Real estate developers should build properties for budget or socialized markets since they remain underserved, a leading economist told Cebu’s developers during an economic briefing last Friday.
Dr. Winston Conrad B. Padojinog said as of the moment, most developers are building properties for high-end and middle-end markets.
He warned that they risked leaving a glut of housing units that might end up unoccupied.
“While most developers are talking about the positive uptake of their products and that the market is still expanding, the purchases or demand is not actually need-driven,” said Padojinog, dean of the The University of Asia and Pacific school of management.
He said buyers of these high-end properties might be driven by other reasons like like convenience and investments. He warned that this could cause speculations and might impact the banks.
The economist cited as an example China where there are a many empty buildings because most of the buyers are investors who don’t need to live or use the space they bought.
Padojinog said the glut of housing units in one market segment could result in a “bubble” and should be avoided.
He said the banks should be upfront in requiring developers who loaned from them to develop housing for low-end markets.
“Developers are required by law to allocate 20 percent of their total project for socialized housing but what they’re doing is just buying credits because these segments only offers limited profit,” Padojinog said.
Based on data from the Housing and Land Use Regulatory Board from 2000 to 2011 there’s a backlog of 2,636,000 housing units in the country. The majority of these are from the lower income brackets.
They are followed by those who cannot afford to buy their own house at 810,000 units.
Padojinog said middle-end to high-end markets would only require 248,000 and 224,000 housing units respectively.
Yet more developers were offering products in these ranges, he added.
Padojinog said in Cebu, there’s a backlog of 200,000 units including those from the socialized and economic class.
“Yet what we see here are mostly middle-end and high-end projects. A similar situation is happening in Manila. We need to address this before we see a glut,” Padojinog said.