Akuura | Is Now a Good Time to Buy a House and Lot in the Philippines? | With the pandemic still raging in many parts of the world, the global economy remains in a somewhat bad mood. In fact, the International Monetary Fund (IMF) paints the outlook for July as “gloomy and uncertain.” Back home in the Philippines, a new government is riding the tailwind of a surprisingly economic rebound. While the Asian Development Bank raised its growth forecast for the country from 6.0% to 6.2%, it warned of possible contractions due to the gloomy world economy and higher prices of goods. This begs the question for new homeowners and investors alike: Is now a good time to buy a house and lot in the Philippines?
How Much is a House and Lot in the Philippines?
Real Estate 101 will tell you that the price of a property depends on location. The same rule applies to buying a house and lot in the Philippines. Homeowners wanting to set roots within the country’s major urban centers should brace themselves for sticker shock, as the average price of a 50 to 70 square meter lot in Metro Manila can cost between three to five million pesos or P66,667/sqm. Of course, the further you stray away from these urban hubs, the lower the cost per square meter. Looking for lots in nearby provinces can pull prices down by at least half.
Buyer beware, however. Any savings you generate from buying lots from outlying places often means increased transportation costs and a greater chance that basic services will either be difficult to come by or nonexistent at the moment. So, if you’re planning on getting a house and lot on the cheap, you’ll probably sacrifice some necessary features like a stable internet connection, steady water and electricity supplies, or even a well-developed road network.
Consider the Construction Costs
Now, if the lot prices aren’t enough to scare you, construction costs can finish the job. The current pandemic led to severe disruption to the world’s supply chain. As a result, production and delivery costs increased considerably as producers experienced difficulty getting deliveries out. Then, the Ukraine – Russia conflict brought another global headache that further spiked oil prices to record levels. These factors led to a global increase in many consumer staples as well as construction materials.
According to local construction resource site Martilyo.com, a rough finish can set owners around P17,500 per sqm while a basic finish can go P22,500 persqm on average. Elegant finishes will bump the costs to an average of P50,000 per square meter.
Financial Factors to Consider
Before we answer this question, let’s look at the financing side of the equation. The Bangko Sentral raised the overnight repurchase facility rate last July 14 to 3.25% from the previous 2.5%. This purchase rate determines how much commercial banks and financial companies charge interest on things like credit card surcharges or housing loan interest rates. For budding homeowners, this means higher interest rates compared to buying properties last year or the previous years before COVID-19.
Buyers should also expect an increase in the extra fees and taxes for home purchases. These are the hidden costs outside of the property value and include registration and notary fees, insurance costs, property taxes, and others.
So, is Now a Good Time to Buy?
Given all these, buying a house and lot in the Philippines right now is highly dependent on your financial situation. Purchasing in cash will always attract sellers who need the money right away, and it will also help you avoid the increases in interest rates and other inflated costs.
However, most buyers are not in a position to pay in full. Most will need the assistance of banks and financial firms for long-term mortgages and loans. The higher interest rates alone mean you will be paying much more compared to last year. For lot owners, brace yourself for higher construction costs. So, all in all, expect to see a spike in prices for that property you’ve been eyeing for the last few years.
Does this mean buyers should wait? Again, that depends. The COVID-19 pandemic continues to drag on as new variants keep emerging. The sooner the world declares itself free from coronavirus, the sooner things can get back to normal. However, some damages have already been done, including the rise in prices of many goods and services.
The silver lining is that interest rates will eventually go down once the economy returns to its pre-pandemic rates. With the way things are going, we’re bound to have a recovery sooner rather than later. If you can afford to wait for better rates, then good. However, don’t expect that your dream house and lot in the Philippines will remain available. Nor should you expect the current price tag to remain as is. Data from the Bangko Sentral Residential Real Estate Price Index last March 2022 shows that local house prices grew 5.6% year on year from March 2015 to March 2022. Between the first quarter of 2022 and the last quarter of 2021, house prices gained by 4.9%.
Learn More About Real Estate in the Philippines
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