An expected monetary policy easing this year—and consequently a drop in mortgage rates–should bolster demand for residential projects and industrial space, the latest edition of Colliers Research said.
Expectations of an aggressive interest rate cut this year was stoked by a recent pronouncement by former Finance Secretary Benjamin Diokno, who remains a member of the policymaking Monetary Board of the Bangko Sentral ng Pilipinas, that projects the central bank’s benchmark rate falling by a full percentage point from 6.5 percent at the moment.
“We have observed developers being cautious with their residential launches partly due to the rising interest and mortgage rates. In 2023, average mortgage rates reached 8.3 percent, the highest since 2011,” Joey Bondoc, director of research at Colliers Manila, wrote.
Bondoc said a “reduction in interest rates and eventually mortgage rates, will likely lift pre-selling residential demand.”
He said the more dovish interest rate outlook should also help drive “businesses expansion plans, particularly manufacturing firms that influence the country’s industrial space and warehouse absorption.”
Colliers’ optimistic outlook for manufacturing is fueled by data from the Department of Trade and Industry that showed total foreign investment pledges from the overseas trips of President Ferdinand Marcos Jr. already reached P4 trillion as of January. If those investment pledges, about a third of which will go to semiconductor, electronics, and automotive sectors, do materialize it will create over 220,000 jobs.
Colliers believes those investments will drive growth of the industrial sector as these projects are likely to take-up industrial space in the next 12 to 24 months. “In our view, further improvement of the Philippines’ competitiveness as a manufacturing site should result in continued inflow of foreign investments, including job-generating manufacturing projects,” he said.
In a parallel development, former Finance Secretary Benjamin Diokno, now a full-time member of the policy-making monetary board, adds a voice to the ranks of those clamoring for significant easing in monetary policy. As finance chief, Diokno sits as ex-officio MB member.
Before being replaced as DOF chief last week, Diokno projected a full percentage point reduction in the BSP’s benchmark overnight rates that currently stands at 6.5 percent.
The MB is headed by BSP Governor Eli Remolona, Jr. as chairman. The other members of the MB are Bruce Tolentino, Anita Linda Aquino, Romeo Bernardo, Rosalia de Leon, and a member of the Cabinet designated by the President.
Diokno took over as BSP governor in March 2019 with the passing of then BSP Gov. Nestor Espenilla, Jr.
He is a professor emeritus of the University of the Philippines, where he earned his bachelor’s degree in public administration and master’s degrees in public administration and economics. Diokno also holds a PhD in Economics from Syracuse University in New York and a Master of Arts in Political Economy degree from Johns Hopkins University in Baltimore, Maryland.
