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Manila Bulletin devider Business devider Inflation, interest rate hikes dampen building permit applications

Inflation, interest rate hikes dampen building permit applications

Published Feb 22, 2024 09:17 am

With construction costs on the rise and banks hiking interest rates for borrowers, many Filipinos have opted to completely rethink their plans for constructing new homes and business buildings.

Data from the Philippine Statistics Authority (PSA) showed that the cost of construction activities in the country increased in the fourth quarter of last year even when the number of constructions dropped.

In a PSA report on Thursday, Feb. 22, the number of constructions from approved building permits stood at 34,675 in October to December 2023, a drop of 10.9 percent from the 38,909 in the same period a year ago.

The PSA data was published in the aftermath of the central bank's implementation of a cumulative 450 basis points interest rate hike since May 2022, aimed at curbing inflation and steadying the peso.

The value of constructions reached P111.14 billion during the same period, up by 2.6 percent from P108.28 billion value in the same period of 2022.

The average construction cost, excluding expenses for alterations, repairs, and other non-residential purposes, stood at P10,683.4 per square meter, higher by 5.6 percent  compared to the P10,113.94 per square meter reported a year earlier.

In terms of types of construction, residential buildings remain on top with 23,009 constructions during the quarter even as it declined by 16.3 percent compared to the 27,482 constructions in the previous year.

“Majority of the total residential constructions were single-type houses with 19,200 (83.4 percent),” the PSA noted.

Non-residential buildings came in second which increased to 7,607 constructions, which is mostly comprised of commercial buildings.

These types of buildings were also the most costly to construct with a total value of P55.21 billion during the period.

For residential buildings, its value declined to P47.34 billion from P51.74 billion during the fourth quarter of 2022.

Among regions, CALABARZON had the highest number and value of constructions.

There were 8,655 constructions in CALABARZON during the period, which was almost four times higher than the second-placer Central Visayas with 4,541 constructions.

In addition, the region recorded a total value of P30.84 billion in construction compared to Metro Manila and Central Luzon which had P16.12 billion and P13.03 billion, respectively.
 

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