Property consultant Colliers sees the inflation slowdown cushioning the impact of the US trade war on the Philippine residential market.
“Tempering inflation is a positive for Philippine property. This will likely result in lower interest rates and help drive a household spending-driven economy like the Philippines,” said Joey Bondoc, Colliers head of research in the Philippines, in an interview on Wednesday.
Bondoc said lower inflation and lower interest rates will complement the innovative and attractive ready-for-occupancy (RFO) promos being implemented by developers. “This should stoke take up in both pre-seling and RFO markets,” he said, adding, “an inflation slowdown makes the residential market more encouraging, especially for Filipinos acquiring residential units.
Inflation in March fell to a five-year low to 1.8 percent inflation rate in March and further decelerated to 1.4 percent in April
“So, if we see inflation further tempering, slowing, we are likely to see further cuts in interest rates. And that should have a positive impact when it comes to residential demand across the Philippines,” Bondoc said.
The overnight borrowing rate among commercial banks in the Philippines currently stands at 5.5 percent.
Paul Ramirez, Colliers senior director for valuation services, said that a prolonged trade war is likely to push costs of residential developments particularly the condominiums.
“So many construction materials are sourced overseas. Also, these tariff wars and other geopolitical uncertainties create economic uncertainties which shake investors’ confidence. This can lead to slower economic growth and affect the real estate market as well,” Ramirez said.
Colliers also noted a lessening of condominium launches in the first quarter of the year at just 5,000 units compared to the pre-COVID period and the proliferation of Philippine offshore gaming operations (POGO) in the country.
Take-up has come down to just 9,000 units as of last year, compared to the peak of 59,000 units during the years of 2017, 2018, and 2017, Bondoc said.
“So, it’s no longer surprising to see substantial declines in condominium launches and take up,” he said.
Bondoc said condominium developers are now focusing more on the higher-end segment, the ulta luxury and upper luxury market priced at P50-100 million per unit, to be able to ride out the current challenges.
Bondoc said that these upscale segments enjoy better take-up than cancellations, resulting in a net take-up, as of last year.
Ramirez at the same time said mid-income housing developers are currently recalibrating their plans to make their projects more affordable given the cost constraints.
“I hope (the) government takes a look at how they can support the market and the industry. Let’s hope taxes like capital gains tax don’t increase, interest rates are lowered, and even look into increasing the VAT exemption thresholds,” Ramirez said.
“If I remember correctly, P3.2 million was the threshold already in 2012, and it’s more than 10-13 years, and it’s only at 3.6.
So, any improvements on that can also help revitalize the middle-income market,” he said.
