Approved building permits fell 14.9% to 36,136 in the second quarter, the Philippine Statistics Authority said on Wednesday, accelerating from a 0.9% decline in the three months to March.
Approved projects were valued at P87.83 billion and covered 7.24 million square meters (sq.m.). The value of the projects declined from the first-quarter total of P104.33 billion and the year-earlier tally of P106.02 billion.
Domini S. Velasquez, chief economist at China Banking Corp. attributed the decline in construction projects to persistently high building vacancy rates dating from the pandemic.
“Although many workers are now onsite, some companies opted to continue their flexible working arrangements, leading to overcapacity in buildings. Hence, developers have been slow to build new non-residential buildings,” she said.
Nicholas Antonio T. Mapa, ING Bank N.V. Manila senior economist, also said base effects from the year-earlier period could also be a factor.
“Last year applications likely jumped upon the reopening of the economy after lockdowns were lifted,” he said.
He also added that rate hikes have made borrowing for construction activity more difficult.
Since May 2022, the central bank has been aggressively raising interest rates by a cumulative 425 basis points in response to inflation, pausing the tightening cycle only in May 2023.
In the second quarter, permits for residential projects accounted for 66.9% of the total, declining 20% to 24,175. These projects were valued at P41.36 billion with a combined floor area of 3.49 million sq.m.
Single homes accounted for 90.8% of approved residential projects, down 16.5% at 21,942.
Applications for apartment buildings decreased 41.7% to 1,949. Approvals for duplex or quadruplex homes totaled 244 (down 55.3%) and other residential applications 28 (down 15.2%). Residential building approvals totaled 12 (up 9.1%) during the period.
Non-residential approvals, on the other hand, totaled 7,928 during the period, up 10.1%. These accounted for 21.9% of all approved permits.
Approved commercial construction applications, which accounted for 71.2% of all non-residential projects, grew 15.7% to 5,645.
Approved institutional building permits fell 5.9% to 1,170, while industrial project approvals rose 0.5% to 579.
Approved agricultural projects totaled 308 in the three months to June period, down 2.2%, while other non-residential works receiving permits totaled 226, up 22.2%.
Permits for additions to existing structures increased 14.7% to 1,553 during the period.
Alteration and repair permits fell 33% to 2,480 approvals.
Calabarzon, composed of the provinces of Cavite, Laguna, Batangas, Rizal, and Quezon, had the highest number of approved construction projects, accounting for 26.3% of all approvals during the period, with 9,504 permits issued.
The Central Visayas had a 12.5% share of approved permits with 4,523, while Central Luzon accounted for 10.2% with 3,682 approved permits.
By value, approved construction projects in Calabarzon amounted to P24.13 billion followed by those in the National Capital Region with P10.12 billion and those in Central Luzon with P10.02 billion.
Ms. Velasquez said she expects the next few quarters to reflect lower vacancy rates.
“However, as interest rates are set to remain high, we think that real estate developments will also be slow in gaining traction. 2024 should be a better year for the industry as interest rates are bound to come down,” Ms. Velasquez said.
Source: Business World