Construction tycoon Reghis Romero II says that a possible US recession due to their housing crisis will not have any negative effects on Philippine real estate. This is due to the fact that the Philippines has a very strict loan to collateral ratio for housing loans. Besides that, Philippine banks do not make use of the same mortgage system as the US, which is rising steadily in home foreclosures.

To prevent any similar real estate crisis in the Philippines, the Chamber of Real Estate and Builders Association (CREBA) implemented a contract-to-sell system instead of a mortgage origination to document sales of house and lot packages. The advantage here is that the buyer won’t have his name on the title until he has paid. If the buyer fails to pay, the contract goes back to the bank, who can use or sell the property.

Another project that will help the local real estate industry are government housing projects like the One Million Homes Program. This aims to address the 20-year housing backlog of 4.5 million houses. For that to happen, at least 500,000 low-cost housing units need to be built per year; however, there are only around 200,000 houses that are built or being built between the years 2005 and 2010.

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DENR secretary Lito Atienza will be drafting and implementing an environmental plan to save Boracay island from destruction caused by construction projects all over.  Atienza’s plan includes a comprehensive strategy to maintain air and water quality and solid waste and flood control.  The final master plan will be presented to all resort holders property holders engaged in new developments Boracay, before being shown to the Department of Tourism, the Philippine Tourism Authority, and the committee formed by President Gloria Macapagal-Arroyo to look over developments in the island.  Atienza says Mayor  Ciceron Cawaling already agreed to put a halt on all construction before the environmental plans get implemented.

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The government-owned Pag-IBIG Housing fund allocates a record high of Php 30B for low-cost housing due to the demands resulting out of the low interest rates. The average retail loan at Pag-IBIG is around Php 475,000 per borrower and based on this amount, they’re targeting a loan growth of around 28% this year. A challenge for Pag-IBIG, however, is to raise more funds to meet the increasing demands for low-cost housing.

Now is the best time to borrow from Pag-IBIG because you can get financing for low-cost houses at an interest of 6 or 7%, for a term that lasts up to 30 years. For a Php75,000 house at 7% a year, the monthly amortization will cost around Php4,000 to Php5,000, which is far more affordable than renting a house of the same quality (around Php10,000/month).  Even OFWs can avail of Pag-IBIG loans now, especially those who are earning in currencies that are gaining against the dollar such as the euro.

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Vice President Noli De Castro lowered the interest rates for Pag-Ibig Housing Loans, a government-based institution that offers affordable housing loan packages for low and middle income families. Loan packages worth Php 300,000 will have a 6% interest rate while loans between Php 300,000 – Php 500,000 have a 7% interest rate. Loans over Php 500,000 to Php 1 million will have 10.5% interest, and loans over Php 1 million to Php 2 million have an 11.5% interest rate.

For more information on how to avail of Pag-Ibig’s housing loan, visit their website.

Analysts believe that the Philippine real estate sector could be close to reaching the summit of the post-Asian currency crisis cycle, and that demand will last for two or three more years. Appetite for real estate has been whetted by big demand and low interest rates, making it more affordable for people to buy units for their own or for their family. This situation is different from what the real estate sector was like ten years ago, when people only bought property due to speculations that prices will increase throughout the years.

Central bank data shows that as of September 2007, the total real estate exposures of Philippine banks about to Php 220 billion, showing an increase of 2.4% from the previous year. Loans for commercial property development and infrastructure projects made up the most of this amount (79.9% or Php 154 billion) while 20.1% or Php 38.6 billion was allocated for residential units by individual borrowers or homeowners. This improvement is mostly due to rigorous collection, restructure, settlement, and foreclosure efforts.

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The Department of Environment and Natural Resources (DENR) Secretary Lito Atienza imposed a ban on all hotel and vacation home construction projects in Boracay island.

Atienza has been attempting a moratorium on construction since August of last year, which local mayor Ciceron Cawaling failed to heed. According to Atienza, the island can no longer handle the additional construction without dire environmental consequences. Evidence of the island’s environmental degradation can be seen in the flooding of several business establishments during a period of heavy rains last year.

The DENR is currently writing a moratorium to the mayor to remind him of his duty to protect the island and enforce the construction ban, stressing the Constitution’s mandate to protect the environment. Should Cawaling fail to do anything about it, the Department of Interior and Local Government will have to act against him.

News source: The Inquirer

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