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Friday, March 29, 2024

Build it, and they will come

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PROPERTY developers are scrambling to serve the demand for residential products serving the lower segment of the market, but challenges remain to making home ownership more affordable for Filipinos, a Lamudi real estate market report  said recently.

The 2017 report showed that “at least 2,600 homes will have to be built every day over the next six years” to tackle the 5.7 million unit backlog before the end of this presidential term.

Mismatch

The main issue facing Filipinos is the lack of low cost and social housing aimed at those who cannot afford the high prices that properties in the Philippines  are commanding these days, the report said. 

“As the population increases in size, the cost of living increases, and incomes don’t increase with the rising expenditures, [and] finding an affordable home is becoming a great challenge,” it said. 

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Julius M. Guevara, head of advisory services at Colliers Philippines, saying that there has been a mismatch in terms of actual demand from the end-user market compared to housing projects developed over the past years.

MINDSET CHANGE. The more jobs  created, the affordable houses become. 

“The demand is there. The product, however, is still not there. It’s still quite expensive. A big portion of housing backlog is those that could not afford housing,”  Guevara said.

Application for licenses to sell at the Housing and Land Use Regulatory Board dropped 14% last year, with the socialized housing segment one of the few bright spots, he said.

“The developers have recognized this given the slowdown in the Metro Manila condominium developments. They are going out there, looking for areas so they can sustain their revenue growth,” Guevara said.

Ideal financing structure

Resty Perez, a former business journalist-turned-real estate entrepreneur, pitched in, saying that property developers must work together and produce socialized housing projects in order to help solve the  housing backlog.

Perez’ First RGP Land Development Corp. built a  low cost housing project worth P470 million in Naic, Cavite last year. He promised to build more  to “change the mindset of other property developers who center their businesses on gaining profit.”

“There is a lot of room for additional projects, but at the high-end, there is tough competition,” Perez said. “That’s why we are in the low-end market where there is real demand.  There is a four-million-housing backlog, which is growing about 200,00 units per year. So in the housing market, from P500,000 to up to P2.5 million per unit, there is real demand for that.”

Key to addressing the backlog is to “strike the ideal financing structure” for this sector, volunteered Ieyo de Guzman, executive director for investment services at Colliers Philippines.

 “If you look at real demand, it’s coming from [the lower segment of the market], the demand for that is still unmet and I’m not so sure if in my lifetime if it will be met and the reason for that is it is heavily dependent on financing and capability of buyers,” De Guzman said.

Lower interest rates, extended payment terms and relaxed financing requirements from the Home Development Mutual Fund, or Pag-IBIG Fund, will allow more Filipinos to afford homes, Guevara explained.

HOUSING PEOPLE CLOSE TO WHERE THEY WORK. Infrastructure such as subways will set  taxpayers back some $30 billion.  KMC MAG’s Michael McCullough suggested building affordable housing in and around the [central business districts], “and traffic is solved.”

“We still have a lot to do a lot to increase the capability of those that could not afford housing. The government should step in to help in similar to what other countries are doing,” he said

Government in the mix

The Lamudi report claimed that the government has been coming up with a variety of suggestions  to help quell the backlog. These  include providing developers with tax breaks that may entice them to building large social housing projects. If the government can attract developers with Income Tax Holidays, it is likely that developers will be more likely to take on projects which are outside of their usual sphere.

Ricky Celis, newly appointed President of the affordable housing business segment of Century Properties Group Inc. said:  “The Philippine government needs to generate and mobilize funds for end-user financing, [to] reinforce what was a predominantly Pag-IBIG Fund-dependent sector.”

Solutions that won’t break the bank

KMC MAG Managing Director Michael McCullough said that there are a lot of solutions backlog that do not cost taxpayers any money.

 “There’s a ton of government land in Metro Manila that you can rent to developers or even for free. It’s not that hard to do. I believe that the current president has probably got the will and strength to push something like that through,” he said. 

McCullough observed that sending people hundred of miles out of Metro Manila is not going to work because the jobs are here [in Metro Manila]. 

David Leechiu, CEO of Leechiu Property Consultants recommended creating more jobs. “The biggest problem with the low-cost housing market is that we build all these houses and somebody has to pay for them,” he said. “The buyers cannot afford to pay, they always default so the government steps in and covers that balance and collects from the people.”

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