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Real estate news in the Philippines

Philippine property prices outside Manila surge by 4.2% as more Filipinos buy homes in the province

rental yield in the Philippines

The number of Filipinos buying homes outside the busy National Capital Region (NCR) has increased, resulting in a significant 4.2% rise in residential property prices in Areas Outside NCR (AONCR) during the second quarter of 2024. In contrast, property prices within Metro Manila decreased by 1% in the same period. This change shows a growing interest in regional areas, which could provide opportunities for foreign investors interested in the Philippine real estate market.

The Bangko Sentral ng Pilipinas (BSP) reported that the growth was driven by annual price increases in duplex housing units, single-detached or attached houses, and condominium units in AONCR. The surge surpassed the decline in townhouse prices, highlighting a diverse market appealing to various buyer preferences.

Overall slowdown in residential property price growth

Despite the increase in the Average Occupancy Rate of the National Capital Region (AONCR), the Residential Real Estate Price Index (RREPI) indicates that residential property prices grew by 2.7% nationwide in the second quarter. This shows a slowdown compared to the 6.1% growth reported in the same quarter last year. The moderated growth suggests a stabilizing market, which could benefit investors looking for steady appreciation without the volatility of rapid price increases.

The slowdown may be attributed to market adjustments following previous years of robust growth, as well as cautious lending practices by financial institutions. However, the continued growth, albeit slower, indicates that the market remains resilient and continues to offer investment potential.

Decline in residential real estate loans granted

During the second quarter, residential real estate loans (RRELs) for new housing units decreased by 3.5% compared to the previous year, in line with the moderated price growth. The decline was greater in the NCR at 9.2%, while AONCR experienced a smaller decline of 0.8%. This indicates that lending is tightening in Metro Manila, while regional areas are maintaining more stable lending activities.

The decrease in loans could be due to stricter lending standards or a more careful approach from both borrowers and lenders. For foreign investors, this could result in less competition when seeking financing for properties outside the NCR, potentially making it easier to enter the market.

Decrease in housing loan availments and transactions

Compared to the previous quarter, there was a 15.1% decrease in housing loan availments nationwide. The NCR experienced an 11.5% decline, while AONCR saw a 16.6% decrease. Additionally, the total number of RREL transactions decreased by 9.9%. This decline was primarily driven by a 14% decrease in loans in AONCR, overshadowing a modest 1.4% growth in the NCR.

The decline in loan availments and transactions may indicate a short-term market correction or a response to economic factors affecting buyers’ ability to secure financing. Investors should monitor these trends, as they could impact property liquidity and negotiation dynamics.

Regional disparities highlighted by average appraised values

The average appraised value of new housing units nationwide was ₱ 83,759 ($1,495) per square meter, showing a 6.8% year-on-year increase. In the NCR, the average appraised value rose to ₱ 131,158 ($2,341) per square meter, which is more than double the AONCR average of ₱ 58,741 ($1,049). This significant difference highlights the potential for more affordable investment opportunities outside Metro Manila.

The regions of Calabarzon, Central Luzon, Central Visayas, Western Visayas, Davao Region, and Northern Mindanao are making significant contributions to the number of residential real estate loans granted. These areas are rich in economic growth and development prospects, making them attractive options for investors seeking diversification and value.

What this means for foreign investors

The change in purchasing trends towards areas outside Metro Manila creates new opportunities for foreign investors looking to enter the Philippine real estate market. The rise in property prices in areas outside the National Capital Region (NCR), along with lower average appraised values compared to the NCR, indicates the potential for increased property value and higher rental yields in these regions.

However, investors should be aware of the general slowdown in property price growth and the decrease in loan availabilities, which could affect market dynamics. It’s important to conduct thorough due diligence and stay informed about regional developments in order to make sound investment decisions.

Your guide to buying property in the Philippines
Written by Matt Timmermans

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