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All the talk about rising inflation rates and higher prices may have people thinking of holding off on their plans on buying a house. With the price of goods still on the rise in the Philippines, many are rightfully thinking that a home purchase is not practical or timely at the moment. Conversely, should buyers wait for inflation to come down before buying a house? 

How Inflation Affects Home Prices

Economics 101 tells us that Inflation is the rate at which the prices of goods and services rise during a period. For example, a cup of coffee costs P100 when its price suddenly rose to P120 due to inflation.  This means that your P100 suddenly decreased in value as it cannot afford that particular cup of coffee anymore. Inflation means that if goods in general become more expensive, your money loses value as you can now only buy fewer items. As a result, higher inflation means lower purchasing power. 

When inflation rises, central banks often counter it by raising interest rates. The idea is to discourage people from spending and consequently, reduce demand for goods and services. Once demand falls down, prices tend to go down as well. Once the central bank raises the key rate (the interest rate at which banks can borrow in order to maintain reserve levels), the interest rate for many consumer financial products usually follows. This includes credit card interest, housing and automobile loans, and even your bank deposit rates. Higher interest rates usually discourage borrowers from taking out new loans, as they’ll essentially pay more money for the same loan amount. This applies to home mortgage purchases.

The Philippine Housing Market During Inflation

Given the effects of inflation, does it make sense to hold off on buying a house when interest rates are higher? After all, you’ll be paying higher interest rates if you do so at this point. However, not all homebuyers enter into mortgage agreements. Households who saved enough money to cover the down payment or even the full amount shouldn’t be worried about interest rates. What they should be worried about is the rising value of Philippine properties over the last few years. After registering more than 26% growth before the shutdowns happened in 2020, the local housing market is at it again. CEIC reported that local house prices grew 6.5% year-over-year during September 2022. This follows a 2.6% increase during the previous quarter.

With the Philippines in full recovery mode, developers have resumed their massive buildup that got sidetracked during the pandemic. With many industries fully reopened and back in business, demand for properties continues to rise. In fact, Colliers expects a total of 166,400 condominium units will become available in Metro Manila alone by 2024. This represents a 17% increase in 2021’s stock of 142,200. The bottom line? Inflation or not, housing prices are growing in value year over year. They’re not likely to go down even if interest rates go down.  

This brings us to our ultimate question: Should you wait for inflation rates to come down before buying a house? There is no short answer. For certain types of homebuyers, buying a house today won’t make a difference than waiting for inflation to go down. In fact, those willing to make spot cash payments or have the full down payment ready can avail of great deals or discounts from sellers. For home loan buyers who took on mortgage payments, the increase in interest rates is way below the increase in the value of homes. Despite the slightly bigger monthly payments to your mortgage, your home’s value will more likely increase at a far bigger rate. 

Meanwhile, Filipinos currently renting homes and holding off their purchases should ask themselves if their rental rates are going down. Right now, rental rates are going up across the country (again, thanks to inflation). Holding off on buying a house and yet paying for higher rental rates might not be the best solution to fight inflation. At least with a home purchase, you’re building up equity with your new home. Meanwhile, renters are just subsidizing their landlords. 

You Can Still Save Money Even if You Buy a House Now 

Of course, there are several ways to cut down on costs associated with buying a house. One, ditch the idea of entering a saturated market location and competing with other buyers. Instead, look at emerging areas where there is steady development in terms of infrastructure and utilities. You’ll find that houses, lots, or condo units will cost much cheaper compared to getting one in the heart of a business center. 

Second, practice some patience when choosing your dream home. You might be tempted to sign off on the first house that attracts you, but it takes due diligence to get the right deal. Having a real estate professional available to help you get the best deals can lead to a lower contract price or get sizable discounts. For example, homebuyers who chose Ohmyhome to close a deal on their target homes reported an average savings of P185,000.  

Get the Help You Need When Buying a House with Ohmyhome 

Doing your research and knowing your limits can help you get your dream property without incurring additional costs. As long as you know what you want and what you can afford, your property investment can beat inflation long term. Compared to continually burning your money on rent increases or watching your choice properties get sold off while you hedge, get the help you need. Visit Ohmyhome Philippines and let the experts help you out.    

Looking to buy your own home and avail of the best mortgage deals? Ohmyhome’s extensive property listing contains over 80,000 property listings from over 150 of the country’s top developers. Our team of real estate professionals, backed by our excellent customer service team, will be on hand to help. With Ohmyhome by your side, you can look at the best properties and choose the best deals that fit you.

For more news and information, you can also download the Ohmyhome iOS or Android app. Additionally, follow our Facebook, Instagram, or YouTube social accounts to receive regular updates and news. 

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