Why Baguio City Real Estate Market and Rentals Are Unaffordable for Simple Wage Earners
By: Timons Cabansi
Baguio City, also known as the Summer Capital of the Philippines, is a beloved destination for both tourists and locals. Its cool climate, scenic views, and vibrant culture make it an appealing place to live and visit. However, for simple wage earners, finding affordable housing in Baguio is a growing challenge.
With skyrocketing real estate prices and high rental costs, many struggle to secure decent housing, creating a growing affordability crisis. This article explores why Baguio City’s real estate market and rentals are increasingly out of reach for the average wage earner.
Baguio City: A Growing Urban Center
Baguio’s rise from a small hill station during the American colonial period to a bustling urban center has been remarkable. It has evolved into one of the Philippines’ top tourist destinations and an education hub, attracting thousands of students every year.
The city’s population continues to grow, reaching over 370,000 residents in 2020, with even more flocking to Baguio during the peak seasons.
As Baguio’s population expands, so does the demand for housing, which contributes to the soaring property prices and rental rates. With limited land available for development and increasing pressure from new residents, the city is experiencing the side effects of its own success.
Factors Contributing to the High Cost of Real Estate
Tourism as a Driving Force
Tourism has been one of the main engines of Baguio’s economy for decades. The year-round influx of visitors, especially during festivals like Panagbenga and the holiday season, has driven up demand for both short-term and long-term accommodations.
Investors looking to profit from tourist demand often buy up properties and convert them into hotels, transient houses, or Airbnb rentals, further inflating property values.
Limited Land Availability
Baguio’s mountainous terrain limits the amount of land suitable for development. With strict zoning laws and environmental concerns in place to preserve the city’s natural beauty, expansion is difficult. This scarcity of land drives property prices higher, especially in prime locations.
Influx of Migrants and Students
Baguio is home to several universities and colleges, attracting students from across the country. The steady influx of students adds pressure
to the rental market, particularly during the academic year. With a constant demand for boarding houses and dormitories, landlords can charge higher rents, knowing there will always be someone willing to pay. Additionally, Baguio has become a haven for seasonal workers and migrants seeking better opportunities, further pushing up housing demand.
Baguio’s Climate Advantage
Baguio’s cool climate is a major draw for both locals and expatriates looking to escape the heat of the lowlands. This has led to a growing number of people purchasing vacation homes in the city or even moving permanently.
The increased demand for residential properties, driven by Baguio’s climate, has made the real estate market even more competitive, pushing prices beyond the reach of the average wage earner.
High Construction Costs
Building a home or apartment in Baguio comes with its own set of challenges. The cost of materials is generally higher in the city due to transportation expenses—everything has to be brought up through winding mountain roads.
Additionally, construction in hilly terrain often requires more engineering work, raising building costs. These factors contribute to the high prices of both real estate and rentals.
Rentals: A Challenge for Average Wage Earners
Low Supply, High Demand in Rental Properties
The rental market in Baguio is highly competitive, with a limited number of available units and a constant demand from students, workers, and tourists. This creates a classic supply-and-demand situation, where the low supply drives prices higher.
For simple wage earners, finding affordable rent becomes a significant challenge, especially in central areas close to schools or business districts.
Short-Term Rentals (Airbnb Effect)
In recent years, the rise of short-term rental platforms like Airbnb has exacerbated the rental affordability problem. Property owners have found it more profitable to rent out their units on a short-term basis to tourists rather than offering long-term leases to locals.
This has led to a decrease in available long-term rental units, causing rents to spike even further. The more profitable short-term rental market frequently drives away simple wage earners who are searching for long-term, stable housing.
Landlords Catering to High-Income Tenants
Many landlords in Baguio prioritize high-income tenants, including expatriates, retirees, and professionals working in tech and outsourcing industries. These tenants can afford to pay premium prices for well-maintained, centrally located properties.
As a result, many rental units are priced beyond what a simple wage earner can afford, with landlords unwilling to lower prices given the steady stream of wealthier tenants.
Comparison of Wages and Housing Costs
Average Wage in Baguio
The average wage in Baguio City varies depending on the sector. Many wage earners, particularly those in retail, hospitality, and service industries, earn around ₱350-₱450 per day. This translates to a monthly income of around ₱10,000-₱13,000 for many workers, which is insufficient when compared to the city’s high housing costs.
