The housing sector received with jubilation the news that the Pag-Ibig Fund or the Home Development Mutual Fund is increasing the maximum loan to its members to six million pesos (P6 million) from the former three million (P3 million).  I had already heard about this plan from Vice President Jejomar Binay as early as March of this year.  Such a favorable development can contribute significantly to a growth rate of GDP of 7% or more for the next five to ten years because housing is an engine of growth with tremendous multiplier effects on many sectors of the economy, starting with the banking sector that is already allocating some 60% or more of its total credit to housing.  Since interest rates are expected to remain low for the foreseeable future, many of the 10.2 million members of Pag-Ibig (of whom 1.5 million are OFWs) will be able to afford the low-cost and mid-end housing units that are being constructed by both big and medium-sized real estate developers, encouraged by the willingness of banks to grant housing loans.

          A recent study on housing supply and demand was completed by a research team at the Center for Research and Communication.  Headed by housing specialist Dr. Winston Padojinog, the research team identified five market segments in the Philippine housing industry:  socialized, economic, low-cost, mid-end and high-end market.  Socialized housing requires an annual amortization of P23,468; economic of P38,041; low-cost of P121,493; mid-end of P324,595; and  high-end of P649,390.  The estimated required annual income for each category is P78,000 for socialized housing; P130,000 for economic housing; P405,000 for low-cost housing; P1,100,000 for mid-end; and P2,200,000 for high-end.  The assumption is that the annual amortization should be 30% of annual income. The average size of the households ranges from a low of 4.7 in the National Capital Region to a high of 6.05 in the Autonomous Region of Muslim Mindanao (ARMM). The bulk of the 10.2 million members of Pag-Ibig would belong to the low-cost and mid-end segments, the very markets being targeted by such developers as DMCI, PHINMA Properties, SMDC, Avida, etc.  According to the NSO Family Income and Expenditure (FIES) survey of 2009, there are 7.5 million household earning an annual income of P130,001 to P405,000 (low-cost) and 1.8 million households earning an annual income of P405,001 to P1,000,001 to P2,200,000 (mid-end).  The total of these two segments almost coincide with the 10.2 members of Pag-Ibig.  For the high-end market (annual income of P2.2 million), there are only 29,653 households, most of them concentrated in the NCR, CALABARZON, Central Luzon and Central Visayas (Cebu) regions.

          In investigating housing supply and demand dynamics, the research team discovered that the high-end market has a surplus of more than 200,000 housing units from 2001 to 2011.  A surplus is defined as the excess of units being built each year over the number of households being formed each year in a specific category.  Each year, the excess housing units in the said segment reaches at least 14,000 units. Similarly, the mid-income category has also experienced a surplus of housing units that can range from 18,000 to 35,000 units per year.  The accumulated surplus reached 247,611 units by end of 2011.  It must be pointed out, however, that the excess housing units are not all unsold.  There are households who belong to the higher income classes who purchase part of these surplus units not for self occupancy but for investments or as additional homes close to the place of work or schooling of children or as vacation or temporary houses.  Although there are no accurate statistics, a good number of them are bought by OFWs for investments or as retirement homes in the future.

          On the other hand, the low-cost, economic and socialized housing segments experience shortages in most years from 2001 to 2011.  The shortage of housing units in the low-cost  segment totaled 484,325, half of the surplus in the mid-income category.  This is a case of a mismatch of supply and demand.  There should be more developers focusing on the low-cost market instead of mid-income.  The shortage surges even more as one moves from low-cost down to economic housing, in which the short supply can be more than 2 million units, the highest across all segments.  It goes down to 624,200 units in the socialized housing category.  In total, the shortage of housing units from all households across income segments amounted to 2.7 million units from 2001 to 2011.  I hope that this very vital information will be used by housing developers to address the shortages at the appropriate segments in cooperation with such NGOs as Gawad Kalinga, Habitat and many others that are addressing the pressing problems of socialized housing.  For comments, my email address is bernardo.villegas@uap.edu.ph.