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percentage of principal, by a lender to a borrower for the use of assets. It is the fee paid for
borrowing the money. The interest rate in the Philippines had been rising throughout 2018.
As based from the Bangko Sentral ng Pilipinas official website, Monetary Board had hiked
the interest rate for the fifth time last September. This move brought the overnight reverse
repurchase rate to 4.75 percent as compared to 3 percent at the start of the year.
Source: Nikkei Asian Review – Philippine interest rate reach highest mark in a decade (2018)
The higher interest rates would discourage banks from borrowing from other banks
and they will be more inclined to restrict the releasing of their money to the public. The real
estate services firm Colliers International (2018) had said that the rising interest rates could
dampen low to mid-income residential demand over the next twelve to twenty-four months.
There has been slowdown on real estate launches for the first half of amid developers’
interest rate by Bangko Sentral ng Pilipinas was to curb inflation. Last July 2018, the
inflation rate rose to 5.7 percent, the fastest in five years, due to the increase in the prices of
food and beverage products. And last October it was held at 6.7 percent which was the fastest
in nearly a decade.
Though amid the slower growth, the property sector was still likely headed to historic
highs in demand and supply with the major segment such as office, residential and leisure in
2018 as stated by the Colliers firm. For despite the challenges, the Philippines was still the
third fastest growing economy in the region (6 percent), behind Vietnam (6.8 percent) and
Relevance: Interest rate can significantly affect the cost of financing used to purchase real
estate properties. Mr. Vince Abejo, senior vice president and cluster head of Filinvest Land
Inc., had said that when interest rates go down, people are more inclined to buy property, thus
increasing real estate sales. And it is also true that when interest rates go up, people are not
inclined to borrow from banks, thus reducing the real estate sales. In addition, the change in
interest rate affects inflation. According to Ralf Rivas of Rappler, raising the interest rates
creates a ripple effect in the economy. With the higher borrowing cost, the people will spend
less. The low consumer spending would then push businesses to lower their prices. And it is
important to lower it for accelerating inflation is a challenged for the property sector for it
http://www.bsp.gov.ph/monetary/monetary.asp
https://asia.nikkei.com/Economy/Philippine-interest-rates-reach-highest-mark-in-a-decade
https://www.rappler.com/business/216778-bangko-sentral-increases-interest-rates-5th-time-
2018#cxrecs_s
https://www.philstar.com/business/real-estate/2018/08/17/1843178/record-year-ahead-
philippine-real-estate?fbclid=IwAR0iqYTn9xzIVkc9Be33HRmGX2-
CZ8Pn02nFKCkrYYrz5XeOYX0YX9GBfbs