Housing demand will hold up amid rising interest rates

INSTEAD of just renting, a real estate developer is encouraging Filipinos to pursue buying their own homes as it will give them good returns in the future.

“Real estate rewards those who invest early,” said Franco Soberano, executive vice president and chief operating officer of Cebu Landmasters Inc. (CLI), during a recent virtual briefing.

He said the value of residential properties typically appreciates at least 30-40% between the time of pre-sale and the time of completion, which allows him to counter interest rate volatility.

It’s also wiser to own your own space because you’re putting your money to work, unlike renting, he said.

Recently, the Bangko Sentral ng Pilipinas (BSP) Monetary Board raised the interest rate by 25 basis points to 2.25%.

“The timing and conditions of the BSP exit strategy remain data-driven,” said BSP Governor Benjamin Diokno.

He said the exit strategy is guided by the medium-term inflation and growth outlook, the country’s public health status, and domestic and global risks to the economy.

Any rise in interest rates will make borrowing more expensive for individuals and businesses, which could lead to lower spending, slower demand, and ultimately low and stable inflation. This means that goods and services become more affordable for everyone, the central bank said.

Amid the recent rise, Soberano said the country “is still in a reasonable interest rate environment for end users due to the long duration.”

“Historically, we’re always at five to six percent (interest rate) spread over a 10 to 20 year term. Even if it hits 6 to 7 percent, it’s still within a reasonable range. That’s why dollar buyers are now taking advantage of the environment,” Soberano said.

Grant Cheng, chief financial officer of CLI, said that even if end users apply for home loans from the Pag-Ibig Fund, which has a payment term of up to 25 years, a small increase in basis points will not make a difference. big difference on the monthly amortization.

He said Filipinos will always weigh gains whether it is renting or owning a home. According to him, the latter offers the end user better rewards.

Housing a priority

In the meantime, housing construction will remain a priority sector in the new administration.

Cheng said every administration sees housing as a fundamental pillar of the economy. This means that the incoming Marcos administration should continue to deal with the country’s housing backlog.

According to government records, the Philippines’ total housing need by 2022 is 6,796,910 units which, according to San Jose del Monte City Rep. Florida “Rida” Dresses, could reach 22 million units by 2040, if there is no proper intervention, with only 0.74% of the budget allocated to deal with the backlog.

Robes is pushing for a bill that will allocate an initial 50 billion pesos to help solve the country’s bloated housing backlog.

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