Weak peso to benefit property sector, BPOs

CEBU, Philippines - The Philippine peso is in for another tough year, as forecasts say it's bound to further weaken this year.

But how does it actually impact the property market in particular, and the consumption sector as well?

According to Joey Bondoc, research manager at Colliers International Philippines, a weaker peso results in a higher peso value of dollar remittances.

As a result, it enables families of overseas Filipino workers (OFW) receiving money from abroad to have higher disposable incomes.

"Higher peso value of dollar remittances also enables families to purchase big-ticket items such as house and lots and condominium units," Bondoc told The FREEMAN as one of its effects.

He said the greater purchasing power brought by this trend also bodes well for the retail sector.

"Property developers respond to increased consumer spending through the development of more retail establishments," he said.

Aside from its effect on the retail segment, he noted that a weaker peso also means higher earnings for business process outsourcing (BPO) operations.

"As more BPO firms establish operations in the country, the demand for office space also increases. The more BPO companies in the country, the greater the demand for office spaces," Bondoc said.

In its recent report, property consultancy firm Jones Lang LaSalle (JLL) noted that the continued weakening of the local currency could lead to stronger demand for residential properties from OFWs because of their higher spending power.

“The recent PHP (Philippine peso) depreciation against the US dollar may strengthen the purchasing power of overseas Filipino families, potentially increasing overseas Filipino demand for residential units,” JLL said.

With this trend, dollar earners like OFWs are likely to find the housing property market attractive, driving new demand.

“While there are a variety of ways overseas Filipinos can invest their hard-earned cash in, many believe that the wisest financial decision would be to put their money aside for a property purchase, either as a first home or an investment property,” property listing site Lamudi Philippines said.

Cebu Bankers Club past president Maximo Rey Eleccion said that converting extra cash into property with great potential is a good strategy.

And if cash is needed, using the property as collateral to borrow money from banks can also be an option.

"We should note that interest rates are still very low and it's a good time to borrow especially for business expansion. Adopting this strategy would be good for the property sector, more will buy properties then," Eleccion said.

In addition, Colliers' Bondoc said noted that weaker peso also results in higher earnings for the country’s exporters.

"Manufacturers would be enticed to expand operations resulting in greater demand for manufacturing equipment and industrial space. More manufacturing firms would also need warehouses and standard factory buildings located inside industrial parks. At present, CALABARZON is the most popular choice for industrial locators but due to limited supply, property firms are starting to develop industrial parks in other viable locations such as Clark, Bataan, Subic, and Cebu," he said.

The peso ended at P49.85 versus the greenback on Friday, down from its P49.805 finish last Thursday.

The peso, which dropped 5.2 percent against the dollar in 2016, will fall a further 4.4 percent to 52 by the end of this year, Dutch lender ING earlier predicted. (FREEMAN)