Interest rate cut to stimulate Philippine real estate activity

The monetary easing by the Bangko Sentral ng Pilipinas (BSP) starting with a rate reduction by 25 basis points on August 15, 2024 will stimulate the Philippine economy and create favorable conditions for real estate development and consumer spending, according to Leechiu Property Consultants.

“Despite localized challenges, our outlook remains positive. In the short term, the confluence of economic factors will prevent any significant weakening in capital values. Looking ahead to the mid to long term, these factors position our market for a potential uptrend in the next two to five years,” said Tam Angel, director of investment sales at Leechiu Property Consultants.

The BSP cut interest rates by 25 basis points, a strategic move to revitalize economic growth and encourage investment in the real estate sector.

Two additional rate cuts are anticipated in the upcoming BSP monetary policy meetings in October and December, each projected to reduce rates by an additional 25 basis points. These cuts are supported by effective inflation control, with September inflation hitting a low of 1.9 percent, the lowest since pandemic-induced deflation.

The BSP also plans to reduce the reserve requirement ratio (RRR) from 9.5 percent to 7 percent, injecting about P375 billion into the economy. The liquidity boost is expected to drive market activity and provide further support for economic expansion.

According to the World Bank, the Philippine economy is projected to grow by 5.9 percent in 2024, positioning the country among the fastest-growing economies in Southeast Asia, alongside Vietnam.

“In the short term, economic conditions are expected to support the stability and resilience of capital values. In the mid-to-long term, a positive uptrend in both activity and property values is projected, barring any significant external shocks,” Leechiu Property Consultants said.