You may be thinking if now is a good time to invest in real estate properties. Although it may seem contradictory, the COVID-19 pandemic, which makes businesses collapse, plummets stocks, increases unemployment, and makes millions of people exhorted to stay at home, is one of the reasons why there is no better time than now to begin planning and investing in Philippine real estate.
During the pandemic, the Philippines’ housing business expanded and updated its operations and services. This is a solid indication that it is time to start planning, preparing, and applying for a home loan as soon as possible.
So, what does this tell us about the real estate market? Is it a good time to buy real estate now? There is a vast range of expert views on the issue of real estate investing. Some argue that the present economic condition makes it an excellent time to invest in real estate. In contrast, others say that you should wait. Here are some reasons why now might be a perfect time to invest in real estate.
#1: REAL ESTATE HAS LOW INTEREST RATES
The first reason is that loans are at an all-time low, due primarily to the pandemic.
In February 2021, the Bangko Sentral ng Pilipinas (BSP) maintained its key overnight borrowing rate at a historic low of 2%. The overnight deposit and lending facility interest rates remain steady at 1.5 and 2.5 percent, respectively.
Gino Olivares, president of the Organization of Socialized and Economic Housing Developers of the Philippines, contrasted the total payments of someone who received a Pag-IBIG housing loan in 2009 to someone who would apply for a loan this year. In 2009, the interest rate on a P3 million house loan with a repayment period of 10 years from Pag-IBIG was 11.5 percent. Meanwhile, the interest rate on the same borrowing amount would be 7.25 percent this year.
As a result, this is an excellent moment to invest in real estate properties such as condominiums and house and lots.
#2: HAS A SIGNIFICANT EARNING IN THE FUTURE
Olivares emphasized that investing in real estate now will yield a significant profit in ten years.
The future value of a real estate property may be calculated using the BSP’s Residential Real Estate Price Index (RREPI), which is an indicator of fluctuations in the values of Philippine residential estate properties. The first stage is to ensure long-term growth. This is calculated as 1+RREPI of a specific region of the country multiplied by the number of years covered by the forecast.
In ten years, the future growth is expected to be 1.97. Then, to calculate the house’s future value, multiply future growth by the present value, which is P3 million. This would bring the total to P5.91 million. As a result, the property purchased through Pag-IBIG for P3 million will be worth P5.91 million after ten years.
Therefore, if a P3 million loan is acquired this year, the entire investment, including interest, would be P4.2 million. Considering the future property’s value of P5.91 million, the investment will result in a P1.71 million increase in value.
#3: REAL ESTATE PROPERTIES PRICE DROP
The virus related to COVID-19 is causing a lot of havoc throughout the world. Financial markets are collapsing, and concerns about another real estate bubble will likely drive real estate owners to sell their properties unexpectedly before they lose their value.
Unemployment rates are also rising, which might contribute to a reduced buyer pool in the real estate market. If sellers are determined to sell, fewer buyers may cause prices to fall. High unemployment may also increase foreclosures, creating more opportunities for discerning investors.
#4: MORE CONVENIENT PROCESSES
Being mandated to stay at home won’t deter you from investing in real estate. Banks, Pag-Ibig, and other real estate firms have already modified online application, touring, and processing for current and potential investors. This allows us to invest in real estate from the comfort of our own homes.
CONCLUSION: THE WORST TIME IS SOMETIMES THE BEST TIME
The type of project you have in mind may determine whether now is a good time to invest in Philippine real estate. House flippers may encounter more tremendous obstacles than those trying to buy properties for the long term as the market continues to evolve at a rapid pace.
Experts say that the best way to significantly gain from real estate investing is to buy and hold. Buy now and wait for years to sell it. With uncertain times ahead in the next year or two, investing in real estate properties now that you want to retain for an extended length of time will allow you to profit from reasonable potential rates due to the uncertainty.
Because of the global level of uncertainty, it’s tough to say whether 2022 is an excellent year to invest in real estate. While the lowest recorded interest rates appeal, fear and constraints on people’s behavior are discouraging.
However, the local real estate market may react differently than markets throughout the country. So, if your local market has a solid financial position, low-interest rates, and the likelihood of falling prices, then now might be a good time to make your investment profitable.