Housing demand to continue amid hike in interest rate

·2 min read

INSTEAD of just renting, a real estate developer encourages Filipinos to pursue buying their own houses as this will give them good returns in the future.

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

He said the value of residential properties usually appreciates at least 30 to 40 percent from the time of pre-selling to completion, allowing it to counter interest rate volatility.

Acquiring one’s own space is also wiser as one puts his money to work, unlike renting, he said.

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

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

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

Any hike in interest rate will make borrowing more costly to individuals and businesses and this could lead to less spending, slowing down demand, and ultimately resulting in low and stable inflation. This means goods and services become more affordable to everyone, said the central bank.

Amid the recent hike, Soberano said the country “is still in a reasonable interest rate environment for end-users because of the long tenure.”

“Historically, we are still at five to six percent (interest rate) spread to 10-to 20-year tenure. Even if it inches up to six to seven percent, it is still within the reasonable scale. That is why dollar buyers take advantage of the environment now,” said Soberano.

Grant Cheng, CLI’s chief finance officer, said even if end-users apply for home loans from the Pag-Ibig Fund, whose payment term is up to 25 years, a small increase in basis points is not going to make a big difference on the monthly amortization payment.

He said Filipinos will still weigh gains whether to rent or own a place. The latter he said gives the end-user better rewards.

Housing a priority

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

Cheng said every administration understands housing as a fundamental pillar of the economy. This means that the incoming Marcos administration is expected to continue addressing the housing backlog of the country.

Based on government records, the Philippines’ total housing needs by 2022 are 6,796,910 units which, according to San Jose del Monte City Rep. Florida “Rida” Robes, could swell to 22 million units by 2040, if there is no proper intervention, with only 0.74 percent of the budget allotted to address the backlog.

Robes is pushing for a bill that will allocate an initial P50 billion to help solve the ballooning housing backlog in the country.

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