Authored by the expert who managed and guided the team behind the Philippines Property Pack
Everything you need to know before buying real estate is included in our The Philippines Property Pack
Are you considering investing in the Philippines’ real estate market? What are the legal steps, tax implications, and cultural differences you need to understand before taking the plunge? What challenges do foreign investors typically face, and how can you overcome them?
These are the questions we hear most often from foreign investors because we’re actively connected to this market. We’ve spent time working with local agents, developers, and investors, so we know what works—and what doesn’t. That’s why we’ve written this article: to provide a clear guide that answers the questions we get asked daily.
Our goal is to help you, as a foreigner, to navigate the property buying process with confidence. If you think there’s something we missed or want more details, let us know (please do!). Your input helps us refine and improve our advice for everyone.
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1) Consider short-term rentals in tourist areas for higher profits, but always check local regulations as they can vary
In tourist hotspots like Boracay Island and El Nido, Palawan, short-term rentals can earn significantly more than long-term ones.
Imagine owning a property in Boracay where a typical listing can bring in PHP709,377 annually. That's a lot more than what you'd get from a long-term rental. These areas are magnets for visitors, making them prime spots for short-term rentals.
Take Taguig, for instance. Here, properties are booked for about 230 nights a year, with a median occupancy rate of 63% and an average daily rate of PHP2,943. This translates to an impressive annual revenue of PHP650K, showing just how strong the demand is in tourist-heavy areas.
But before you dive in, remember that local regulations can vary and might affect your earnings. While places like Manila and Taguig have more relaxed rules, others might tighten up to tackle housing shortages and neighborhood issues.
So, always do your homework and check the local rules before investing in short-term rentals. This way, you can avoid any surprises and make the most of your investment.
Owning a property in these areas can be a lucrative venture, but it's essential to stay informed and adapt to any changes in regulations. Being aware of the local landscape can make all the difference in your success.
Sources: Airbtics, Airbtics, Touchstay
2) Foreigners can’t buy land directly in the Philippines, but you can lease it for 50 years with a 25-year renewal option
In the Philippines, foreigners can't directly own land due to constitutional restrictions.
But don't worry, there's a workaround. You can lease land for up to 50 years, with a chance to renew for another 25 years. This is a great option if you're looking to invest or settle in the Philippines without owning the land outright.
There's even more good news. In 2023, the House of Representatives approved a bill that could let foreigners lease land for up to 99 years. This move shows a strong push to attract foreign investment through leasing, making it a more appealing choice.
Imagine having a piece of paradise for nearly a century! This change is a big deal because it reflects the country's growing openness to foreign investors. It's a win-win situation for both the Philippines and those looking to invest in its beautiful landscapes.
For those interested in the local real estate market, this extended lease period could mean more stability and long-term planning. It's a chance to enjoy the country's stunning beaches, vibrant culture, and warm hospitality without the hassle of ownership.
Sources: Asia News Network, Philstar, Inquirer
We did some research and made this infographic to help you quickly compare rental yields of the major cities in the Philippines versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you’re planning to invest there.
3) Partner with locals to maximize investment, as foreigners can only own up to 40% of a condominium project in the Philippines
In the Philippines, foreigners can only own up to 40% of a condominium project due to the Condominium Act.
If you're thinking about investing, consider teaming up with local developers. This partnership not only helps you stay within legal limits but also gives you a leg up in the market. Filipinos must own the majority of the condominium corporation, so working with locals is a smart move.
Many foreign investors have found success by forming joint ventures with local developers. This strategy not only keeps you compliant with the law but also boosts your investment potential by tapping into local expertise and networks.
Local developers know the ins and outs of the market, which can be a huge advantage. By partnering with them, you can navigate the complex real estate landscape more effectively and make informed decisions.
These partnerships are more than just a legal necessity; they are a strategic advantage. Local partners bring valuable insights that can help you maximize your returns and minimize risks.
So, if you're eyeing a property in the Philippines, remember that collaborating with locals is key to making the most of your investment.
Sources: FiledDocsPhil, Lordlaw.ph, Lawyer-Philippines.com
4) Consider areas with high OFW investment in the Philippines, as they tend to offer more market stability
You might be surprised that the real estate market in the Philippines is heavily influenced by overseas Filipino workers (OFWs), so areas with high OFW investment can be more stable.
In 2023, remittances from OFWs hit a record high, playing a crucial role in boosting the country's GDP. This influx of money fuels consumer spending, which is vital for the economy. OFWs often choose real estate as their investment of choice, seeking both stability and growth potential. This preference is evident in the rising demand for housing, especially in regions with large OFW communities.
Take Metro Manila, for example, where property prices have steadily increased, largely due to OFW investments. This trend is not just limited to the capital; other regions with significant OFW populations are also seeing a surge in real estate activity. Developers are keenly aware of this, often tailoring their projects to attract OFW investors by focusing on strategic locations and desirable features.
