DEVEL()PMENTRESEARCHNEWS
of partially developed subdivision properties still available. The same unpublished source suggests that 65 percent of all land use in the NCR is residential. However, if the average lot size identified in the PWU survey is compared and if circulation and open space is allowed, the total area developed for housing should be approximately half the area classified for residential purposes in the same unpublished survey. This suggests that a very large proportion of this area remains vacant, being used either as an investment or inheritance for future off-spring.
Therefore,
the supply crisis
is not one of physical shortage but the failure of the delivery system to properly distribute land. 1°
Se Hember- October 1993
Box 2 Permit Delay, Land Conversion Multiplierand Land Development Multiplier A comparisonis made of the relationshipbetween the "permitdelay" def'medas the median length in months to get approvals, permits and titles for a new medium-sized residentialsubdivision in an areawhere residential development is permitted, and the "land conversionmultiplier"(the ratio of theprice per squaremeter of agriculturalzoned land to residentia_z__ed_and_ntheurbanfringe)andthe___anddeve__pmentmu_tip_ier"(incr_ase in price of undeveloped residential land to developed land) and the composite of these tw0. ¢/_
P_fmitOatay
Land Omvorsion Land Oevolopm_t Multiplier - Idultiplier
Composite Idultiplier
Manila Bangkok
36 11
2.2 1.8
6.7 2.6
14.74 4.68
Kuala Lumput Singapore Jakarta Tokyo
18 2 28 8
5.5 6.0
4.3 1.3 2.2 2.0
23.65 7.80
10.4
20.80
Source: Housing Indicators Program, 1993.
A Good Investment
Potential Note: There is a correlation between the "permit delay" and the "land development multiplier," but not the "land conversion multiplier" which is a better indicator of real
Anumberofreasonshavebeen given tO explain the supply shortage: from the cumbersome bureaucracy (Box 2) to the cultural link between people and the land. However, while these may be contributory, it is also clear from the analysis that land is widely used asa safe investment. The investment potential for land as a speculative commodity has greatly contributed toland price inflation. Land will continue to play this role while the cost of holding land including actual costs and loss of potential income can more than be made up by the capital gains achieved when it is ultimately soldorismortgaged.Itisbelievedthat land price inflation can best be brought down by an efficiently administered land tax."
supply shortage. A comparison of the effective real property tax rate in countries with similarGNPpercapitalikeWashington, Paris and Tokyo, shows that the price of l00 square meters ofland in Tokyo is in a ratio of 12.5 the GNP per capita, whileinParisitis0.6andinWashington, DC, a little over 0.3. The effective propertytaxrateis0.4percentinTokyo and4.0percentinParisandl.3percent in Washington?3These figures indicate the relationship between effective property tax and land prices.
Efforts to impose suitable and efficient land tax met with little success in the Philippines. The idle land tax, now five percent, hasbeenrarelyifever imposed.RealPropertyTax(RPT) rates are lowest for residential land, being based on 20 percent of assessed market values which should all have been reassessed within two years of the effectivity of the Local Government
started this process. According to U.P. School of Economics' Dr. Edita Tan, thereisnostandardsystemforassessing the market value. Instead, "the most important obstacle to effective implementation of the RPT is the caseto-case method of valuation, which makes it physically impossible for local governments to achieve a fair and accuratevaluation.Themethodisprone to corruption..(and) the problem, combined with power politics at the local level, works against the implementation of the RPT. ''2 Consequenfly, because of the system used and the time delay in the applicationof the assessment, assessed market pricescanlagbehind real market prices by 200 to 600 percent or more. Hence the actual cost of holding land which is assessed at 20 percent its real market price is approximately 0.08 percentthevalueoftheland.Even with the five percent idle land tax, thecostis still only 0.28 percent of the market value. With land prices rising at 20 to 100 percent per year, it is hardly surprising that the tax offers little
Code
disincentive.
people
(RA 7160). However,
very
few
local government units (LGC) have .completed , and many have not yet
However,
weretheactual
market valuesapplicable, the tax would increase to l.4 percent the market value. , nl ,.
On Equal
Footing
Metro Manila households pay a shareof theirincometowardshousing that is not noticeably different from that found in other countries with similar levels of development and economic growth. But, it is clear that the people tend to enjoy less adequate housingthanmightbeexpected.Thisis largely due to the price of land which resultsinanatypicalshareofthecostof housing goinginto that element.Thls, in turn, has hindered the movementof at different
periods
of their
_To page 10 .