Approved building permits declined 5.5 percent in February from a year ago as fewer residential projects were started amid high borrowing costs.

Preliminary data released by the Philippine Statistics Authority (PSA) showed the number of construction projects from approved building permits reached 13,100 in February this year, lower than the 13,859 in the same month of the previous year.

The construction projects in February were valued at P43.27 billion, 40.3 percent higher than the P30.84 billion in the same month last year.

'The year-on-year decline in the number of building or construction permits may largely reflect the decline in the number of residential construction projects,' Rizal Commercial Banking Corp. chief economist Michael Ricafort said in an email.

Residential projects accounted for bulk or 63.7 percent of the approved building permits in February this year.

There were 8,345 approved building permits for residential projects in February, down 9.4 percent from the 9,209 residential construction permits approved in the same month in 2023.

While the number of residential projects registered a year-on-year decline in February, Ricafort said the floor area covered by such projects increased.

Residential projects in February had a floor area of 1.44 million square meters, 3.7 percent higher than the 1.39 million square meters in the same month a year ago.

In terms of value, residential projects in February amounted to P19.34 billion, up 20.6 percent from P16.03 billion in the same month of the previous year.

Ricafort said higher interest rates, which increased borrowing or financing costs, led to slower demand for residential real estate projects from developers and end-users.

He said the slowdown in residential real estate construction could also be attributed to increased construction costs due to higher prices or inflation, as well as higher wages since 2022.

Non-residential projects increased 1.4 percent to 3,177 in February from 3,134 projects in the same month last year.

The value of non-residential projects climbed 59.4 percent to P19.47 billion in February from P12.21 billion in the same month a year ago.

Approved permits for additions to existing buildings or structures posted a 20.4 percent growth to 544 in February from 452 in the same month of the previous year.

Additions to existing structures were valued at P930.04 million in February, up 31.7 percent from P706.25 million in the same month last year.

Approved permits for alteration and repair works declined 2.8 percent to 1,034 in February from 1,064 in the same month of the previous year.

The value of alteration and repair projects jumped 86.2 percent to P3.52 billion in February from P1.89 billion in the same month last year.

For the coming months, Ricafort said geopolitical risks in the Middle East could lead to some volatility in global commodity prices, including those used as inputs or raw materials for various construction materials.

He said such 'could also lead to higher interest rates for longer and could delay any cut in US or global or local interest rates that could eventually help spur greater demand for credit or loans that could lead to more construction or building activities and the necessary permits, as well as more business or economic activities.'

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