Inflation Rates Continue to
Threaten Housing Industry
Rizal Commercial Banking
Corporation
The Philippine housing industry is at risk as inflation rates
continue to threaten the market. The Bangko Sentral ng Pilipinas
(BSP) has raised concerns that the current rate of inflation could
harm economic growth and disrupt the country's overall
development plans.
The inflation rate increased to 5 percent this June 2022, which
could lead to stagflation, a situation where prices are high and
there is low economic growth. This would be a significant setback
for the housing industry, which has seen modest growth in recent
years.
The Monetary Policy is the main tool that the BSP uses to adjust
inflation. They focus on Inflation Targeting when the central bank
sets a target inflation rate and uses monetary policy to influence
economic activity so that the inflation rate remains at the target.
Many times, the monetary policy is in the form of changing
interest rates.
BSP Taking Action
To address this issue, Governor Benjamin Diokno stated that BSP
will take policy action to lower the inflation rate back to its target
of 2 to 4 percent. However, this will not be an easy task given the
current global economic conditions.
The Suffering Housing Market
The housing market is vital to the Philippine economy as it
employs millions of people and provides shelter for families. The
current inflation situation threatens the industry's stability and
could lead to a decrease in home loan approvals, which would
further harm the market. Home prices have already been rising in
recent years, making it difficult for many families to buy a house.
The
COVID-19
pandemic
has
exacerbated the inflation situation as
the
global
economy has
been
disrupted. But home buyers are taking
advantage of the situation as prices
are expected to rise even further.
Many people rush to buy homes before
inflation gets out of control. While this
could be a good short-term strategy, it
is not a sustainable solution to the
housing crisis.
Real estate investors may