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When is the best time to build?

Another full-circle journey brings us back to the month of January, when people reflect on the year that was and plan for the year ahead.

It is the month of making resolutions and for many, the time for looking at all sorts of forecasts for decision-making references. Even the most rational of beings combine the science of weighing options with instinct-led processing of choices. The concepts of luck and logic converge this month as life-changing decisions are made.

Planning by minimizing the unknowns

Decisions on high value purchases, territorial movements, directing investments are usually assessed based on correct timing. Real estate-related matters are among the critical decisions made as these represent significant risks that involve human and financial factors. Risks that are largely due to uncontrollable variables are managed by minimizing the unknowns in the decision algorithm.

From household level to city-scale planning, the decision-maker needs to deal with these unknowns and the unpredictable future scenarios.

The weeding out of unlikely future conditions is key in answering questions such as: When is the best time to build a house? When is the perfect time to develop the next mega-commercial center? When is the best time to sell my property?

The science of decision-making

The other end of the spectrum offers scientific views that refer to statistics, trends, and documented patterns.

Useful references have been inflation trends, prices change records, business investment data, urbanization trends, migration and relocation patterns, among others.

Recent years have been characterized by sharp turns and outlier events defying history and theory-backed trends. These surprises are attributed to long-standing trends due to the effects of globalization and the sudden disruptive onset of the global health crisis.

Globalization has triggered fast-paced changes in the last decades as power structures and relational networks reconfigured at fast rates. The outcomes of a comprehensive approach that factors in as much of the known variables in the planning equation are often invalidated by unexpected turns of events as capital moves around the global cities. Single mega-scale events such as disasters and the COVID-19 pandemic added to the air of uncertainty that accounts for the difficulty in planning.

In view of all these constantly changing decision parameters, how are real estate-related decisions timed?

Start of the year tendencies

January for many is the time for fresh starts that come with new jobs or change in residence. It marks new beginnings as new investments are made with much optimism.

Traditions figure in decision-making as construction of houses begin in time for the planned occupancy. Culturally constructed rules—such as moving in time for the after-June weddings as couples plan for family abodes, or moving in before the Holy Week—rationalize the decision to build at the beginning of the year.

The usual cycles that establish the busy and expense-laden times of the year such as the start of classes also influence real estate investment decisions. The state of household economics at the start of the year also matters. January comes after the inflow of bonuses but it also follows the peak of expenses.

On another level, a lot more happens as the year opens for another round of city activities. January is the time when city halls are filled with long queues as permits and licenses are applied for or renewed and as real estate taxes payments are updated. With all these possibly coming in the way of expedient building permit processing, timing of construction and land development are paced accordingly.

January marks our local spring season, when the weather is most construction-friendly. It is neither too hot for construction work nor disruptive due to strong rains. Environmental conditions dictated by the season changes definitely come in the timing decisions for building and land development.

Demand and supply factors

But the effects of combined timing preferences should also be considered as these would have demand and supply consequences. Peaks of construction activities equate to high demand, which translates to high prices of materials and labor.

Selling properties is the other side of real estate activities that need to be timed. It would be determined by the market environment that is shaped by purchasing power, competition, variety of choices, and place factors.

Hybrid approach to decision-making

In this day and age of information and communication technology, big data may be relied on for big decisions. There are scientific approaches that can guide the processing of information with the goal of matching the decision with the predicted future.

Local knowledge, traditions, and vernacular practices are also supported by time-tested trends that can figure in the structured decision-making process.

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The article was originally published in Inquirer and written by Prof. Grace C. Ramos PhD.

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