Published on September 26, 2013, Malaya Business Insight:

By Albert Castro

The housing backlog in the Philippines is seen to hit 6.5 million by 2030 as developers have to adequately address demand, according to the Subdivision and Housing Developers Association (SHDA).

Between 2011 and 2030, housing demand is seen to hit 6.3 million units, on top of the 3.9 million current backlog, bringing the total demand for property units for the next 20 years at 10.21 million

“Even with the assumption that production will average 200,000 units every year from 2012 to 2030, the backlog will persist and hit 6.5 million households by 2030,” said SHDA in its Housing Industry Roadmap.

“With the housing backlog from 2001 to 2011 reaching about 3.92 million units and housing need from 2012 to 2030 of 6.29 million units, the housing need that has to be addressed reaches 10.21 million houses,” it added.

Based on the study commissioned by SHDA, and conducted by the Center for Research and Communication of the University of Asia and the Pacific (UA&P), highest demand in the next several years will come from the economic housing segment which accounts for 41 percent of the total demand.

The socialized housing comes next with 25 percent of total while demand from low-cost housing segment meanwhile comprises 10 percent of the total needs.

The mid-income segment comprises a paltry 1 percent of the housing demand in the next 18 years, while the high-end market is seen to only comprise 0.16 percent of the demand, SHDA also noted.

The balance meanwhile is taken up by those who cannot afford to buy a house, households earning less than P78,000 a year.

“Given this data, housing developers should improve their response to the needs of those households in the lower income brackets, which easily accounts for 89 percent of the market and demand for housing until 2030,” said SHDA.

Bansan Choa, SHDA director, said prices of the various housing segments are capped at P400,000 for socialized housing; P1.25 million for the economic segment; P3.19 million for the low-cost, while the mid-end segment is capped at P6 million. Those priced above P6 million comprise the high-end market.

Government definition of the housing segment, however, isdivided into four — socialized, economic, low-cost, and open market.

SHDA data show the four lowest housing segment has been mostly disregarded by developers in the last 10 years.

While most developers had been building units that cater to the higher end segments, the demand in the affordable segment — consisting of economic, socialized, and low-cost housing — were hardly tapped.

The low-cost segment has a shortage of 484,325, the economic with almost 2 million, the socialized housing with 663,282 units — hitting 3.09 million.

SHDA noted that the shortage in the economic segment is “the highest shortage of housing units across all segments. This does not account the demand for housing from families who earn below P78,000 each annually.

SHDA added that if the demand from households “who cannot afford the cheapest housing unit offered in the market,” is added to the computation, the shortage jumps up to 3.92 million.

The SHDA roadmap shows that as a rule, the annual amortization should not be greater than 30 percent of the annual income of a household. An individual buying a house should earn at least P78,000 a year to be able to afford a house under the socialized-housing category.

The annual income capacity goes up to as high as P2.2 million for the high-end market.

SHDA said that for the government to achieve a sustainable housing program, it must focus its housing subsidy support to the lower income households, especially those that cannot afford housing or who do not have the capacity to pay, keeping in mind the principles of equity and efficiency in promoting its housing program and plans.

The government likewise mush put in place a more comprehensive and multi-sectoral housing subsidy program while ensuring that financing costs are not distorted to encourage private sector financing to flow into housing, SHDA said.