Economics of Housing (Philippine Housing Market : Housing Needs, Supply and Demand)

1. Philippine Housing Market Situation

1. Tremendous gap between the demand and supply of housing,
2. Majority of household were unable to pay house and land cost,
3. The minimum housing cost of P150 thousand is 3.8 times the yearly wages of unskilled laborer,
P250 thousand is 3.1 times the annual income of an employee earning an average income of
P6,700 per month,
4. Average annual housing price appreciation per year is 32%,
5. High rate of increase in land price is a major factor in house price appreciation
6. House price boom by property type:
a. Condominium units year over year increase of 5.8%. Average price of luxury 3-bedroom
condominium unit (Makati CBD) Php 230,000 per square meter in 2018 (15.55% in 2018;
10.46% in 2017; 9.95% in 2016; 13.43% in2015; 7.11% in 2014; 14.37% in 2013 and
10.06% in 2012). Luxury residential market to breach Php 400,000 per square meter in
2019.
b. Single detached/attached house, rose 0.2% in 2018
c. Duplex house prices surged to 30.7% year over year in 2018.
d. Townhouse prices rose by 18.3% in 2018.
7. High cost of urban land is due to constraints in the supply side of the market.
- Poor planning and infrastructure development limit the supply of housing
- Administrative bottleneck in land and housing developments to contradicting
laws, unclear standards overlapping turfs cause delay in obtaining development
permits,
- Problems on property rights (e.g., fake titles, delay in agreement of RROW,
land grabbing, etc.,
- Land ownership is highly concentrated, low land and property tax encourage holding
land idle.
8. Lack of long-term financing for housing, Long-terms funds for housing are constrained and
highly dependent from government Social security systems (e.g., SSS, GSIS),
9. Government housing finance is unsustainable, Graft and corruption in the approval and release
of loans for the low-income sector, Government housing programs mainly emphasize
homeownership instead of home-ownership, not all families can afford it, Rent control law has
not been effective in providing low rents for low-income families, Average supply of less than
200,000 unit and a demand for 650,000 units per year (from 2005 to 2012),
10. In Metro Cebu, the average annual demand is 20,000 units, Average total supply for 173
development projects and 80 local developers, 10,000 units reported for 2012 alone, 52% short
fall in Metro Cebu, Average number of units per project is 223.

HOUSING 1 JGPL2019
Module 08: Economics of Housing
2. Methodology in Projecting Housing Needs

HUDCC Utilizes the UN Shelter Method

where:
Housing Need = Backlog + New Households

Component:
Backlog • Double occupancy
• Displaced units
• Homeless
• Upgrading
New Household • Number of Households formed due to population increase

Definition:
UN
Double Dwelling units which are shared by 2 or
Occupancy more households
= HHT –DUT
Where:
HHTis total no. of households
DUTis total no. of dwelling units
Displaced Units Units to replace those units:
1.In danger areas
2.On lands earmarked for govt.
infrastructure
3.In areas where there is a court order
for eviction and demolition
Total Displaced Units is the summation
of units defined above.1.
Homeless Households living in parks, along
sidewalks, and all those without any
form of shelter (NSO Definition)
Homeless Formula:
(1) Homeless Household Population =
Total homeless individuals -Homeless
Individuals (not a member of any
household)
(2) Homeless Households = ( 1) /
Household size
(3) Total Need for Homeless = (2) +
Homeless individuals who are not
household members
DATA
NSO CPH
Double occupancy rate, urban and rural
HHT
Total no. of squatters surveyed by NHA,
by region
Based on the information that HUDCC
gathered, the acceptable norm in
computing the no. of homeless is as
follows:
1. 0.1% of urban households
2. 0 .01% of rural households
e.g.
Given:
Total Homeless indl= 300
Homeless indl not in HH = 28
HH size = 5
(1) Homeless HH Population =
300 –28 = 272
(2) Homeless Households =
272 / 5 = 54
(3) Total Need for Homeless =
54 + 28 = 82 units

HOUSING 2 JGPL2019
Module 08: Economics of Housing
 UN DATA
Upgrading Units Units for land tenure, infrastructure and Makeshift units by region
structural improvement (Compendiumof Social Statistics)
= Proportion of Makeshift Units1994 x
DUT2000
DUT2000 = HHT2000less double
occupancy (2000 est.)
Where:
DUT is total dwelling (occupied) units
HHT is total households
Double Occupancy Rate: 1990 CPH,
Rural and Urban
New Number of Households formed due to 2000 CPH
Households population increase
= HHT2004–HHT2000
Annually:
New HHy= HHTy–HHT y-1
where:
HHT is the total households
y , given year
y-1 , preceding year

3. Supply and Demand

A. Basic Notion of Supply and Demand

Supply-and-demand is a model for understanding the determination of the price of quantity of a

good sold on the market. The explanation works by looking at two different groups – buyers and sellers –
and asking how they interact.

B. Types of Competition

The supply-and-demand model relies on a high degree of competition, meaning that there are
enough buyers and sellers in the market for bidding to take place. Buyers bid against each other and
thereby raise the price, while sellers bid against each other and thereby lower the price. The equilibrium
is a point at which all the bidding has been done; nobody has an incentive to offer higher prices or accept
lower prices.

▪ Perfect competition exists when there are so many buyers and sellers that no
single buyer or seller can unilaterally affect the price on the market.
▪ Imperfect competition exists when a single buyer or seller has the power to
influence the price on the market.

The supply-and-demand model applies most accurately when there is perfect competition. This
is an abstraction, because no market is actually perfectly competitive, but the supply-and-demand
framework still provides a good approximation for what is happening much of the time.

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Module 08: Economics of Housing
 C. The Concept of Demand

Used in the vernacular to mean almost any kind of wish or desire or need. But to an economist,
demand refers to both willingness and ability to pay.

The Law of Demand states that when the price of a good rises, and
everything else remains the same, the quantity of the good demanded
will fall. In short,

P Q d

D. The Concept of Supply

Used in the vernacular to mean a fixed amount. Again, economists think of it differently. Supply
is not just the amount of something there, but the willingness and ability of potential sellers to produce
and sell it.

The Law of Supply states that “when the price of a good rises, and
everything else remains the same, the quantity of the good supplied
will also rise.” In short,

P Q d

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Module 08: Economics of Housing