In March 2024, the Philippine real estate market saw a significant decrease in the number of approved building permits, dropping by 15.5% compared to the same month last year. This decline is noteworthy, especially considering the 2.2% decrease in February 2024, indicating a consistent trend of reduced construction activity. According to the Philippine Statistics Authority (PSA), local building officials granted only 13,320 permits in March 2024, down from 15,764 in March 2023. This downturn has important implications for current property owners and potential foreign investors in the Philippine real estate market.
Residential permits see a steep decline
In March 2024, the majority of permits issued were for residential buildings, totaling 8,964 permits, which accounted for 67.3% of the total. This represented an 18.1% decrease from the 10,949 permits issued in March 2023. Single-family homes made up the majority of these residential permits at 86.4%.
For current property owners, the decrease in residential permits could have both positive and negative implications. On one hand, the limited supply of new residential properties could potentially increase the value of existing homes, making it a favorable time to sell. On the other hand, the reduced activity may reflect broader economic challenges that could negatively impact property values.
Non-residential construction permits and value decline
In March 2024, there were 3,105 non-residential construction permits issued, accounting for 23.3% of the total permits. This represented a 6.1% decrease compared to the previous year. Commercial buildings were the most common type, making up 71.2% of the non-residential permits. The total value of construction projects in March 2024 was ₱ 34.07 billion ($579.19 million), a 24.3% decrease from ₱ 45 billion ($765 million) in March 2023. Non-residential buildings made up 48.1% of this value, with commercial buildings accounting for ₱ 8.08 billion ($137.36 million). The decline in commercial construction could indicate a slowdown in business expansion, potentially affecting the demand for commercial properties.
Implications of declining construction costs
In March 2024, the total floor area of construction projects was 2.84 million square meters, showing a 14% decrease from March 2023. The average construction cost was ₱ 11,142.74 ($189) per square meter, which is 11.4% lower than the previous year. Among residential buildings, condominiums had the highest average construction cost per square meter.
For current property owners, the decline in construction costs could mean lower expenses for renovations and improvements, potentially increasing the value of their properties. For new buyers, lower construction costs might lead to more affordable prices for new developments once the market stabilizes.
Opportunities for foreign investors
Foreigners interested in purchasing real estate in the Philippines might find it a good time to invest. The decrease in new construction permits indicates a slowdown in new property developments, potentially reducing competition for existing properties. Additionally, the overall decline in construction value and costs could result in more favorable purchase prices for buyers. However, potential investors should thoroughly research the local market dynamics and assess the long-term implications of these trends.
