The additional loanable funds that will be injected to the local economy following the easing of banks’ cash requirement could boost private construction activities, with the hotels and accommodation sector expected to see a building boom that could support the industry.
Speaking to reporters, Emilio Neri Jr., lead economist at Bank of the Philippine Islands (BPI), said the decision of the Bangko Sentral ng Pilipinas (BSP) to further trim the reserve requirement ratio (RRR) of banks would unleash about P380 billion in fresh liquidity that may partly go to hotel operators as loans to finance their construction projects.
Such an expansion may also get support from declining prices of construction materials, Neri added. This, in turn, could help offset the impact of the exit of Philippine offshore gaming operators or Pogos, as well as the pandemic-led shift to work-from-home arrangements on the local property market.
“Some of the sectors that can benefit are hotel and accomodations. I think there are at least 170 hotels that are being built as we speak and more could actually come in to help offset some of the negative impact of the Pogo exit,” he said.
“So bottomline, with lower inflation and construction materials, a stronger peso to some extent, and loans being more readily available because of the reserve requirement cut, there could be a big boom for accommodations and hotels. Not just local brands,” he added.
The BSP in September announced that the RRR for big banks and non-bank financial institutions will be trimmed by 250 basis points (bps) to 7 percent from 9.5 percent starting Oct. 25.
Sustainability
Latest data from the BSP showed 6.7 percent of banks’ residential mortgage portfolio had soured in the second quarter, still higher than the prepandemic level of 3.1 percent.
But this was nevertheless better than when the ratio of bad housing loans peaked at 9.6 percent in 2021, reflecting the growing aversion of banks to extend home loans to Pogo workers.
President Ferdinand Marcos Jr. recently ordered the controversial sector being linked to money laundering to wind down quickly.
According to BPI’s Neri, the big shift that hit the local real estate market had boosted demand for housing outside of Metro Manila. But he said landlords may opt to “repurpose” the spaces vacated by POGOs in a bid to reduce their vacancy rates.
”I think they can repurpose the POGO condominiums to BPO (offices) or make them sustainability coherent,” he said. “The only way you can attract more people to buy these condominiums is if you use sustainable materials.” INQ