Property consultant Leechiu Property Consultants (LPC) said the real estate industry is poised for revitalization once the Bangko Sentral ng Pilipinas’ (BSP) rate cut gets into motion.
“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,” said Tam Angel, LPC director for investment sales.
Speaking at LPC’s quarterly briefing Thursday, Angel said the inflation figure in June and the succeeding pronouncements of the BSP have provided optimism for a possible rate cut in the third and fourth quarter of the year.
“The impact of these rate cuts is it will provide more price stability(and) stimulate a very sluggish market, and will allow both developers and investors to take on more activity,” Angel said, adding the real estate market in business districts are feared to soften.
“All we really need from the BSP is a sign of where the interest rates are (going to) go. It’s not like we need any drastic change. Real estate’s a long- term play, we really just need a sign of whether (or not the rate is) 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 twhile 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 is a good signal.
“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 .25 percent. That will bring our rates down to 6 percent, which is really good news for people who lose sleep over (their) mortgages,” he said.
“It’s going to be a soft landing, it’s going to be a gradual decrease of rates,” he added.
Angel said this could result to 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. From the investors, buyers perspectives, 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.
“That should allow for a much more stimulated market healthier transaction volumes. And just generally more activity in this current the quite cathartic market that we have,” he added.
