Guide to Investing in Real Estate in the Philippines

If you're wondering when is the best time to invest in the real estate industry in the Philippines, then the answer is NOW.

The country's real estate industry is robust and thriving, with a favorable forecast due to the country's resilient economy, growing population, and increasing urbanization. In fact, housing prices in the Philippines are at their all-time high with a 26.6% YoY increase in 2020]

The Philippines operates in a macroeconomic environment where the government, investors, and consumers play significant roles in keeping the economy stable and flourishing.

The expansion of the BPO (Business Process Outsourcing) industry, foreign investments, and the steady inflow of OFW (Overseas Filipino Workers) remittances continue to make the economy robust, thereby paving the way for promising real estate investments.

What is the current state of real estate in the Philippines?

Real estate investment is thriving in the Philippines because the country has one of the best real estate policies. Real estate laws in the Philippines are generally buyer-friendly. Still, provisions ensure that both seller and buyer have equal rights regarding their properties. Property tax is also appraised based on the current and fair market value and assessed according to use.

Economists and real estate experts have optimistic forecasts for the country's forthcoming economic recovery in 2021 despite the record low -4.2% drop in housing prices.

Even though the global pandemic has reshaped the trends and needs in real estate, intelligent investors can take advantage of new opportunities presented post-pandemic. An appreciation in property value is inevitable because of the expected completion of various government infrastructure projects.

Despite the slow economy brought about by the pandemic, the Philippines' BPO industry is in steady traction and is expected to provide additional services to cater to global outsourcing needs. This will increase the demand for additional offices and workspaces, providing real estate investors with golden opportunities to buy, hold, and sell properties.

The country's economy has bounced back and grown stronger after several global and regional financial crises. As seen from the past, the country's economy is highly resilient, creating a solid and flourishing market for the real estate industry.

Why invest in real estate in the Philippines?

Aside from the country's property-friendly policies, one compelling reason to invest in real estate in the Philippines is that property investments have a steady yield of high returns despite the global pandemic.

Industry experts point to various data points that show that real estate properties in the country generate profitable capital appreciation, preserve wealth, and are one of the best long-term investments.

Why should OFWs invest in real estate in the Philippines?

In general, real estate investments in the Philippines are lucrative. However, that is not the only reason why you should invest in real estate. For one, investing in real estate lets you call your house your own.

Owning a residential property as an OFW can be a significant motivation to sacrifice working away from your family. Investing in real estate also provides you with an excellent opportunity to save and grow your hard-earned money, securing your future and that of your family.

Before you decide to purchase a property, it is crucial to conduct extensive research and consider the location, amenities, and accessibility of important services. It is also essential to have a solid financial plan to ensure that you can pay the reservation fee, down payment, and mortgage payments.

Once you have decided to purchase, partner with a reputable real estate developer and work with a reliable attorney to help you with legal advice and documents to ensure you comply with all the requirements needed to complete the property purchase.

What types of real estate investments are available in the Philippines?

Below we discuss the different types of real estate investment options available in the Philippines.

Residential

Residential properties refer to all kinds of property specifically suitable for dwelling and living. Such properties can be a newly constructed or resale homes. The most common residential properties are single-family homes that include condominiums, apartments, and townhouses. Multiple dwelling residences are also commonly available.

If you are planning to own a house, then investing in a residential property is an excellent choice. You can also make money through rental income and value appreciation.

Purchasing a foreclosed residential property is also a wise way to start a real estate investment. However, you'd want to consider the condition of the property and the possible cost for repairs.

Commercial

Commercial properties typically include buildings and structures that are used for various businesses and industries. They house businesses, but they can also be land intended for profit or large commercial rental properties. A few examples are malls, hospitals, business offices, hotels, and related commercial buildings.

Commercial investments are considered safe investments by industry experts the returns tend to be higher. Additionally, lease agreements are generally straightforward and direct compared to residential contracts, thereby resulting in lesser issues and problems when dealing with and managing the property.

Industrial

Industrial properties are generally used by businesses that manufacture or produce goods. They can also be a real estate property that supports packing, moving, or storing goods and products. Some examples are warehouses and buildings as well as land properties where products are manufactured, researched, stored, and distributed.

These buildings are typically not as aesthetically designed as commercial or residential properties.

One way to start investing in industrial real estate is to purchase vacant land and build an industrial facility or buy shares from a real estate investment trust (REIT) through a brokerage account.

Land

Land in real estate refers to property without buildings or equipment and designated by a fixed boundary. Examples of land properties are ranches, farms, and vacant lands. Undeveloped properties also fall under this category.

Land is an economically scarce property, and investing in land development comes with risks and high associated costs. Developing land comes with higher taxation, regulatory restrictions, as well as leasing and selling ramifications.

Land in itself is a valuable resource; however, its value increases with natural resources like oil, gas, or gold. If done correctly and with due diligence, investing in undeveloped land property can produce lucrative cash flows with consistent appreciation value.

How to invest in real estate in the Philippines?

Below we present several helpful tips to successfully invest in real estate in the Philippines.

Identify your target market

If you're planning to invest in real estate, it's essential to identify your target market first. After all, you're less likely to gain a profit from your investment property if it's something that is not compatible with its surroundings.

For example, if you invest in a more luxurious real estate property in an area where most households are in the low-income market segment, you won't earn much profit because local residents in that area don't have enough purchasing power to avail of your property.

This is why you can find condominium units at a much lower price in some areas than others, even if they're under the same property developer. This is because real estate developers typically categorize their projects according to the target market in that area. As a result, they can maximize the market's purchasing power, especially those in low to middle-income households.

Assess your budget

Investing in real estate is undoubtedly a costly endeavor, especially if you're planning on purchasing real estate in busy locations like the Bonifacio Global City, Ortigas, and Makati.

In addition, different property types will also entail different price points, so you need to ensure you have the capacity to pay for your investment before committing.

For example, you need to check if you have enough funds to afford the property's down payment. This is usually around [10-20% of the full contract price](https://www.zipmatch.com/blog/upfront-costs-buying-philippine-home/#:~:text=The%20usual%20down%20payment%20ranges,the%20required%20total%20down%20payment.) in the Philippines.

Other fees include the reservation fee, registration fees and monthly mortgage if you're getting a bank loan. You also need to ensure you have enough emergency funds to accommodate any repairs or maintenance required for your investment property.

Before you dive in and invest, thoroughly assess your budget and ensure you have enough to cover any expenses needed for your investment.

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Source: https://www.remitfinder.com/blog/guide-to-investing-in-real-estate-in-the-philippines