What you should know about RP construction industry

By Jun Sanchez*
http://blogs.inquirer.net
06/08/09

THIS entry is based on the study this author made on the survey released this April by the National Statistics Office on all types of private building construction in the Philippines. The study focused on residential construction since it is meant for prospective Pinoy homeowners and residential developers.

The survey is based on the number of building permits approved by the local building officials in all cities and municipalities in the Philippines; the projects are described as “started.” No figure was given as to how many were finished, still in progress or discontinued. The study shows that:

Residential projects account for 70% of all private construction in the Philippines. Of which, 85% are single houses, 3% are duplex/quadruplex/townhouses, 9% are apartments and 3% are condos.

Residential projects have a short boom-bust cycle, i.e., growth cannot be sustained. It’s moderate for single houses and apartments but for townhouses and condos, the cycle is volatile. They enjoy massive growth for a year or two only to plummet later. Condo construction has been declining massively since 2005, indicating a glut in this segment. This, however, is a national trend and does not classify projects into Class A, B or C.

Apartment construction grows steadily indicating that there’s a growing demand for it from Pinoys who have yet to own their homes.

These facts are relevant only if the regions (and provinces therein) where these projects were erected are considered. Knowing where these projects are may give a hint as to which regions offer the best living conditions and possibly ample job opportunities. It will also give insight on the said volatility of output of certain residential types.

Of the seventeen regions in the country, eight account for 86% of total residential construction from 2004 to 2008.

National Capital Region ranks only 4th. Manila is last in three residential types among the six districts but 4th in condos.

So, why does construction of certain residential types behave erratically while others do not?

Inherent geographic characteristics of the region, scarcity and cost of land, population density and availability of commercial establishments, job opportunities and conveniences determine the suitable residential type in the areas therein.

Refusal or failure to acknowledge this fact resulted in erratic construction of certain residential types.

Take Manila for example. Scarcity and high cost of lots no longer make it ideal for single houses. Its density and abundance of commercial establishments, offices and conveniences currently make condos the ideal housing project in Manila. The same is true in Makati City.

See how the other regions performed, especially CALABARZON and Central Luzon.

CALABARZON ranks first. In Cavite alone, over 1,700 condos were started. Compare that with 23 condos in NCR’s District 5 that includes Makati. Cavite also accounts for 25% of all quadruplex and townhouses in the eight regions.

Central Visayas is 2nd. Cebu is way ahead of the other provinces in this region. Its output is equivalent to 71% of NCR’s total output.
Central Luzon is 3rd. Bulacan overtook Cavite with over 1,900 condos, 29% of all condos.

5th, 6th and 7th are Davao Region, Ilocos Region and Western Visayas, respectively. The number of their condominium projects is also peculiar. 174 condos were started in Davao del Sur, 208 in Pangasinan, 135 in La Union and 130 in Iloilo. Ranked 8th is Northern Mindanao.

Not in the top eight, 125 condos were started in the Cordilleras, 57 in Mimaropa, 39 in Bicol, 36 in Soccsksargen and 23 in Caraga in 2004.
CALABARZON and Central Luzon are largely responsible for the apparent glut of quadruplex, townhouses and especially condos.

These housing projects, condos particularly, enable a developer to optimize the cost of land. They are most suitable in highly urbanized areas where lots are scarce and price is high. Building them where lots are not much of a premium and remote with little to offer in terms of conveniences and diverse job opportunities is imprudent.

How many of these townhouses and condos have been completed or discontinued? Since condos are sold on a pre-selling basis, how many Pinoys who bought into these projects lost their money?

Each residential type possesses advantages that are uniquely its own. It is only by applying the principle “form follows function” not only in the way a residential project is built but as important, where it is built can a developer be certain of his project’s viability and assure that the Pinoy homebuyer gets the home that fits his lifestyle and provides what he values most – time, convenience, space, privacy or peace and quiet.

For a free copy of the study, you can email the author at junsanchez2003@yahoo.com