By Juliana Chloe A. Gonzales, Reporter
HIGHER borrowing costs could weaken residential property demand following the Bangko Sentral ng Pilipinas’ (BSP) latest interest rate increase, although subsidized housing loans may offer some relief to eligible homebuyers, property consultants said.
“It will really have a detrimental impact on take-up because higher interest rates will likely result in higher mortgage rates. We’re already seeing a lot of back-outs,” Colliers Philippines Director and Head of Research Joey Roi Bondoc told BusinessWorld on the sidelines of the firm’s third-quarter market briefing on Tuesday.
The Monetary Board raised its benchmark interest rate by 50 basis points to 5.5% on Oct. 22. Higher policy rates could eventually translate into increased mortgage costs, particularly for new borrowers and those whose existing loans are due for repricing, according to analysts.
Meanwhile, socialized housing loans released by the Home Development Mutual Fund (Pag-IBIG Fund) nearly tripled in the first nine months of the year, according to the Department of Human Settlements and Urban Development (DHSUD).
Financing for socialized housing rose by 172% to P12.10 billion from P4.45 billion a year earlier, while the number of homes financed increased by 173% to 10,904 from 3,987.
Under the Expanded Pambansang Pabahay para sa Pilipino (4PH) Program, qualified borrowers purchasing socialized housing units can avail themselves of a subsidized interest rate of 3%.
Pag-IBIG Fund also offers promotional rates of 4.5% for eligible housing loans above the socialized housing ceiling up to P4.9 million, and 5.75% for loans exceeding P4.9 million up to P10 million. Both rates are fixed for the first three years of the loan.
Savills Philippines Research Director Dino Palanca said subsidized housing loan rates could help ease monthly mortgage payments, although rising living expenses and construction costs continue to affect housing affordability.
“Lower interest rates can make a significant difference by reducing monthly amortizations,” Mr. Palanca said in a Viber message. “However, interest rates are only one part of the affordability equation. Inflation continues to affect household budgets through food, transportation, utilities, and other everyday expenses. Construction costs also influence the prices developers can offer.”
DEVELOPER ADJUSTMENTS
Property developers are also reviewing their housing offerings as higher costs and changing demand affect the residential market.
Hausland Holdings, Inc. President and Chief Executive Officer Christopher Ryan T. Tan said developers in Pampanga and the Clark area face similar economic pressures.
“I think we are not immune in Pampanga, and specifically in the Clark area. We are also confronting the same issues,” Mr. Tan said during a fireside chat at the Colliers briefing.
He said the company is offering housing options across different price segments to respond to varying buyer requirements.
Hausland has also increased its planned socialized housing commitments through Fiesta Communities, Inc. to between 21,000 and 27,000 units from an earlier commitment of 9,000 units, according to Mr. Tan.
“We’ve increased the volume of our Fiesta Communities socialized housing [projects]. [We previously] committed 9,000 units, [but now] we upped it all the way up [between] 21,000 to 27,000 units,” he said.
LAND AND CONSTRUCTION COSTS
Apart from financing costs, developers face challenges involving land availability, construction expenses, and project approvals, according to property consultants.
“Land availability and construction costs will continue to be major considerations, particularly in areas where demand is growing but suitable land is becoming more expensive,” Mr. Palanca said.
He said a sustained supply of housing projects would require efficient approval processes, infrastructure development, and access to developable land.
Mr. Bondoc said developers outside Metro Manila could consider acquiring land ahead of the completion of major infrastructure projects to manage acquisition costs.
“Outside of Metro Manila, what would be ideal to implement is to start land banking,” he said.
Acquiring sites before new road networks are completed could allow developers to secure land ahead of potential price increases, according to Mr. Bondoc.
Meanwhile, Mr. Tan cited the Luzon Economic Corridor, an initiative involving the Philippines, the United States, and Japan, as a factor supporting housing demand in Pampanga and Tarlac.
“The support of the US government, then the Japanese government to really develop Clark and New Clark City is really pulling in a lot of demand, not only in Pampanga, but also in Tarlac City, and Tarlac province,” he said.
He identified Clark, Mabalacat, Angeles, and San Fernando in Pampanga, as well as New Clark City in Tarlac, among the areas benefiting from interest in regional development.