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Everything you need to know is included in our the Philippines Property Pack
Are you thinking of investing in property in the Pearl of the Orient? Are you thinking about when would be a suitable time to make a move?
Market timing is a topic that elicits various opinions from people. The Filipino real estate agent you know may suggest that it's currently a good time to buy property, but your childhood friend living in Manila suggests waiting for a couple more months.
At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in the Philippines, we base our analyses on factual data and statistics rather than opinions, minimizing biases and uncertainties.
We've done extensive research on official reports and government website statistics, resulting in a comprehensive database. Here's what we've learned, which can provide valuable insights for your decision-making process regarding real estate purchase in the Philippines.
Ready? Let's go!
How is the property market in the Philippines currently?
The Philippines is, today, a relatively stable country
Neutral
Stability should be the first thing you look at when you want to invest in real estate because it fosters consistent cash flows and long-term wealth building. It is an information you need as a foreigner looking to buy a property in the Philippines.
In today's context, the Philippines can be regarded as a country that has achieved stability to some extent. The last Fragile State Index reported for this country is 75.1, which is a respectable number.
The Philippines' relative stability today can be attributed to its robust economic growth driven by sectors such as business process outsourcing and remittances from overseas Filipino workers, which have bolstered domestic consumption and infrastructure development. Additionally, the country's democratic governance, despite challenges, has facilitated political continuity and reforms aimed at improving social services and reducing poverty.
Let's analyze other data now to assess whether it's a favorable time to purchase property in this country.
The Philippines is forecasted to grow massively
Positive
To figure out if it's the right time to buy a property, start by checking how well the country's economy is doing.
Based on the IMF's outlook, the Philippines is likely to finish 2024 with a growth rate of 6.2%, which confirms the country's quick development. If we take 2025, the experts say 6.2%.
That's not all - this impressive growth will keep going on since the Philippines's economy is expected to increase by 28.3% during the next 5 years, resulting in an average GDP growth rate of 5.7%.
The expected massive growth in The Philippines means there will likely be increased demand for housing and commercial spaces, driving up property values and rental income potential. This creates a promising opportunity for real estate investors to earn significant returns on their investments.
Nevertheless, there are other indicators to watch.
Filipino business owners keep radiating unshakable confidence in the economy
Positive
Although the GDP forecast is a relevant metric, as it comes from foreign institutions, it may not fully capture the local sentiment. Luckily, in The Philippines there exists an official metric that is consistently published. This doesn't apply to every country, so we're in luck.
Measuring business leaders' confidence in the current and future economic conditions, the metric known as the Business Consumer Index (BCI) is derived from surveys and assessments.
The Bangko Sentral ng Pilipinas's data indicates that the Business Confidence Index is currently 38 for The Philippines. This is a great score.
Examining the data more rigorously, we notice that optimism was already around the corned 12 months before, with a score of 44.
Local businesses in The Philippines are experiencing an impressive level of confidence about the future, which is an encouraging sign for property investors. This suggests that the economy is poised for significant growth, resulting in more job opportunities and increased incomes. Such heightened optimism is driving a surge in property demand, presenting a prime opportunity for investors to generate rental income and potentially see property values rise over time.
The Philippines is issuing a lot more building permits
Positive
The number of building permits delivered is a helpful indicator to consider when deciding if it's a good time to buy a property in a country. When more building permits are granted, it shows confidence in the property market, which is a positive sign.
We have very good news for you: the number of building permits delivered is booming in The Philippines.
Within the last year, according to Philippine Statistics Authority, the number of building permits granted by Philippine local institutions rose by 66.1%, from 113,644 to 188,740 units.
This data is clearly telling us that many people think it's a good time to buy a property.
Another important point. There will be more properties available in the market. Based on this data point, it's possible that housing prices will drop in the Philippines in 2025.
Stagnant property prices persist in the Philippines
Neutral
The Philippines's home prices have increased by 13.4% in 5 years according to Philippine Statistics Authority.
