All sources have been thoroughly verified for credibility. Furthermore, an industry specialist has reviewed and approved the final article.
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, as of now, a vulnerable and fragile country
Negative
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.
Sadly, the Philippines is going through a period of great instability. The last Fragile State Index reported for this country is 80.5, which extremely low.
The Philippines is a vulnerable and fragile country due to its susceptibility to natural disasters, lack of access to resources, and the socio-economic disparities between its citizens. Additionally, the country has a history of political instability, which has weakened its overall stability and security.
It does not seem to be the right time to buy a property in this country. Let's check more data.
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 2023 with a growth rate of 6%, which confirms the country's quick development. For 2024, the experts say 5.8%.
According to the World Bank, the key drivers of economic growth in the Philippines are strong consumer demand supported by a vibrant labor market and robust remittances. Also, a strong growth in urban household incomes is predicted, which is an interesting point for someone who wants to invest in properties.
That's not all - this impressive growth will keep going on since the Philippines's economy is expected to increase by 27.5% during the next 5 years, resulting in an average GDP growth rate of 5.5%.
The expected massive growth in the Philippines provides a great opportunity for investors to purchase real estate at a lower cost and benefit from the potential increase in value as the country develops. Additionally, the growing economy and population also provide a great opportunity for rental income.
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 42 for The Philippines.
This is a top score. Needless to say that business-friendly policies implemented by the Marcos government contribute significantly to this positive trend.
Examining the data more rigorously, we notice that optimism was already around the corned 12 months before, with a score of 46.
Local businesses in The Philippines are feeling confident about the future and it's a positive sign for property investors. It indicates that the economy is expected to thrive, creating more job opportunities and higher incomes. This increased optimism leads to a higher demand for properties, making it an opportune time for investors to earn rental income and potentially witness property values appreciate over time.
Make a profitable investment in the Philippines
Better information leads to better decisions. Save time and money. Download our guide.
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 2024.
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 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.
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 2024.
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 2024.
Everything you need to know is included in our the Philippines Property Pack
In the Philippines, inflation will intensify
Positive
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 15.3%, which gives us an average yearly increase of 3.1%.
This data infers that the Philippines could experience inflation, resulting in rising prices. Therefore, it's worth considering buying property now as a potential opportunity.
Is it a good time to buy real estate in the Philippines then?
Let's wrap things up!
Despite some favorable signals, 2024 might not be the ideal time for property investment in the Philippines due to a combination of factors that raise concerns. While the forecasted massive growth is promising, it's important to note that robust economic expansion doesn't necessarily translate to a stable and thriving property market. Economic growth alone doesn't guarantee a parallel rise in property values.
The unshakable confidence of Filipino business owners in the economy is encouraging, yet other aspects need consideration. Factors such as political stability, property market dynamics, and regulatory environment play crucial roles in determining the viability of real estate investments. Business confidence might not directly correlate with the real estate market's performance.
The issuance of more building permits and the population's improving financial status could contribute to increased real estate activity, but other variables like oversupply and demand imbalances can influence the market dynamics. Additionally, while intensified inflation might indicate economic activity, it can also affect the purchasing power of potential buyers, impacting property affordability.
When combined with the neutral signals of stagnant property prices and average rental yields, the unfavorable signal of being a vulnerable and fragile country poses significant concerns. Given these complexities, careful consideration is advised before making property investment decisions in the Philippines in 2024.
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.
-Is it a good time to buy a property in New Zealand?
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.
Buying real estate in the Philippines can be risky
An increasing number of foreign investors are showing interest in the Philippines. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.