Building permit approvals pick up by 12.8% in April

Approved building permits rose by 12.8% in April, a reversal from a 12.2% drop a year ago, the Philippine Statistics Authority (PSA) said in a report.

Preliminary data showed that building projects covered by the permits totaled 13,332 in April from 11,822 a year ago.

April’s year-on-year growth was also a turnaround from the revised 14.2% contraction in March.

Building projects in April covered 3.35 million square meters (sq.m.) of floor area, up by 35.5% year on year.

Construction projects represented by the permits were valued at P39 billion, up 30.8% from P29.82 billion a year ago.

The double-digit year on year growth rate in building permits is partly due to lower base effects amid the continued growth in the country’s economy as reflected by the gross domestic product (GDP), as well as the recovery of many industries with the lifting of Covid-related restrictions in July 2023, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said.

“The economy continued to recover and continued to benefit the [real estate and property] industry, especially in high-growth areas around the country as manifested by the boom in [real estate and property] prices in recent [months],” he added.

The country’s economy grew by 5.7% in the first three months of the year.

Permits for residential projects, which accounted for 65.7% of the total, rose 9.6% to 8,764.

These projects were valued at P17.09 billion, against the P12.95 billion recorded a year earlier.

Single homes made up 82.2% of the residential category with approved permits inching down by 0.2% to 7,202.

Applications for apartment buildings grew by 111.1% to 1,421 while applications for duplex or quadruplex homes were up by 36.8% and totaled 130.

Nonresidential projects likewise grew 18.3% year on year with 3,057 permits accounting for 22.9% of the total.

Nonresidential permits were valued at P17.54 billion, jumping 27.2% from P13.79 billion in April last year.

Approved commercial construction applications made up 70.8% of nonresidential projects, up 17% to 2,165.

Institutional and industrial permits rose 34.9% and 23.4% to 468 and 243, respectively.

Alteration and repair permits amounted to 927, up 16.6% annually and valued at P3.21 billion.

Permits for addition — construction that increases the height or area of an existing building — jumped 31.2% to 584.

Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) had the most approved construction projects, making up 25% of the total with 3,339 permits, followed by Central Luzon (2,076 permits), and Central Visayas (1,558 permits).

Mr. Ricafort expects US and local interest rates to affect construction activities and building permits in the future.

“Going forward, any possible cut in [US] interest rates later in 2024 and in 2025 that could be matched locally, would eventually help spur greater demand for [loans] that could lead to more [construction] activities and the necessary permits,” he said.

The Fed kept its policy rate at 5.25-5.5% on June 12, pushing rate cuts to as far back as December, Reuters reported.

The PSA said that construction statistics are compiled from the copies of original application forms of approved building permits as well as from the demolition and fencing permits collected every month by the agency’s field personnel from the offices of local building officials nationwide.

Source: Business World

Housing crisis — A ticking time bomb

“The toughest disincentive to the homebuilders is the acute scarcity of available real estate for housing."

In the 1800s, when the Philippines had a population of 1.89 million living in traditional “bahay kubo” homes iconic to Philippine culture, housing and shelter shortages were unheard of.

Today with 119.1-million Filipinos, a staggering increase of 6,300 percent, we face a housing crisis with a shortage of 6.5-million homes, projected to rise to 22.0 million by 2040. Behind these numbers lie millions of families enduring substandard living conditions in shelters that can hardly be called home.

Various studies conducted by reputable housing development associations attribute this shortage to rapid population growth, urbanization, a surge in informal settlers, limited availability of land for housing, outdated construction processes, slow permit processes, inadequate financial support to developers, high financial costs, low returns, and a myriad of other unsettling challenges plaguing the housing industry.

The toughest disincentive to the homebuilders is the acute scarcity of available real estate for housing which is a finite supply currently estimated at ₱305 trillion and growing.

The Home Development Mutual Fund, popularly known as Pag-IBIG Fund, was established in 1978 with two mandates: first, to assist in providing affordable decent shelter, and second, to generate savings for its members.

The Fund was given the herculean task of assisting all its members to build a home through socialized housing loans.

Pag-IBIG has performed exceptionally well in reducing the housing backlog since its creation with an impressive record in the past three years of releasing housing loans totaling ₱341 billion to build 297,000 units.

However, the housing gap reported at 6.5-million units as of end 2023 prompted PBBM to order Pag-IBIG to accelerate its program by financing one million houses per year until the end of his term.

But the huge housing backlog even before Pag-IBIG was created and the rapidly expanding population will keep the housing shortage a continuing national concern.

This dire housing situation poses a serious threat to the nation’s security and stability, which can only exacerbate the divide between the underprivileged homeless and the affluent homeowners.

