Separations, not marriage drop, affect housing sector

While fewer Filipinos choose to tie the knot these days, this does not mean that mortgage financing is on the decline. Whether single, married or cohabiting with a partner, people still need a roof over their heads.

But Gonzalo Bongolan, vice president at investment house Philippine Commercial Capital Inc., said the aftermath of broken marriages was the bigger issue in the housing sector.

Often, Bongolan said it was difficult to move on after a marriage broke up because a potential housing borrower could not apply for any new housing loan while he or she was still married on paper.

He said the lack of divorce in the Philippines even when cases of separation were rampant would have serious implications for the housing sector.

Some argue that a decline in marriage rates can even be a positive factor in mortgage finance demand.

“You have two single people borrowing two properties instead of just one. It increases the demand,” said Eugene Acevedo, senior executive vice president for retail banking and corporate banking at Union Bank of the Philippines.

“I don’t think the marriage or suspected non-marriage trend is affecting the home financing business—at least not yet.  It is still growing at double-digit pace,” said East West Bank president Antonio Moncupa Jr.

Rising portfolio

The banking system’s mortgage financing portfolio has consistently risen over the years, tripling from only P162.6 billion in 2009, according to the Bangko Sentral ng Pilipinas.

For unmarried couples who decide to live together, Moncupa said it would be harder for them to stay with either of their original families.

“They would either rent or buy some form of real estate,” he said.

Acevedo said for young working people, it would be hard to live with their parents because of the worsening traffic congestion in Metro Manila.

“So people buy condos close to their place of work instead. I actually also see many unmarried couples borrowing for a single property,” he said.

Mark Perez, head of retail business at Metropolitan Bank and Trust Co., agreed that more unmarried people were applying for loans to buy homes.

“It appears to be the case, driven by the BPO industry and (rising) incomes,” he said.

Coborrowers

Perez said having a coborrower would certainly help. In the case of couples, this means having two persons contributing earnings.

Typically, coborrowers are not too important in real estate lending because such a loan is collateralized.

“This (having a coborrower) is useful only if the borrower is weak credit,”  Acevedo said.

“Unmarried people can be coborrowers. But it gets messy when they break up,” he said.

Federal Land president Pascual Garcia III said the downtrend in marriage rates in the Philippines had little effect on the buying and mortgage financing markets. “Some (unmarried couples) now cobuy and coborrow but the level is very low yet. In some instances, buyer/borrower is one of the parties only as a single person,” he said.