Did you delay your planned property purchase? Are you following the news about the economy and real estate lately? Residential prices, as with construction prices and inflation are on the rise.
Government statistics
Residential Real Estate Prices. The first quarter of 2022 was considered by 18.5 percent of Filipino households as a favorable time to buy a house & lot, compared to 15.6 percent the same period last year. Among the residential housing properties purchased in this first quarter, 25.1 percent were pre-owned, while 0.7 percent were foreclosed properties.
The Bangko Sentral ng Pilipinas reported that the Residential Real Estate Price Index, used as an indicator for assessing the real estate and credit market conditions, rose by 5.6 percent year-on-year (YoY). Residential prices in Metro Manila increased by 9.5 percent YoY while areas outside the NCR rose five percent. The growth was mainly due to increases in townhouses (25.6 percent), duplexes (20.9 percent) and condominiums (14.7 percent). However, single-detached houses declined by 2.5 percent.
Construction materials. The Construction Materials Retail Price Index for March 2022 continued its uptrend. Preliminary data from the Philippine Statistics Authority showed that Metro Manila prices rose by 4.8 percent YoY, compared to 1.2 percent same month last year.
The annual increments of plumbing materials increased to 6.9 percent; electrical materials went up to 3.6 percent; painting materials and related compounds slightly increased at 2.5 percent; carpentry materials the same at 1.1 percent while masonry materials slowed at 1.9 percent.
Inflation. The PSA also reported June 2022 inflation rate at 6.1 percent, the highest since October 2018 when it hit 6.9 percent. Annual increases were also high in sub-indices like housing, water, electricity, gas and other fuels (6.6 percent) and furnishings, household equipment and routine household maintenance (2.9 percent).
Meanwhile, fewer items can be purchased with the peso as the purchasing power went down to P0.87, the lowest since the Consumer Price Index was rebased to 2018.
Why invest in real estate?
Real estate properties are considered tangible assets and low-risk investments. Generally resilient, especially in times when market volatility can easily wipe out your equity investment, properties produce passive streams of cash flow from rentals and opportunity for yearly increases, although the rates vary with the state of the economy.
Properties are among the ingredients for wealth building as prices rarely decrease steeply in the Philippines and instead would appreciate in value over the long run. Businessmen have utilized properties as collaterals to guarantee their loans, and depreciation to lower the taxable amount due.
Thus, as an investor, you can be shielded from rapid inflation, not to mention paying mortgages can help build equity once fully paid.
Caution
Despite the rosy prospects of investing in real properties, investors, especially beginners, should be reminded that ample time must be equally invested. As a potential landlord, your cash flow may encounter problems if you fail to get the right tenant, or attend to constant repairs and maintenance if you made the wrong property choice. If you wish to flip and earn a quick buck, be aware that real estate properties aren’t necessarily as liquid as stocks or bonds, and will need more time to sell.
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Henry L. Yap is an architect, environmental planner, real estate practitioner and former professorial lecturer.
