CHANGING WORLD
Dr. Bernardo M. Villegas
(Part 2)
A study done for the Habitat for Humanity by the Center for Research and Communication (CRC) showed that among the 5.6 million households belonging to the unserved market, about 55 percent or 3.1 million households meet the profile of owner-driven construction (ODC) segments. They enjoy property rights and have incomes that are below thresholds of lending terms set by financial institutions. According to the study, these households are concentrated in regions, provinces, and cities where housing affordability remains an issue.
The two complementary segments — the unserved segment and the ODCs—are outside the purview of government policy as well as private sector initiatives. For ODCs, the possession of a valuable asset like real estate property provides the security and the opportunity for these households to improve their plight, given their limited purchasing power, as long as they can be provided with some form of direct assistance and support. Based on preliminary studies of Habitat for Humanity in the Philippines, the typical abode of an ODC remains a multi-dwelling facility that lacks important access to basic necessities such as telecommunications and Internet, is unable to withstand the effects of severe climate change and natural calamities, and, with the COVID-19 pandemic, cannot meet the required design to facilitate physical distancing and isolation if one or more members of the family are infected by the virus.
The study opened the eyes of both public policy makers as well as private investors to the opportunities provided by the sheer size of the ODC market and its concentration in some areas which can provide the necessary economies of scale, magnify the opportunities as well as the positive impact for stakeholders —government , business, and civil society — who can address the needs of the ODC segment of the housing market. Concentrating sources and efforts on a large and focused segment such as the ODC can lower costs and magnify the multiplier effects. It is estimated that the construction cost of the ODC segment made up of 3.1 million households is at least P641 billion. Unfortunately, budget constraints limit this market as the latest (2015) survey results indicate that this estimated segment can afford to allocate only P6.7 billion of their households income to housing development.
As I discussed in this column in an article entitled “Build, Build, Build for Housing” some months ago. it is wise for government housing agencies to relocate informal settlers in medium-rise buildings (MRBs) in urban centers. These MRBs can be constructed as public-private partnership projects which are heavily subsidized. For example, a Local Government Unit can contribute land that it owns in the middle of urban centers and a real estate developer can invest in the construction of the MRBs. An example of this is the Bistikville housing project which was a partnership between the Quezon City Government and the PHINMA Properties. A similar project was set up in Cavite and was called Strikeville. Since households among informal settlers earn less than P200,000 annually, it is more prudent to have the units in these MRBs rented out rather than owned since these informal settlers do not have the financial wherewithal to amortise payments needed to own the property, no matter how low the interest rate charged may be. What will have to be developed is a good estate management system for these projects so that they do not deteriorate though inappropriate practices that may be common among lower-income households. It also gives leeway for families at this level to eventually move to better quality housing units as their incomes improve. The units in which they used to reside can then be rented out to other informal settlers lower in the income ladder.
For the more expensive units, detached or condominium, the market is made up of those households earning about P70,000 to P120,000 monthly. These belong to the upper-middle income households which constitute 4 percent of the total households or a total of about 4.4 million households. There are no estimates of how many of these households are actually homeowners. They have sufficient incomes to be able to acquire their own homes or to invest in the more expensive units to rent them out. The demand for these units is expected to slow down because a good number of the heads of these households have suffered from business failures or from being laid off in such sectors as travel and tourism, retailing, media and entertainment, and other sectors hard hit by the pandemic. I expect the market for expensive housing units (P10 million or more) to weaken during the pandemic and about two years after the pandemic.
One exception I perceive is the strong market for condominium units among parents who have children studying in universities like De La Salle, Ateneo, UST, and UP who want to provide their children with dormitories physically close to their campuses. The demand for these alternative homes for the children of the well-to-do will continue even if blended learning will be part of the new normal. These units are always a good investment because there will always be upper-middle-income families with students in these universities.
There is also the demand from workers in the BPO-IT sector that will definitely benefit from the expansion of digitalization and e-commerce worldwide and domestically. Even during the pandemic, some of the BPO-IT companies were expanding. A good number of them were very creative in preventing a significant slowdown in their business by housing their workers in the empty hotels close to their sites.
Also partly exempted from the general slowdown of demand for high-priced condominium or detached housing units are those that are part of an integrated community approach to urban living. With limited public transportation and limited mobility during the many lockdowns occasioned by the pandemic, upper-middle-income households may be attracted to these integrated housing communities that are being set up in the emerging metropolitan areas close to the Metro Manila area, such as in the provinces of Cavite, Rizal, Batangas, and Laguna; the so-called Pampanga Triangle made up of Angeles, San Fernando, and the Clark-Subic complex; Metro Iloilo; Metro Davao, and Metro Cagayan de Oro.
Leading real estate developers are investing in integrated communities in these emerging metropolitan areas and actively marketing their products to the families being started by the millennials and the centennials. These integrated communities have the attraction of the housing units being located within walking or biking distance from schools, offices, supermarkets, churches and other public amenities.
The pandemic, whose virus is expected to linger in the environment for a long time to come even when the vaccine is discovered and widely distributed, will lead to a permanent change towards a preference for having home integrated within a community that requires the least physical movement from place to place. (To be continued)