analysts.
“That should fuel the take-up for condominium units, especially in Metro Manila for the mid-income segment, P3.6 to 12 million, which is the most sensitive right now to interest rate spikes,” Joey Roi Bondoc, director and head of Research of Colliers Philippines, said in an interview with BusinessWorld.
He noted that while demand remains somewhat stable, it has not yet reached pre-pandemic levels. The interest rate cut is expected to “definitely jump-start” the infusion of “much-needed confidence” in the residential market.
Mr. Bondoc also expressed hope for additional rate cuts toward the end of the year and into 2025.
Similarly, lower credit card interest rates may boost consumer spending, leading mall operators to expand and occupy larger retail spaces, he noted.
He also said that this renewed interest in the retail sector could attract more foreign retailers to the Philippines, leading to an increase in new store openings.
“And while those that are already here, they might even find that as an impetus to expand brick-and-mortar spaces,” he added. — A.R.A. Inosante
