Вы находитесь на странице: 1из 3

Economic Environment

According to Investopedia (2017), interest rate is the amount charged, expressed as a

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’

concern over higher interest rates.


Furthermore Rappler business news (2018) had stated that the continuous hikes on

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

China (6.7 percent) as reported by The Philippine Star Global 2018.

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

curtails consumer spending.


https://www.investopedia.com/terms/i/interestrate.asp

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

Вам также может понравиться