Property Investment in the Philippines
Despite the economic downturn experienced throughout the world in recent years, the performance of the real estate market in the Philippines has remained consistent since 2011. Boosted by demand, both foreign and domestic, real estate companies are developing new and exciting properties in many parts of the country and even non metropolitan areas are now being targeted as well.
The overall property market in the Philippines has been steadily growing in recent years and is attracting investment from both Philippine expatriates looking for a safe, home based investment as well as foreign businesses and foreigners looking to retire to or holding investments in the country.
One of the reasons cited by investors who have chosen the Philippines as their country of choice for property investment has been the relatively low price of real estate. Property prices are relatively low compared to the United States or other Asian countries but the demand for rental properties is high. This high level of demand is, in part, due to the large number of foreign nationals working in the information technology and business outsourcing industries in the Philippines.
For many, investment in property in the Philippines is seen as a much better bet than leaving money in the bank. Both foreign investors and Filipinos are gaining a much better return on their property investments than they would receive from a bank with the current very low interest rates.
The continuing demand for good rental property from foreign business people is attributed not only to the presence of the IT and BPO industries in the Philippines but also to the relatively low cost of renting compared to other Asian countries. This, combined with the development of properties in attractive locations near to airports, business centres and entertainment centres makes the Philippines a great and cost effective location for a base from which to travel to the rest of the region. Many of the new developments are also designed with an international theme and carry an international sounding name, further increasing the attraction for the international business person.
The real estate market in the Philippines is on a definite upward trend and is expected to compete with similar markets in Indonesia, Singapore and Vietnam and provide investors with good capital growth as well as a healthy cash flow and a good return on investment.
Experts predict that this growth will continue for some time to come fuelled by the expected economic growth of the Philippines as well as the continuing demand from expatriates and, with property prices on the increase, now is definitely the time to invest in property in the Philippines.
Guide to investing in real estate in the Philippines
Foreigners are not allowed to own land the Philippines but can own apartments or condominiums so long as they don’t own more than 40% of the total development. Foreigners are also allowed to buy a lease on a building but are still not allowed to own the land on which the building sits.
The process of buying a property in the Philippines is a bit complicated and there are many forms that have to be completed and filed before the transfer of ownership can take place so, as with any property purchase in any country, investors are always advised to appoint a reputable local legal firm to handle the process on their behalf.
The representative that is appointed to deal with the transaction will be known as the attorney in fact. This representative will have power of attorney and will act on the investor’s behalf and reserve the property for the investor.
The property agent will then send the investor the power of attorney form, authorising the attorney in fact to act on the investor's behalf. This power of attorney will need to be authenticated in a process known as 'consularisation' by the Philippine consulate. Once a property has been reserved, there is a whole host of documents and procedures that must be completed within 30 days which the appointed attorney in fact will guide the investor through.
When purchasing a condominium, a down payment of between 10%-30% is usually required and transfer of title, evidenced by the Condominium Certificate of Title (CCT), does not occur until the property has been paid for in full.
Investors should also make sure to ask their property specialist attorney in fact about the various taxes that will be payable which can vary depending on whether the purchase is being made from a private individual or a corporation. Some taxes may be included in the purchase price, others not, so a clear understanding of the full cost of the purchase is obviously advisable.
It is also good advice, if possible, to always physically inspect the property that you are going to purchase and to check not just the property but the deeds to make sure that what is described on the deeds completely matches the property and all has been properly and legally documented.
When all the due processes have been completed, the final handover procedure of the property is known as the Turnover Process which occurs when an Authority to Turn Over document is issued. At this point, all fees and deposits will need to have been paid and a final punch list for any work that still needs to be completed will be agreed.
Real estate in the Philippines is viewed as an extremely sound investment with on-going growth potential and with a reliable agent and legal advisor, it is not too onerous to complete the transaction.
