The continued weakening of the Philippine peso may dampen demand from local real estate buyers and investors, although it may attract foreign buyers into the country, a property analyst said on Monday.
In a text message to the Manila Times, Jones Lang LaSalle head of research, consultancy and valuation services Claro Cordero Jr. said the continued weakening of the Philippine peso against the US dollar “can negatively affect the local buyers and investors.”
The Philippine currency has recently been depreciating compared to the greenback, falling to a 10-year low of P50:$1 level during midday trading on November 24. On Monday, December 5, the peso closed at P49.69 to a dollar, still hovering near the P50/$1.00 level.
Cordero said that a depreciating peso will have short- and long-term effects on the country’s property markets.
“In the short-term, authorities such as the Bangko Sentral ng Pilipinas might be forced to increase interest rates to arrest the further weakening of the Philippine peso,” he said.
As interest rates increase, Cordero noted that the cost of borrowing money from banks will also increase, affecting borrowers’ existing and future decisions to avail of housing loans or mortgages.
“In the long run, it may mean foreign buyers will be drawn into the property market and [this would]drive property prices up,” Cordero said.
In a recent report, JLL said that the continued weakening of the local currency could lead to stronger demand for residential properties from overseas Filipinos because of their higher spending power.
“The recent PHP depreciation against the US dollar may strengthen the purchasing power of overseas Filipino families, potentially increasing overseas Filipino demand for residential units,” JLL said.
Cordero agrees with this view, noting that “dollar earners like overseas Filipinos may find the housing property market attractive, driving new demand.”
In contrast, he said that demand from local buyers will likely decline. “As property prices become more expensive, the local buyers will be constrained from investing further,” Cordero noted.
Meanwhile, Cordero noted that a weaker peso may bode well for the business process outsourcing (BPO) industry.
“The higher dollar value further diminishes its operating costs from doing business in offshore locations such as the Philippines. This will make us more attractive to BPO firms,” Cordero said.