PRICE ceilings for low-and medium-cost housing packages have been adjusted amid the rising construction cost and inflation.
The new ceiling for low-cost housing is now P4.9 million while for medium-cost housing is P6.6 million, according to the Joint Memorandum Circular 2024-001 by the National Economic and Development Authority (Neda) and the Department of Human Settlements and Urban Development to address the need to align housing costs with current economic conditions.
Licensed broker and founder of Filipino Homes Anthony Gerard Leuterio welcomed the move saying that the adjusted ceiling would allow developers to build quality housing units and at the same time attract more developers to produce units under these segments.
“Firstly, it acknowledges the inflationary pressures and construction cost increases, helping developers to maintain quality while staying within the affordable housing segment. Secondly, it potentially broadens the market for affordable housing, allowing more families to own homes in a price range that better reflects the current economic conditions. This move could stimulate the housing market, drive economic growth, and improve living conditions for many citizens by making quality housing more attainable,” said Leuterio, in an interview on Wednesday, Aug. 7, 2024.
The Philippines is currently experiencing a ballooning housing backlog of 6.5 million housing units.
The Subdivision and Housing Developers Association (SHDA) has been lobbying for a review of the price ceiling. In a July 22, 2024 request to Neda for Philippine Guarantee Corp. approval, Neda Undersecretary Rosemarie Edillon informed SHDA that the adjustment was “timely and necessary” due to the country’s economic conditions.
“This adjustment is a significant step towards making housing more accessible to Filipino families,” said SHDA chairman architect Leonardo Dayao Jr. “We are grateful to Neda and DHSUD for considering our request and understanding the challenges faced by the housing sector.”
“The revised ceilings will help bridge the gap between rising development costs and the affordability of homes for many Filipinos. This is a positive development for both developers and prospective homeowners,” SHDA president lawyer Joy Manaog.
Joey Roi Bondoc, director for research at Colliers Philippines, noted that the industry might see fewer residential launches due to the rising prices of construction materials, a trend observed even before this adjustment.
“In our view, the P2.5 to P7 million a unit remains a sweet spot for overseas Filipino workers, so residential units priced within that range will continue to remain attractive among Filipinos working abroad,” he said.
He added that the reclassification will have minimal impact in terms of demand, especially if the usual growth drivers remain intact and continue to propel the take-up for residential projects.
Adjustments
The Joint Memorandum Circular 2024-001 specifies the following adjustments: low-cost housing ceiling adjusted to P4.9 million and medium-cost housing ceiling adjusted to P6.6 million. Rising material costs, labor expenses and overall inflation trends were key factors considered in these adjustments.
Neda’s economic analysis highlighted that these new ceilings would provide a more realistic framework for housing developers and make it easier for potential homeowners to purchase properties within their budget.
According to the mandate to jointly determine price ceilings for socialized, low-cost, medium-cost and open housing every two years, the DHSUD and Neda have set the ceilings as follows: Level 1-A (socialized) - P300,000 and below; Level 1-B - above P300,000 to P500,000; Level 2 - above P500,000 to P1.25 million; Level 3 - above P1.25 million to P3 million; medium cost - above P3 million to P 4 million; and open market - above P4 million.
Since its revision in 2007, the price ceilings for socialized and economic housing have been revised several times through various resolutions due to the steadily increasing costs of raw land, development, construction materials and labor. The most recent revisions before this adjustment were on May 11, 2022, setting the economic guarantee ceiling to P2.5 million and socialized subdivision and condominium projects from P580,000 to P850,000. / KOC