It may seem counterintuitive but the coronavirus pandemic, which has prompted everyone to stay home, is one of the reasons why there is no better time than now to start building and investing in your first home.
The housing industry in the country has evolved and modernized in its processes and options it offers especially during the pandemic. This is a good sign that it is time to plan, prepare and get a house loan as soon as you can, said Gino Olivares, president of the Organization of Socialized and Economic Housing Developers of the Philippines.
In his presentation at the Global Filipino Investors' 2021 Real Estate Online Conference, Olivares said social media significantly impacted the landscape of the housing industry, driving it to perform better and offer customers quality products.
Then and now: Space and aesthetic
Olivares compared housing units in subdivisions during the late 90s and the early 2000s:
Over 15 years ago, houses only had plain and little architectural details.
- Now design standards have changed to give premium to aesthetic.
Before, developers maximized the saleable area of their projects up to 70%, so subdivisions were denser.
- Developers now offer wider roads and more open spaces for parks and playgrounds.
In the early 2000s, only the most luxurious gated communities that only the wealthier 10% of Filipinos could afford had basketball courts and playgrounds.
- Now, developers have upgraded their projects with more amenities that one of the largest developers in the Philippines built a world-class sports complex with an Olympic-sized swimming pool, as well as soccer and tennis courts for a middle-income clientele.
Future value: Often, the worst time is the best time
Aside from developments in terms of design, spaces and amenities, another reason why one should invest in a house now is because loans are at an all-time low, mainly because of the pandemic.
- In February, the Bangko Sentral ng Pilipinas held its key overnight borrowing steady at a record low of 2%. The interest rates on overnight deposit and lending facilities are also unchanged at 1.5% and 2.5%, respectively.
- Olivares compared the total payments of someone who got a Pag-IBIG housing loan in 2009 and someone who would apply for a loan this year.
- The interest rate for a P2 million housing loan from Pag-IBIG in 2009 was 10.5%. Meanwhile, the interest rate for the same loan amount that would be taken this year is only 7.25%.
- If, for example, the amount is payable for 10 years, the loan taken in 2009 will have a total payment of P3.2 million, while the loan taken in 2021 will have a total payment of only P2.8 million.
Investing in a house now would deliver a significant earning after 10 years, Olivares stressed.
- Using the BSP’s Residential Real Estate Price Index, an indicator of changes in the prices of residential properties in the Philippines, one can calculate the future value of the house.
- The first step is to get the future growth. The formula for this is 1 + RREPI of a certain region in the country, multiplied by the years covered by the projection. In the case of the National Capital Region, the RREPI is at 7% or .07.
- Ten years from now, future growth will be at 1.97. Then, to get the future value of the house, multiply future growth by the current value, which is P2 million. That would lead to a total of P3.94 million. Therefore, the property one bought through Pag-IBIG for P2 million would have a value of P3.9 million in 10 years.
So if one got a P2 million loan amount this year, the total investment, including the interest, to be paid is P2.8 million. Considering the future property value of P3.9 million, the investment would result in P1.1 million in appreciated value.
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Since the pandemic has made houses the new school because of online classes, the new office because of work-from-home arrangements, the new restaurant because dining out is too dangerous, it is high time for one to invest in their first house provided that they are capable.
“There is nothing more worth investing in than precious time spent at home with our loved ones. So why wait? Invest in your first home now,” Olivares advised.
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