The Philippines needs more affordable houses… 5 million more

0

While developers focus on the luxury residential market, the need for affordable housing in the Philippines grows ever more pressing

Cost and effect

Affordable housing is major concern for the Philippines. According to the latest census in 2010, the nation is home to 92.3 million souls and the majority of these people do not own homes because they simply cannot afford them.

Experts estimate that there’s a backlog in the country of at least 4 million low cost units, including half a million in the densely-populated National Capital Region (NCR) around Manila.

Others believe that this estimate is way on the low side, citing figures of up to 5.5 million. Among these sceptics is Ferdinand “Bongbong” Marcos Jr, son of the country’s controversial former president and leading opposition senator, who recently challenged the national government to address the situation via more funding for the sector.

Industry figures predict the backlog will increase to at least 6.5 million units by 2030 if demand for socialised and affordable housing is not addressed.

Knock on effects of this shortfall include an influx of informal settlers in major cities – especially in the NCR – increasing congestion, putting a strain on urban sanitation services and contributing to unemployment, which stood at 5.7 percent in October 2015 according to figures from the National Statistics Office of the Philippines.

Despite an impressive 25.9 percent annual increase in real estate loans as reported by the Bangko Sentral ng Pilipinas in Q1 2015, minimum wage Filipino workers earning PHP481 (USD10.15) daily are not desirable candidates for a housing loan to start a monthly payment programme for houses valued under PHP2 million (USD42,300).

More: What unchanged lending standards mean for Philippine real estate

“At the moment, the Philippines does not have a comprehensive financing programme for buyers of socialised and affordable housing,” said Jacqueline Van den Ende, founder and managing director of mass-market property portal Lamudi.com.ph.

“In terms of financing, the government’s solution is a provident fund through Pag-IBIG, which is insufficient. In fact, the interest rates of loans offered by Pag-IBIG are quite high. Therefore these loans are unaffordable to minimum wage earners.”

A recent quarterly report by Colliers International Philippines stated that housing prices continue to surge in the country, making it even harder for average-earning Filipinos to afford a home.

At the other end of the spectrum, prices for a three-bedroom luxury condominium unit in the Makati central business district of Manila can reach as high as PHP149,300 (USD3,179) per sqm – an astronomical figure for most Filipinos.

There’s a belief that developers have put all their efforts into mid-to-high-end residential project due to their perceived profitability, while neglecting to build affordable housing. Some of these companies have begun to address this imbalance, however.

“Developers traditionally categorised as high-end are now venturing into the middle and affordable housing market because they see opportunities in it,” observed Abelardo “Jojo” Tolentino Jr, president and CEO of Aidea Philippines Inc, during the Philippines panel of the first Property Report Congress 2015.

“For example, Ayala Land (one of the country’s most prominent developers) now has a socialised housing arm called Amaia Land. These premium developers are seeing that the affordable segment is also a very important market. In reality the low-end segment represents at least 90 percent of the entire Philippine housing sector.”

More: 3 golden growth opportunities for the Philippine real estate sector in 2016

Former senator and real estate tycoon Manuel Villar had significant success in the affordable housing sector through his Vista Land and Lifescapes Inc ventures. Amaia Land, meanwhile, is pursuing projects in provinces where homes cost as little as PHP400,000 (USD8,450).

This mini-boom in affordable housing has made minimal impact in NCR, however. “No decent housing within the reach of minimum wage earners is available in Metro Manila,” noted Van den Ende.

She suggests that the Philippines needs a cabinet-level government agency devoted to housing, and recommends the creation of a Housing and Development Board-type agency such as the successful model in Singapore.

The Chamber of Real Estate and Builders’ Associations Inc (CREBA) is also advocating through its five-point housing agenda, “A Home for Every Filipino.” The organisation is pushing for the establishment of a “Department of Housing and Urban Development” in the country as a necessary reform.

Marcos, who is running for the vice presidency, told reporters in Manila last November that “the problem is simple. There is lack of funds for housing starts.”

As the issue of insufficient affordable housing persists, questions continue to wait for effective answers. Is the crisis caused by over-population? By lack of funding initiatives? Or by the reluctance of major developers to fully commit to affordable projects? Or a combination of all these?

With the next national elections coming up in May, advocates of affordable housing will be able to state their case in more meaningful fashion – this time at the polls.

is the deputy editor of Property Report