The real estate industry, particularly the residential segment, is seen to be revitalized once the Bangko Sentral ng Pilipinas finally implements the much anticipated interest rate cut in the coming months.
“We have been anticipating for much too long. We're moving from a pessimistic market to hopefully a more optimistic one. And that will have very positive near-term and long-term effect to all sectors — office, hospitality, residential,” Leechiu Property Consultants (LPC)Director for Investment Sales Tam Angel said during a press briefing.
Angel noted that the recent inflation figure in June and the succeeding pronouncement from the BSP have provided optimism for a possible rate cut in the third and fourth quarter of the year.
“We think, for the most part, as far as the real estate sector is concerned, the impact of these rate cuts is it will provide more price stability... stimulate a very sluggish market, and will allow both developers and investors to take on more activity,” he said.
Amid the high interest rate environment, the real estate industry has been concerned that the softening of the market around Metro Manila may eventually affect properties located in key business districts of the metropolis.
“All we really need from the BSP is a sign of where the interest rates are gonna go. Because it's not like we need any drastic change. Real estate's a long term play so we really just need a sign of whether it's going to go down. Now, given the very dovish tone from the BSP, we're closer to really be more optimistic,” he said.
Angel said that, while the BSP kept interest rates at 6.5 percent after its June 27 meeting, the pronouncement of monetary officials of “bordering if not committed to doing a rate cut” of 25 basis points in the third quarter has been a good signal.
“So that will bring us down from 6.5 to 6.25 percent. Not massive, still high, but a very good first. And on top of that cut that they will do in August, or maybe October, they also are looking at another cut in December 19, during their last board policy meeting for the year of another point 0.25 percent. So that will bring our rates down to 6 percent, which is really good news for people who lose sleep over our mortgages,” he said.
He noted that, it's going to be a soft landing, a gradual decrease of rates and this could result in better funding costs for investors.
“Developers are going to be more willing to buy properties, launch their new projects, or activate their land bank, even develop and start constructing because they now have access to funding that's more reasonable.
“And then, from the investors’ and buyers’ perspective, also a practical standpoint, they can now feel more confident, more secure in picking up and taking positions in these projects, because they will also have access to more reasonable funding costs for their five-, 10-, 15-, 20-year mortgages.
“Because they wouldn't be worried that it will go from P10,000 a month to P20,000 or P50,000 or P200,000. They know that, for the foreseeable future, the next three, four or five years, it will be more or less the same,” he said.
Thus, Angel said “that should allow for a much more stimulated market, healthier transaction volumes, and just generally more activity in the current, quite cathartic market that we have.”