The Philippines has a long way to go to match the growth of its neighbors, such as Singapore and Malaysia. It doesn’t mean that it’s not making any progress. IMF’s World Economic Outlook report revealed that the country has the world’s second fastest-growing economy for the past two years. It’s also the rising star in Southeast Asia.
Different challenges, though, might stunt the growth. These include urbanization issues such as housing. Population in the cities has the potential to grow by as many as 102 million by 2050. The supply is not enough.
The Housing Deficit in the Philippines
BMI Research predicted the property market of the Philippines to grow an average of almost 10% until 2026, making it one of the fastest in Asia. In spite of this, the demand for property far exceeds the available supply, particularly with regard to housing.
Based on the 2016 housing need study, the country has to provide 6.57 million new homes by 2022. Almost 700,000 of these will be in the National Capital Region (NCR). The need will also increase each year until the end of the forecast period. For example, in 2018, additions should be about 826,000. By 2019, it will climb to 870,000.
The report further highlights at least two of the emerging markets for new homes. These include the low-income households and families who will lose their homes to calamities and infrastructure projects. The first group is more likely to have a house, but the property tends to be unacceptable by standards. It means the home is unsafe or is in a lot not owned by the household.
Seeing the Opportunities
For small to medium-scale contractors and builders, the massive gap between the demand and need can be a golden opportunity for growth. Large companies and the government are less likely to satisfy the significant deficit.
Fledgling players can also receive quick support when it comes to new technology from businesses such as Topspot Heavy Equipment. The modern types of heavy equipment can speed up the job. In turn, it can lower the labor costs and make the project more efficient. It can increase volume and bring the prices of the residential property down.
One of the significant developments in the housing sector is the lowering of PAG-IBIG’s interest rates. In 2018, it declined to 3% from 4.5% for mortgages up to 450,000 pesos. It means that a household might have to pay less than 2,000 pesos for the next 60 months. The loan term can still be up to 30 years.
The annual tax savings further made their loans more affordable to the underserved markets. These are individuals who earn no more than 12,000 pesos outside NCR. Due to their low income, they are less likely to get a mortgage approval from a mortgage lender.
The increase in the volume of homes also tends to have government backing. BMI Research report showed a 24% increase in approved construction permits in the second quarter of 2017. It was equivalent to 30,000 new residential properties in the country.
Granted, it takes more than new homes to make a city competitive or solve the urbanization problem. The growth needs to be both inclusive and sustainable. Providing roofs over the heads of millions of Filipinos is one giant step in that direction.