Comparison of Rent Prices to Income
Rental prices in Baguio have surged in recent years. A basic apartment in the city center can cost anywhere from₱8,000 to₱15,000 per month, depending on the location and amenities. For simple wage earners earning less than ₱15,000 a month, rent alone can consume their entire paycheck, leaving little room for other essentials like food, transportation, and utilities.
Housing as a Percentage of Income
Housing experts recommend that no more than 30% of a household’s income should be spent on rent. However, in Baguio, it’s not uncommon for wage earners to spend 50% or even 70% of their income on rent, making it difficult to save or invest in other aspects of life. This leads to a vicious cycle of financial instability for many workers.
The Strain on Simple Wage Earners
Impact on Quality of Life
The rising cost of housing in Baguio has a direct impact on the quality of life for wage earners. High rental costs leave little money for other essentials like healthcare, education, and savings. Many families are forced to live in smaller, overcrowded spaces, sacrificing comfort for affordability.
This situation is especially difficult for families with children who need access to good schools and healthcare services.
Double-Job Culture
To make ends meet, many wage earners in Baguio have resorted to working multiple jobs. Whether it’s taking on part-time work during the weekends or running small businesses, the need to supplement their income is becoming more common.
This double-job culture leads to longer working hours, less time for rest, and increased stress, ultimately affecting their health and well-being.
Government Policies and Interventions
Housing Subsidies and Programs
The Philippine government has recognized the housing affordability issue in many urban areas, including Baguio. There are housing subsidies aimed at helping low-income earners, but the reach of these programs is limited. Many wage earners do not qualify, or the available housing is located far from the city center, making it inconvenient for work and school.
Zoning and Land Use Regulations
Baguio’s government has implemented zoning regulations to control urban sprawl and preserve green spaces, but these regulations also limit the amount of land available for affordable housing development.
Without more land designated for affordable housing, the market continues to prioritize high-end residential developments, leaving wage earners with few options.
Speculation and Property Investments
Real Estate Speculation
Real estate speculation is another factor driving up housing costs in Baguio. Investors purchase properties with the intention of selling them at a profit after prices appreciate. This speculative buying further limits the availability of affordable housing, as more properties are held off the market while their value rises.
For wage earners, this means fewer homes within their budget and rising prices for the ones that remain.
Second Home Market
Many wealthy individuals from other parts of the country buy second homes in Baguio as vacation properties. These homes are often left vacant for much of the year, further tightening the supply of available housing. The second-home market inflates property values, making it difficult for locals, especially wage earners, to find affordable options.
The Influence of Developers
Large-Scale Developers and Gentrification
The influx of large-scale real estate developers in Baguio has led to the gentrification of several neighborhoods. Developers prioritize luxury condos, high-end apartments, and gated communities, which cater to wealthier residents.
While these projects may improve infrastructure and bring in investment, they also push out low-income residents who can no longer afford to live in their communities.
Luxury vs. Affordable Housing
Most developers in Baguio focus on luxury properties that promise high returns on investment, leaving affordable housing projects on the back burner. The lack of incentives for developers to build affordable housing means that simple wage earners are often left with substandard options or forced to move to less desirable areas on the outskirts of the city.
The Role of Real Estate Agents and Brokers
Real estate agents and brokers also play a significant role in the affordability crisis. Some agents prioritize high-end properties and international clients, who are willing to pay more for prime locations. This focus on wealthier buyers and renters can lead to inflated property prices as agents try to maximize their commissions.
Wage earners are often priced out of the market, unable to compete with wealthier clients.
Lack of Affordable Housing Options
Minimal Social Housing
One of the major issues in Baguio is the scarcity of social housing projects. There are few government-backed initiatives that provide affordable housing for low-income families. Without significant investment in social housing, wage earners have very few options when it comes to finding affordable places to live.
Affordable Housing Projects
There are some affordable housing projects in Baguio, but they are often located far from the city center, where land is cheaper. While these projects provide more affordable housing options, their distance from key amenities like schools, hospitals, and workplaces makes them less desirable for many wage earners.