It means that if you had bought a beachfront villa in Boracay for $500,000 five years ago, then it would now be worth around $567,000.
Property prices are currently experiencing a state of stagnation, with minimal fluctuations or movement.
This trend should not be interpreted as a guarantee that your real estate investment in the Philippines won't appreciate. Remember - past performance does not necessarily predict future outcomes.
You can find a more detailed analysis of the real estate prices in our property pack for the Philippines.
Everything you need to know is included in our the Philippines Property Pack
The Philippines' population is growing and getting (a bit) richer
Positive
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In the Philippines, the average GDP per capita has changed by 2.6% over the last 5 years. It's not much, but the growth is here. Furthermore, the Filipino population is growing (+7% in 5 years).
This means that, if you purchase a beachfront house in Palawan and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be an increase in rental demand in Philippine cities like Manila, Cebu, or Davao City in 2025.
Rental yields are average in the Philippines
Neutral
Rental yield is a common measure used to determine the value of real estate investments.
It's the annual rental income of a property divided by its price. For example, if a property in the Philippines is purchased for 3,000,000 PHP and generates 120,000 PHP in annual rental income, the rental yield would be 4%.
According to Numbeo, rental properties in the Philippines offer gross rental yields ranging from 1.6% and 4.3%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in the Philippines.
It means that your income potential is relatively moderate.
Moreover, as seen before, there might be a drop in property prices (due to an increase in real estate supply) and more wealthy tenants, then gross rental yields are likely to increase in the Philippines in 2025.
Everything you need to know is included in our the Philippines Property Pack
In the Philippines, inflation is projected to remain minimal
Neutral
Inflation is the rise in the cost of living.
It's when your customary jeepney ride in Manila costs 10 Philippine pesos instead of 8 Philippine pesos a couple of years ago.
If you're considering investing in a property, high inflation can bring you several advantages:
- Property values tend to increase over time, potentially leading to capital appreciation.
- Inflation can result in higher rental rates, increasing the property's cash flow.
- Inflation decreases the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, helping preserve the investment's value.
- Diversifying into real estate provides stability during periods of inflation.
According to the IMF's estimations, over the next 5 years, the Philippines will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.
This data infers that the Philippines is expected to have near-zero inflation then. Unfortunately, buying a property now may not lead to significant price increases or high profits in the future.
Is it a good time to buy real estate in the Philippines then?
Let's wrap things up!
While the Philippines is currently a relatively stable country, the anticipated economic growth over the next few years might make 2025 a less ideal time to buy property. With the economy expected to grow by 28.3% over the next five years, averaging a GDP growth rate of 5.7%, this impressive growth could lead to increased demand for housing and commercial spaces. As demand rises, property values and rental income potential are likely to increase, which might make it more expensive to purchase property in 2025 compared to earlier years.
Moreover, the expected massive growth in the Philippines means that real estate investors might see this as a promising opportunity to earn significant returns on their investments. This increased interest from investors could further drive up property prices, making it more challenging for individual buyers to find affordable options. As more people look to capitalize on the booming market, competition for available properties could become fierce, potentially pricing out those who are not prepared to pay a premium.
On the other hand, the Philippines is issuing a lot more building permits, which could eventually lead to an increase in the supply of properties. However, this increase in supply might not be enough to keep up with the growing demand, especially if the population continues to grow and become slightly wealthier. Stagnant property prices have persisted in the past, but with the current economic trajectory, this trend might not continue, making it harder to find good deals in 2025.
Additionally, according to Numbeo, rental properties in the Philippines currently offer gross rental yields ranging from 1.6% to 4.3%. While these yields are not particularly high, they could become even less attractive if property prices rise significantly. Although inflation is projected to remain minimal, the combination of increased demand, rising property values, and potentially lower rental yields might make 2025 a challenging time for new buyers to enter the market.
We genuinely hope this article was useful!. If you need to know more, you can check our our pack of documents related to the real estate market in the Philippines.
-Will real estate prices go up in the Philippines?
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.