Philippine housing sector to continue growth but funding remains a barrier

THE Philippine housing sector would likely continue growing due to increasing local demand coupled with a push coming from regional integration, industry officials said yesterday, although funding remains a key barrier in terms of further expansion.

Officials at the National Housing Mortgage Finance Corp. (NHMFC)’s Philippine Housing Finance Conference 2016 estimate a 5.7 million backlog for low-cost and socialized housing will persist as access to financing channels remain limited to traditional avenues.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said increased demand for housing and commercial space is expected as the country moves towards the Association of Southeast Asian Nations (ASEAN) integrated market — which would tap a 630 million consumer base — and amid increased domestic activity that has propped up demand.

However, he flagged access to finance as the key barrier to home ownership.

“Despite strong demand, some developers experience tightness in financing for huge real estate projects. There is a need for new, alternative mechanisms — probably a more creative, imaginative way in providing financing to the industry to fund long-term needs for real estate,” Mr. Guinigundo said during the conference at the Makati Shangri-La Hotel.

The central bank official said they want banks to maintain their lending standards and continue to extend more loans to the sector with “prudence,” amid growing demand for housing units led by a change in lifestyles among the working class and rapid demand for office space.

Philippine banks extended P1.138 trillion in real estate loans during the first half of 2016, a fifth higher than the P949.88 billion tallied a year ago, based on BSP data. This accounted for 19.2% of banks’ total loan portfolio as of end-June, with 75% of the credit given to property developers and construction firms.

Mr. Guinigundo said the Philippines is far from seeing an asset bubble just yet, with robust demand for housing units driving up prices rather than an oversupply. The cost to acquire homes rose by 9.2% during the first quarter from a year ago, according to central bank data.

Rodelio B. Racadio, national president at the Subdivision and Housing Developers Association, Inc. (SHDA), said housing production should be raised to 350,000 units annually to catch up with the backlog, against a 15-year average of 180,000 units.

Comprehensive government subsidies and tax incentives, simpler licensing procedures, and affordable financing schemes for buyers would also allow the housing gap to narrow, Mr. Racadio added.

“The sector remains resilient but sales may not jump,” said Gonzalo Benjamin A. Bongolan, vice-president at the Philippine Commercial Capital, Inc., adding that he expects “stable” growth for the property sector on the back of sustained confidence in the local economy and hints of a global recovery that can uplift the markets.

A weaker peso against the dollar would also support a faster expansion in the housing sector, Mr. Bongolan added, as it would arm overseas Filipino workers with more money to purchase homes.

The government can explore at least two alternative channels to raise more funds for the property sector, although stringent regulatory standards limit the elbow room for authorities to tap such platforms.

NHMFC president Felixberto U. Bustos, Jr. said the country can look to tap sukuk or Islamic bonds to support low-cost housing, but noted that there is no regulatory framework in the Philippines to allow Islamic finance at present.

Rick M. Santos, chairman of property consulting firm CBRE Philippines, said the issuance of real estate investment trusts (REIT) would also broaden property ownership locally, although issues on taxation and a higher-than-usual minimum public float set by regulators stand in the way.

“I think the low-hanging fruit here that is almost a guaranteed success would be commercial office sector. There’s so much growth there,” said Mr. Santos.

A REIT is a stock corporation that uses a pool of investor funds to purchase and manage income-generating real estate assets. However, no property firm has come forward to use the channel to raise capital since the REIT Act lapsed into law in 2009.



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