In light of the current global economic crisis, the Bangkok Central and Philippines has decided to cut Philippine interest rates by 50 basis points (or .5 percent) to 5%, which they said was the same level of interest rates during the start of the US meltdown. In fact, they are signaling another .5% cut next month to further encourage consumer spending among Filipinos and keep our Philippine economy afloat amidst all this chaos.
I mentioned there that our Economy grew more than what our government expected at 4.5% GDP, which is obviously good news since it proves we are resilient to the economic downturn. This current move by the B SP is precautionary because they’re “playing it safe” and making sure that there is still enough money to go around with and keep our country moving forward.
Perhaps they were taking notice of the many multinationals here cutting jobs or decreasing working hours for Filipinos, so we definitely would experience a slowdown in growth. Still, HSBC analysts confirm that our monetary reserves remain adequate to keep us going (as also mentioned before
This of course has great implications for Real Estate Philippines investors and buyers. Lower interest rates mean that people will get encouraged to loan more in the bank to buy houses, lots and condominiums.
It also implies lesser interest expense in loans for constructing a home or buildings. However, this can also turn out to be a sign that our fall is yet to come since the US had several straight rate cuts in a row, but still their economy fell into recession.
The main difference here is that their exposure to sub-prime mortgages are way too high, and they even had complicated debt instruments which were also exposed to bad debts from American homes which gave them more trouble. Here in the Philippines, such is not the case, because majority of home buyers here are not speculators but mostly end-users who really need a place to stay.
As I mentioned before population growth is our main demand driver for Real Estate Philippines, so we should remain strong in the times ahead. In fact, Philippine banks here have made it more difficult to loan, since they do not want to emulate the disaster of the US banks, so this should put us in check.
If you ask me, we should definitely consider going to the bank for a housing loan, especially when they cut rates again next month, and maybe even the months after Provided of course that the Philippines indeed proves to be healthy in these hard times.