The next big jump in mass housing traffic will come from the shift of the low-cost mass housing market to middle class housing projects driven by the anticipated collapse in interest rates, according to a top official of a leading property management and consultancy firm.

David Leechiu, CEO of Leechiu Property Consultants, Inc. (LPC), said during the Property Market Report, a virtual forum organized by the German Philippines Chamber of Commerce, that the current high interest rate for housing loan is expected to substantially go down as interest rates collapse further resulting in a mortgage market in the Philippines.

“The next big jump is the traffic from the low-cost housing market people to middle class driven by cheap money. I am talking about the collapse in interest rate and the mortgage market in the Philippine that will empower the middle class to be able to afford middle class housing units,” Leechiu said.

In fact, he  categorically stated that the growth driver in mass housing demand will not be driven by the 8-10 million unit estimated housing backlog in the country, but by those low income housing market people who will move to middle and lower middle class mass housing projects.

“The real market is the transition of people moving up, all across the Philippines from low cost to middle cost housing,” he said.

Leechiu explained that what has prevented people from taking up housing loans is the high cost of money as interest rate per annum is 9-11 percent fixed for 10 years and payable over a 20-25 year period. “But that will come down soon and it is coming down now,” he said.

 In the US, he said, interest rate for housing loan is just 2.7 percent fixed for 30 years, but in the Philippines the rate is 9-10 percent per annum fixed for 10 years and payable over a 20-25-year amortization period. “That will choke you,” he said.

 Once interest rates go down, he said, owning a house will not be very prohibitive. Equity would go down to 10 percent to 15 percent and rates would be fixed for over a longer term than the current 10 years.

He cited of the roughly 15 million square meters of mass housing projects under construction pre COVID. “That is a lot and that happened before COVID at high interest rate. What will happen after COVID when high interest rates go down meaningfully and dramatically?” he said.

Leechiu, however, said that new mass housing developments in the National Capital Region and even in nearby provinces, Laguna and Cavite have to shift to vertical like mid-rise condominium buildings.

“Mass housing developments have to be vertical, cannot be single detached, single level anymore. Even in Laguna and Cavite have to be vertical very soon because land values have become very expensive for low cost mass housing because of the penetration of infrastructure and higher affordability due to lower cost of money,” he said.

Leechiu also cited rising land values in Laguna, Cavite and Alabang with the opening of expressways and tollways in the south. He noted that prior to 2019, the only few people who bought lands in Laguna and Cavite were people wanting to do for logistics warehousing and low cost housing projects and other low value utilities, but now with the skyways and expressways all those lands that were not suitable for mid-rise have become very viable mid-rise projects. Land values in these areas could skyrocket to P10,000 –P20,000 per square meter from P2,500 square meter.

In 2007, land price in Ayala Alabang was only at P25,000 per square but prices went up to P35,000 per square meter when the first phase of the Skyway was completed in 1999-2000 amid a financial crisis.

“People were saying ‘Why are people buying at that price, are they crazy.’ I happened to be one of those who bought.  Today, how much is the property price in Alabang? It is now at P130,000 per sqm to P160,000 almost 4x in a span of 12 years,” he said.

 He also advised for diversification of assets in the provinces stating that the best value properties are in Davao, Iloilo, Bohol, Palawan and Caticlan where prices are still cheaper with quicker  value appreciation.