You may be considering if now is a good time to invest in real estate. Although it may appear counterintuitive, the COVID-19 pandemic, which has caused businesses to collapse, stock markets to plummet, unemployment to rise, and millions of people to be advised to stay at home, is one of the reasons why there is no better time than now to start planning and investing in Philippine real estate.
During the pandemic, the Philippines’ housing business expanded and updated its operations and services. This is a clear indicator that you should begin planning, preparing, and applying for a house loan right now.
So, what does this say about the housing market? Is today a good time to invest? On the subject of real estate investing, there is a wide spectrum of professional opinions. Some claim that the current economic situation makes now a good time to invest, while others advise waiting. Here are a few reasons why now may be an excellent time to buy real estate.
#1: REAL ESTATE HAS LOW INTEREST RATES
The first reason you should buy a real estate property now 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 linked to COVID-19 is wreaking havoc all across the world. The stock market is falling. Concerns about another real estate bubble will also likely prompt property owners to sell their homes quickly before they lose value.
Unemployment rates are also growing, which might lead to a smaller pool of buyers in the real estate market. Fewer bidders may lead prices to decline if sellers are determined to sell. High unemployment may lead to a surge of foreclosures, which will provide more chances for savvy investors.
#4: MORE CONVENIENT PROCESSES
Staying at home isn’t going to stop you from investing in real estate. For present and future investors, banks, Pag-Ibig, and other real estate businesses have already adjusted online application, touring, and processing. We may now invest in real estate from the convenience of our own homes.
CONCLUSION: THE WORST TIME IS SOMETIMES THE BEST TIME
Whether or not today is a good time to invest in Philippine real estate depends on the sort of project you have in mind. As the market continues to move at a quick rate, house flippers may face greater challenges than those looking to acquire real estate for the long term.
Experts say that the best way to significantly gain from real estate investing is to buy and hold. Purchase now and wait years to sell. With uncertain times ahead in the next year or two, investing in real estate holdings today that you want to keep for a long time will allow you to profit from fair prospective rates.
Because of the worldwide degree of uncertainty, predicting whether 2022 will be a good year to invest in real estate is difficult. Fear and restrictions on people’s conduct are discouraging, notwithstanding the lowest interest rates ever recorded.
The local real estate market, on the other hand, may react differently than markets throughout the country. So, if your local market has a strong financial position, low interest rates, and the potential for price declines, now can be a good moment to make a return on your investment.
