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Filipino middle-class no houses

Written by John Guzman

The Philippines is experiencing a construction boom for quite some time now. In particular, real estate developers continuously build high-rise apartments within Manila and its suburbs. The development fiasco even reaches the neighboring provinces of Cavite and Laguna to the south and as a result, real estate value in the said two provinces already skyrocketed.

In a recent report by Inquirer, property giant Ayala Land Inc. has turned its attention north of Metro Manila, as it plans to invest PHP 6.8 billion over the next five years to develop Altaraza, a 98-hectare project in the province of Bulacan.[1] This project would make real estate prices even higher. These developments carry positive influence on the country’s economy but the majority of Filipinos just cannot afford to buy their own houses.

The Philippine government mandated National Housing Authority (NHA) as the sole national agency to engage in housing production for low income families. In addition, Home Development Mutual Fund (HDMF) was established to help citizens obtain a loan for the purpose of purchasing a house.

Although NHA and HDMF may seem helpful for majority of the Filipinos, decades after their establishment, majority still cannot afford to buy a house. NHA mainly provides assistance to the poorest of the poor. While HDMF is accessible to the middle class, prices of houses are too high relative to the salary standard making the majority belonging to this group ineligible to apply for loans.

According to latest data, poverty level in the country stood at 27.9 percent of the total population. The middle class consists of about 55 percent, while the high-income consists of about 15 percent of the total population.

The prices of posh apartments being erected by developers are excessively high for the majority. In the first six months of 2013, the average price of a 3-bedroom luxury condominium in Makati Central Business District rose by almost 10 percent after adjusting for inflation. The average price of a premium 3-bedroom condominium in Bonifacio Global City rose by more than 12 percent year-on-year, while secondary residential property in Rockwell Center by more than 10 percent year-on-year. These three areas are commercial districts where many middle-class people work. The absence of mid-priced property aggravated by soaring prices makes the Filipino working class trapped in renting houses for a long period of time.

A Forbes article warned about the property bubble that exists in the country. More than the threat of a property bubble is the immediate need to address the housing needs of the majority. As the middle class represents the biggest number of workers in the country and therefore contributes the most in propelling the economy, this group deserves to afford a house.

The solution may not be easy. First, enterprises are reluctant to raise the salary standard of their employees. Second, taxes imposed on personal income are one of the highest in the region, which sometimes arrive at 32 percent. A report that the Bureau of Internal Revenue (BIR) is open to reduce the rate is a welcomed development, but that would not happen soon, according to Philstar report. A bill to this effect is already filed in Congress, however it might take years before the bill becomes a law or be cancelled altogether. Unless the two impediments are addressed, the majority of the Filipinos will continue to work hard without being able to own a house.

–Edited by Mohamed P.Hassan

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