TAX REFORM TO SLOW HOUSING TAKE-UP
Colliers Philippines says tax reform will make it diffcult for lower-income families to own house and lots.
Will the country’s robust housing sector experience a downtrend in the coming days?
Colliers International Philippines thinks the situation can traverse into that direction following the approval of House Bill 5636 or the “Tax Reform for Acceleration and Inclusion” (Train) last May 31, which has removed the value added tax (VAT)-exemptions on low-cost housing and lease of residential units, among others.
“If the House Bill is passed into law, selling prices of lowcost housing stand to add as much as P384,000 due to VAT. Colliers believes that the increase is quite significant especially for starting families or new professionals,” said Dinbo Macaranas, Colliers’ senior manager for research.
Tax perks cut
While the bill aims to improve Filipinos’ disposable income by reducing personal income tax for majority of its citizens, it has also cut back tax perks to some sectors including the housing industry.
Under the said bill, VAT-exemptions will be removed on the sale of low cost housing; and sale of residential lot valued at P1.9 million and sale of other residential dwellings valued at P 3.2 million. Upon the establishment of a housing voucher system, the VAT-exemption for the sale of socialized housing will also be removed.
Moreover, the lease of residential units not exceeding P12,800 per month will be imposed with VAT.
“The removal of the VAT-exemptions will potentially slowdown in the take-up. Inevitably, the planned tax reform will make it harder for lower income families to own house and lots,” said Colliers.
“The removal of the VAT exemption on residential leases amounting to P12,800 and less will also see additional increase in rental rates. The higher rents will consequently push vacancies up in existing condominiums,” it added.
Concerns
A local housing official also expressed concern on the removal of the VAT-exemption on housing, especially socialized housing.
“The removal of VAT exemption is really unfortunate as it will be the socialized sector who will suffer. We are hard pressed to come up with a decent socialized housing structure as it is, one can only imagine the quality of the ‘deliverable’ unit,” said Richard Azares, Cebu president of the the Organization of Socialized and Economic Housing Developers of the Philippines (OSHDP).
“Alternative ways”
Although, he personally doesn’t see a slowdown of the housing sector with the tax reform given today’s housing developments, Azares said this will press developers to find “alternative ways” for compliance.
Developers are required to build a socialized housing project for every condominium or housing development, equivalent to five percent to 15 percent of the project’s cost or land area, respectively.
Price increases on socialized and economic housing may or may not increase, said Azares, since price ceilings are at P450,000 to P1.7 million respectively.
“We see developers stretching the payment terms to a few more months to ease the burden of condominium buyers,” Macaranas noted.