THE upcoming Association of Southeast Asian Nations (Asean) financial integration is expected to present opportunities to make housing finance more accessible, but there are still challenges to the sector that need to be addressed for it to fully reap the benefits of a financially integrated region.
This was the message of Housing and Urban Development Coordinating Council (HUDCC) Secretary General Angel Ojastro 3rd and Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo during the Philippine Housing Finance Conference organized by the National Home Mortgage Finance Corp. (NHMFC) on Thursday.
“This is relevant moving forward, particularly in developing and expanding the mortgage-based securities market to be more supportive of the socialized housing financing schemes that makes home financing accessible and within the reach of ordinary Filipino families,” Ojastro said.
At present, the Philippine’s housing backlog is estimated at 5.7 million, according to HUDCC.
Ojastro noted that with the integration, the Philippines could learn from the various housing finance instruments of Asean countries, to improve fund raising schemes for the housing sector.
“With the Asean financial integration happening this year, developing and expanding our secondary mortgage market is important more than ever,” Ojastro said.
Ojastro described the country’s mortgage-backed securities market as “still in its infancy stage” despite the passage of the Securitization Act in 2004. This is mainly because the volume of securitized mortgages is very limited as the government-owned and -controlled corporations (GOCCs) are the main providers of these securitization services.
At present, these securitization services in the housing sector are only offered by the NHMFC, with the Home Guaranty Corp. (HGC) providing the credit guaranty.
Ojastro said the financial integration will make the Philippines’ secondary mortgage market more competitive so that it can keep up with other Asean countries.
“We view that Asean integration will impact housing finance through different channels,” BSP’s Guinigundo said, noting that the opportunities offered by a larger market of an integrated Asean region can be seen as a potential driver of real estate demand in terms of office space, housing, and investment outlets and opportunities.
In particular, he said, the country can benefit largely from regional connectivity, business expansion, and capital account liberalization under the Asean integration.
“We do expect that this, in turn, will further lead to the growth of local urban development and real estate markets,” the BSP official said.
“It will not just be industrial and office properties that will have high demand but also residential real estate, particularly condominium units, because here in the Philippines foreigners cannot own land but they can buy condominium units,” he said.
But challenges in the Philippine housing sector remain that ought to be addressed, he said.
These include: strengthening the governance of the housing sector; improving access to finance for developers and homebuyers; improving the infrastructure for housing development; and expanding access to the rental market for low-income earners.
He said uncertain standards and overlapping rules and regulations that cause temporary and permanent delays in housing developments warrant a comprehensive coordination between existing housing agencies, local governments and the private sector to reduce the transaction cost in land development.
There is also a need for new mechanisms in providing financing to the industry to fund its long-term needs.
“We need financing products that are affordable and accessible to give everyone an opportunity to own a house without compromising prudence,” he said.
Lastly, he said there is also a need to develop the rental market to support access for low-income earners and enable mobility to the economy.
HUDCC’s Ojastro said among the real estate reforms that the country needs to work on is the real estate investment trust (REIT) and the Islamic housing finance bond (Sukuk).
“There is an urgent need to speed up much-needed reforms in the capital markets, and among others, push for the development of the Philippines’ real estate investment trust industry, to catch up with neighboring Asean countries who already have well-established REIT systems,” Ojastro said.
Despite the passage of the Real Estate Investment Trust Act (REITA) in 2009, the real estate product has not taken off yet due to several restrictions mandated by the said law, and Sukuk is not yet well-established in the country, according to Ojastro.
He also emphasized that making the country’s secondary mortgage market competitive is crucial in addressing the 5.7 million housing backlog.
“As we move forward in making our secondary mortgage market competitive in the Asean market, we continue to urge the NHMFC, HGC and the rest of the housing finance sector to reorient the available home financing programs and formulate novel ones that are more appropriate for and supportive of the low-cost clienteles and socialized housing programs of the government for the homeless and the underprivileged families,” Ojastro concluded.