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  • Writer's pictureZiggurat Realestatecorp

Real estate recovery at risk from rate hikes

The recovery of the real estate market may slow down due to the government’s aggressive contractionary monetary policy stance, a property services firm said.

“The aggressive contractionary monetary policy stance by the BSP (Bangko Sentral ng Pilipinas) which is in sync with other central banks, prompted by the rallying prices, may slow down the global recovery, as well as delay the expected real estate market recovery in the short term as local and global locators, assess the elevated uncertainties,” Cushman and Wakefield Philippines said in its latest Property Market News report.

The BSP has raised the policy rate for the fifth time this year to 4.25 percent, after the most recent 50 basis points (bps) increase and a total of 225 bps since May 2022, in a bid to tame the surge in inflation.

Cushman and Wakefield pointed out that the BSP’s move followed the recent 75 bps hike by the US Fed that pushed the peso and stocks to tumble, as the Fed signaled more rate hikes.

As inflation quickened anew to 6.9 percent in September from 6.3 percent in August, the BSP said it is prepared to take further policy actions.

The BSP is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term, consistent with its primary objective to promote price stability,” the central bank said.

It also continues to urge timely implementation of non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices.

The BSP vowed to continue carefully monitoring and assessing pertinent economic developments that could affect the country’s price dynamics and growth prospects.

Meanwhile, the property services firm said the affordable and mid-market housing segments are seen to be stirred up by the higher price for borrowing as a result of the several hikes in the benchmark interest rate.

“Households forming demand in the affordable and mid-market housing segment are expected to be impacted by the real income squeezes due to high inflation levels in the short-term to mid-term,” cushman and Wakefield said.

In an earlier report, Cushman and Wakefield said the increase in key policy interest rates and the higher level of overall prices could dent demand for residential real estate in the country in the short to medium term.

The property services firm earlier said upward adjustments in the benchmark interest rates may also affect the level and accessibility for both retail and corporate bank financing.

Santos Knight Frank (SKF) chairman and chief executive officer Rick Santos said the higher interest rates in the country are expected to affect home mortgages.

“Interest rates impact on home mortgages will also be seen. We’re seeing mortgage rates going up,” Santos said.

Source: Philstar

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