Given this, there is a risk the homeless may turn to ideologies like socialism, viewing Karl Marx’s classless society as more desirable than capitalism.

Neglecting the housing crisis could lead to widespread homelessness, forcing families to live on the streets or in inadequate, overcrowded, and unsafe conditions, accentuating further the social inequality and potentially sparking political disorder and social unrest.

Further, the housing shortage will have broader economic implications, affecting employment, consumer spending, and economic growth.

Some experts in the housing industry propose solutions such as rethinking government’s role in housing finance, delinking housing social assistance from finance markets, and addressing fundamental supply side and urban governance issues.

But with our freewheeling and disharmonious multiparty political system where the economic agenda is subordinate to other less meritorious plans, there is always the bleak prospect the housing crisis will just be overlooked in the halls of power.

Time is of the essence in addressing the housing problem, and while we may not have the luxury of solving it overnight, we need to demonstrate to future generations that beginning today we are earnestly committed to providing decent homes for all of our countrymen.

Source: Daily Tribune

Global house prices rebound as economists predict turning point

Across the 37 industrialized OECD countries, nominal house prices grew 2.1% in the third quarter of 2023

The widespread drop in global house prices that hit advanced economies has largely petered out, according to a Financial Times analysis of OECD data, leading economists to predict that the deepest property downturn in a decade has hit a turning point.

Across the 37 industrialized OECD countries, nominal house prices grew 2.1 per cent in the third quarter of 2023 compared with the previous three months, up from near stagnation at the start of last year.

Only about one-third of those countries reported a quarter-on-quarter decline in the latest period, down from more than half at the start of the year, according to the FT analysis.

“The most recent data suggest that house price falls have now bottomed out in most countries,” said Andrew Wishart, senior property economist at Capital Economics. “I think we’ve had the house price correction that we’re going to get.”

Housing prices took a hit in late 2022 after central banks in most economies raised interest rates at the fastest pace in decades to curb inflation. In OECD countries, house prices grew by just 0.6 per cent quarter on quarter at the end of 2022, the lowest nominal rate since 2012.

However, that decline has eased or even reversed in many economies as expectations that central banks will cut borrowing costs this year have helped mortgage rates to decline. A shortage of properties for sale has also helped to prop up valuations and real prices across the OECD returned to growth in the latest quarter.

House prices are increasing or stabilizing in most advanced nations, while other countries are seeing falls at a slower rate. Prices are likely to fall further in some countries such as Germany, Denmark and Sweden, which have larger rental markets, “but even in these economies we think that most of the fall in prices is already behind us”, said Wishart.

House prices are “close to the bottom in many places and recovering in a lot of places”, said Tomasz Wieladek, economist at investment company T Rowe Price. He said that migration and restrictive planning permission had kept the pressure on house prices in many countries, including the UK, Canada and Australia.

Households will continue to face higher mortgage costs as they come off fixed-rate deals, but many face better terms compared with last year. While UK and the US mortgage rates have ticked up in February, they remain well below national peaks reached in 2023.

House prices have held up best in the US, where solid economic and job growth helped nominal house prices to rise 5.2 per cent in the year to November.

Germany, by contrast, where economic woes, property overvaluations and a large rental market weigh on the sector, saw a 10.2 annual contraction last year — the worst of the EU economies excluding Luxembourg.

In Australia and New Zealand, house prices are growing again, national data shows, while in Korea they have stabilized after hitting a trough in mid-2023. In the EU, they rose at a nominal rate of 0.8 per cent quarter on quarter in the three months to September, reversing the fall seen at the start of the year, Eurostat data shows, though they were still 1 per cent lower on an annual basis.

“We believe that the correction in housing prices in Europe is not over yet, but we have probably seen the worst of it,” said Sylvain Broyer, chief economist of EMEA at S&P Global Ratings. He expects the price correction to continue in some countries, as mortgage payments remain elevated and high building costs that have kept prices high are expected to decline.

However, the remaining correction “is going to be a moderate one”, said Broyer.

The global house price decline has been generally milder than expected. Fitch now estimates nominal prices grew 6 per cent in the US last year, down from a previous forecast of up to a 5 per cent contraction, while in the UK it predicts a milder 2 per cent contraction in 2023 compared with a previous estimate of up to 7 per cent. The better forecasts are partly because high inflation hid the scale of the decline, economists said.

In some economies, including the US, Australia and the UK, the market has shown unexpected resilience and the house price correction has not wiped out the large gains seen during the coronavirus pandemic, either in nominal or real terms.

But in some countries outside the OECD the picture is different. In China, which has been experiencing an acute housing downturn, Fitch forecast house prices would continue to fall for the next two years, warning that investment demand “has mostly vanished” following a 7 per cent price contraction over the past two years.

Source: Financial Times