Why invest in the Philippines Real Estate Market
The Philippines real estate market is an excellent opportunity for investors looking to gain a good capital growth as well as regular cash return on investment. Foreign investors are currently flocking to the country to snap up condominiums that are currently being developed all around the country in the established metropolitan centres and in some of the less densely populated areas too.
Investment in real estate in a country on the verge of a boom like the Philippines, provides both capital growth from the steadily increasing property values in the country and a reliable source of regular income from the rents which are on an upward trend due to the steadily increasing demand from both domestic tenants, foreign business people and those looking to retire to the country.
The value of the rental income is based upon an indicator known as the rental yield which is expressed as a percentage and is calculated as the net annual rental income divided by the purchase price of the property and multiplied by one hundred. The average rental yield for properties in the Philippines is currently estimated at 8.62% which makes it the second highest in Asia. This annual return on investment is set to increase as the demand for condominiums in the Philippines continues to grow so investors who buy property today are guaranteed an increasing rental yield into the future at percentages far higher than could be achieved in a bank deposit at the moment.
With multinational companies continuing to move their Asian operations to the Philippines, the influx of expatriates looking for luxury homes is on the increase and the luxury condominium sector is particularly buoyant. This consistent demand is fuelling the increasing prices in property in the country and the high occupancy rates created by this demand ensure investors a stability of recurring rental income.
Property prices in the Philippines are expected to double within the next seven to ten years so, for investors in for the long haul, are virtually guaranteed a fantastic return while many looking for a quicker return are looking at pre-buying property at a discounted price and re-selling as soon as the condominiums are finished.
Real estate is considered a good investment in most countries but with the Philippines being one of the fastest growing, emerging economies in Asia, the prospects for investors here is an exciting one. Demand will increase the capital value of the property and, as rents will increase in line with inflation anyway, the rental income is virtually inflation proof too.
Property developments in the Philippines are designed and built to international standards and property here appreciates, on average 10% per annum, higher even than the US, but purchase prices today are still slightly suppressed by the economic downturn so now is defiantly the time to invest.
The Philippine Real Estate Market – Still Growing
Just five years since the economic crisis triggered by the bursting of the bubble that was the housing market, real estate in the Philippines has never been a better place to invest money and the growth looks set to continue.
Metro Manila and other locations in the country are fast becoming a safe haven for property investors and demand for quality rental properties is being fuelled by the overall growth in the country’s emerging economy, investment from foreign businesses in the business process and outsourcing markets and the continuing flow of remittances from OFW’s (Overseas Filipino Workers) who are also looking for safe investment vehicles for their money.
BPO (Business Processing Outsourcing) companies continue to favour the Philippines as a base for their operations and it is estimated that around 50% of all office space in the country is occupied by such businesses. The employees of these companies have money to spend and are looking for properties in the mid to high end range of the market, making condominiums a great potential investment. This demand generated by BPO employees will only increase in the coming year as it is estimated that some 1m square metres of new office space to house them will be built by 2015.
Demand for quality condominiums is also coming from the growing and ever more affluent local population of the country itself. The growing and younger population of the Philippines will propel the future economic growth of the country and create a greater demand for consumer and luxury goods as well as for mid to higher ranges residential property.
Tourism is also proving to be a major boost to the economy with the government targeting 10 million visitors by 2016. This drives demand in all sectors, provides employment and, in turn drives the demand for residential properties as well as hotels and related projects.
The Philippines real estate sector has seen significant growth over the past few years and recent announcements by the government pledging to boost spending on infrastructure projects through PPP (Private-Public-Partnership) is expected to have yet another positive impact on the industry.
The growth potential of the Philippine real estate sector looks set to become phenomenal and all the right elements are in place for a boom that will see early investors, who make their move today, reaping the rewards of increasing property prices, high occupancy rates and the reliability of steadily increasing rental income. The country’s improving economic situation, low interest rates have re-invigorated foreign investment and now is the prime time for property investment in the Philippines.