What are the top three considerations when buying a house? Location, location, location. And right now, the entire Philippines is starting to heat up. In fact, prices are starting to go up yet again as the economy slowly reopens. Right now, the average price of a 50 to 70-square-meter lot in Metro Manila costs around three to five million pesos (P66,667/sqm). For cost-conscious would-be homeowners, prices do tend to go down when you go opposite the country’s center of population.
The tradeoff, however, will be steep. Whatever money you save from buying a house in boondocks will give way to increased household and transportation expenses, with the biggest killers being fuel and toll expenses. In addition, amenities we take for granted in the metro like a stable internet signal, steady water pressure, and a reliable power grid.
Cash or Charge?
The good thing about investing in property is that they almost always appreciate value over time. This is why most investors will tell you that the best time to buy a house was five or ten years ago. Right now, the Philippine property market is about to take off again. However, prices are rising along with interest rates.
First, let’s tackle interest rates. The Bangko Sentral recently raised overnight interest rates from 2.5% to 3.25%. Long story short, it costs more to take out a loan than it was two years ago because of higher interest. The same goes for smaller loan products such as credit debt, auto financing, or payday loans. For homebuyers, expect interest rates to reach double digits, especially for 20-year mortgages.
Next, we look at property prices. According to the March 2022 Bangko Sentral Residential Real Estate Price Index, local house prices grew 5.6% year on year from March 2015 to March 2022. In the period between December 2021 and March 2022 alone, prices jumped by nearly 5.0%
So, is Now a Good Time to Buy?
Sadly, there is no straight answer to this question. Prices are higher and interest rates might be higher compared to rates before the pandemic. However, that doesn’t mean they’ll go down soon. The nature of real estate investments, especially those in great locations, is that prices only go one direction: up. Buying now may seem disadvantageous compared to a few years back. However, that’s always been the case with real estate. Take the case of pre-selling developments. You can buy them much cheaper when the actual place is just dug-soil without so much as an entranceway. Get the developers to work and you’ll find prices nearly double when the first row houses appear.
But what about inflation rates? They will go down eventually, right? Yes, but your purchasing power won’t likely return the way it was before. While interest rates might go down, prices will stay up.
So, what’s the bottom line when buying a house? Buy your dream home soonest you can afford one. Property is a finite resource. Waiting for better conditions won’t guarantee your ideal house or even location remains available. Sometimes, it’s better to buy high and see interest rates drop than buy low and see the opposite effect.
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