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Construction starts continue to drop in Q3 as plans get shelved

construction starts continue to drop in q3 as plans get shelved 816x478 - Construction starts continue to drop in Q3 as plans get shelved

By Lourdes O. Pilar, Researcher

APPROVED building permits fell by 35.3% year on year in the third quarter as households and investors opted to delay their construction plans amid the gloomy economic backdrop brought by the pandemic.

Construction starts, as measured by building permit approvals, totalled 28,696 in the July-September period from 44,376 a year ago, preliminary data from the Philippine Statistics Authority showed.

The third quarter’s decline eased from the 63.2% drop seen the previous quarter but sharper than the 2.6% fall last year.

These projects involved 5.66 million square meters of floor space worth P64.02 billion, down 48% year on year.

Residential construction, which accounted for the bulk of the approved permits during the period, shrank by 37.2% to 20,178.

Majority of approved projects under this segment came from single house construction, which declined 33.5% to 17,294. It was followed by apartment/accessoria (-50.6% to 2,154), duplex/quadruplex (-58% to 701), “other” residential (-63.6% to 20), and residential condominiums (-80.4% to nine).

Non-residential permits also went down by 34.3% year on year to 4,490.

Broken down, commercial structures fell by 32.1% to 2,857. Also posting declines were institutional (-44.8% to 876), industrial (-35% to 430), agricultural (-6.9% to 202), and “other” non-residential buildings (-24.7% to 125).

Permits for additions to existing structures retreated 44% to 879, while those for alterations and repairs of existing structures decreased by 17.6% to 3,149.

Calabarzon — the region consisting of Cavite, Laguna, Batangas, Rizal, and Quezon provinces — had the most approved permits with 5,635 or nearly a fifth of the total during the three months to September quarter. It was followed by Central Luzon with 4,009 or 14% share and Ilocos Region’s 3,701 or 12.9% share.

Economists traced the third quarter’s fall to the anemic investor appetite amid the pandemic.

University of Asia and the Pacific Senior Economist Cid L. Terosa said the third quarter’s decline was “a sustained manifestation of the lack of business confidence and poor investor sentiment.”

“The overall dour business and economic environment has dulled appetite for investments in physical capital,” Mr. Terosa said in an email interview.

“People and enterprises that had, before the lockdown, plans to build houses and buildings and with cash flows affected by the virus spread, may have opted to discontinue plans and postpone for a later date,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an email.

“As mobility increases and the economy continues to open up, building permit approvals are expected to rise, but not to pre-pandemic levels. 2020 approvals will definitely take a hit,” Mr. Asuncion said.

Mr. Terosa said the fourth quarter’s fall will be shallow due to less gloomy business and economic outlook.

“For 2020, approved building permits will fall unprecedentedly,” he said.

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