Impact of the COVID-19 Pandemic on Real Estate
Shift in Housing Demand
The COVID-19 pandemic shifted housing preferences across the country, with many people seeking more spacious homes outside of city centers. This trend has affected Baguio as well, with more people looking for larger properties in the outskirts or nearby towns.
This shift has driven up property prices in areas once considered affordable, further straining the budgets of wage earners.
Economic Recovery and Its Impact on Real Estate
As the economy recovers post-pandemic, the real estate market in Baguio has bounced back quickly. The pent-up demand for housing, combined with economic recovery, has driven prices even higher, making it more difficult for wage earners to find affordable housing in the city.
Case Studies: Simple Wage Earners in Baguio
Real-life stories of wage earners in Baguio illustrate the challenges they face. Take Joseph, a service worker who earns ₱12,000 a month. He spends ₱7,500 on a small, one-room apartment, leaving little for food, transportation, or savings. Many people experience similar difficulties in finding affordable, high-quality housing, which is his struggle.
Possible Solutions to Improve Affordability
Increased Affordable Housing Projects
One solution to the affordability crisis is increasing the number of affordable housing projects within the city limits. Collaboration between the government and private developers could result in more housing options for wage earners.
Rent Control Policies
Implementing rent control policies could help stabilize rental prices and prevent landlords from overcharging tenants. By capping rental increases, wage earners could find more stability in their housing costs.
Improved Wage Structures
Raising wages to reflect the rising cost of living in Baguio.
It could also help bridge the gap between income and housing costs. Adjusting the minimum wage to better align with the local cost of living would allow wage earners to afford decent housing without sacrificing other necessities.
Improved wage structures across sectors, especially in industries that dominate the city’s economy like tourism and hospitality, could significantly ease the financial burden on low-income workers.
Takeaway
The real estate market and rental landscape in Baguio City have become increasingly unaffordable for simple wage earners. A combination of factors such as high demand from tourism, limited land availability, rising construction costs, and speculative real estate practices has driven prices beyond the reach of average-income residents.
While the city’s climate and lifestyle make it a desirable place to live, these same qualities contribute to the rising demand that pushes housing prices higher.
Simple wage earners, particularly those working in service industries or holding multiple jobs, are often forced to spend a large portion of their income on housing. This reality puts them in a financial bind, limiting their ability to save, invest in their future, or even meet their basic needs.
While some government programs and policies exist to address the affordability crisis, more targeted efforts are needed.
Moving forward, solutions like rent control policies, improved wage structures, and increased affordable housing projects could help make housing more accessible to low-income residents.
Without significant interventions, however, Baguio City’s real estate market may continue to cater primarily to wealthier individuals and investors, leaving wage earners in a constant struggle to find affordable housing.
Frequently Asked Questions (FAQ’s)
1. Why is real estate so expensive in Baguio City?
Real estate in Baguio City is expensive due to several factors, including high demand from tourists and students, limited land availability due to the city’s geography, and speculative investments in the property market. Baguio’s cool climate and popularity as a vacation destination also contribute to the rising property values.
2. How do tourism and short-term rentals affect Baguio’s real estate prices?
Tourism significantly impacts Baguio’s real estate market. The demand for short-term rentals through platforms like Airbnb leads to higher property prices, as many property owners prioritize short-term, high-paying tourists over long-term local renters. This reduces the supply of available rental units, pushing prices up even further.
3. Are there any affordable housing projects in Baguio City?
Yes, there are affordable housing projects in Baguio, but they are often located in less central areas. While these projects provide cheaper housing options, their distance from key amenities and work opportunities makes them less desirable for many wage earners.
4. Can government policies make housing more affordable?
Government policies such as zoning regulations, rent control, and housing subsidies can help make housing more affordable. However, the impact of these policies depends on their effective implementation and the government’s commitment to addressing the needs of low-income residents.
5. What should wage earners consider when renting in Baguio?
Wage earners should consider factors such as proximity to work and public transportation, rental costs as a percentage of their income, and the potential for future rent increases. It’s also important to explore different neighborhoods and weigh the benefits of renting further from the city center, where prices may be lower.
Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. Always consult with a professional before making any decisions.
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