In areas like Cebu and Davao, real estate developments are booming, driven by the purchasing power of OFWs. These regions offer a mix of urban convenience and provincial charm, making them attractive to both investors and potential residents. The impact of OFW investments is so pronounced that developers are increasingly targeting these areas, offering properties that cater to the specific needs and preferences of OFWs.
Moreover, the stability provided by OFW investments has a ripple effect on the local economy. Businesses in these regions often thrive due to increased consumer spending, further enhancing the appeal of investing in real estate. This cycle of investment and economic growth creates a robust market that benefits both investors and the local community.
For potential buyers, understanding the influence of OFWs on the real estate market can provide valuable insights. Investing in areas with high OFW activity might offer more stability and growth potential, making it a smart choice for those looking to enter the market. With the continued flow of remittances and the strong demand for housing, the real estate market in the Philippines remains a promising investment opportunity.
Sources: Inquirer, Harvard International Review, VHBC, Global Property Guide, Statista
5) Avoid properties in disaster-prone areas like flood zones or earthquake regions, as they can lower property values and raise insurance costs
When buying a property, think about the location's vulnerability to natural disasters.
In the Philippines, properties near rivers like the Tullahan River have seen decreased values due to frequent flooding. This trend was especially noticeable in 2023 and 2024, making these areas less appealing for investment. If you're considering such locations, be aware that the property's worth might drop over time.
Insurance costs are another big factor. In disaster-prone areas, premiums are higher because of the increased risk. For example, in the Philippines, insuring against typhoons costs more than for earthquakes. This reflects the frequent typhoons, meaning you'll pay more for insurance, which can add up over the years.
The Philippines is highly exposed to natural disasters, with a large part of its land and population at risk. The country faces numerous hazards like floods and cyclones, which can cause severe damage. This frequent exposure not only affects property values but also leads to substantial repair and renovation costs, further impacting your finances.
Given these factors, it's wise to consider the long-term financial implications of buying in such areas. The potential for increased insurance premiums and repair costs can significantly affect your budget. It's crucial to weigh these risks against the benefits of the location.
Sources: Lawyer Philippines, Asian Development Bank, Climate Change Knowledge Portal
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6) Factor in property taxes and fees to your budget to avoid unexpected costs
When buying a property, remember that the purchase price is just the beginning.
In the Philippines, especially in 2023 and 2024, many buyers were surprised by extra costs. These include property taxes and fees that can really add up. For example, in Metro Manila, the property tax rate can be as high as 1%, and there's a local transfer tax of 0.75% of the property's value. In provincial areas, the local transfer tax is a bit lower at 0.50%.
These percentages might seem small, but they can become a big deal, especially for expensive properties. Imagine buying a property worth PHP 5,000,000; the taxes alone can be a significant chunk of change. And that's not all—there are notarial fees to think about too.
Notarial fees usually range from 1% to 1.5% of the property's selling price. So, for a property valued at PHP 1,000,000, you're looking at an extra PHP 10,000 to PHP 15,000. If the property is worth PHP 5,000,000, those fees could jump to between PHP 50,000 and PHP 75,000. These costs often catch buyers off guard and can really stretch your budget if you're not prepared.
It's essential to factor in these additional expenses when planning your purchase. They can make a big difference in your overall budget and help you avoid any nasty surprises down the road. So, when you're crunching the numbers, don't forget to include these extra costs.
7) Watch for government announcements on new MRT lines, as properties nearby often appreciate faster
Buying property near upcoming infrastructure projects can be a smart move.
When a new MRT line is announced, it often means better connectivity and accessibility for the area. This makes the location more appealing to buyers and investors, as commuting becomes easier. For instance, after the MRT Line 3 in Manila was completed, property values in nearby areas saw a significant rise. The new line made travel more convenient, boosting demand and, consequently, property prices.
Developers are quick to notice these opportunities. When the government plans to expand MRT lines, developers often show increased interest. They see the potential for growth and start investing, which can further drive up property values. This was evident with the Metro Manila subway system, where developers eagerly formed consortia to propose projects to the government.
Experts like those from Colliers International highlight that well-planned infrastructure projects can enhance real estate strategies. These projects create value and generate revenue, which in turn boosts property values. It's a cycle of growth that savvy investors and buyers can benefit from.
In the real estate world, location is everything, and proximity to new infrastructure can be a game-changer. Properties near these projects often appreciate faster, making them a worthwhile investment. Keep an eye on government announcements for new MRT lines or other infrastructure developments.
Understanding these dynamics can give you an edge in the property market. By focusing on areas with upcoming infrastructure, you can make informed decisions that align with future growth trends.
Sources: Colliers International, Lumina
8) Be cautious with "pre-selling" properties in the Philippines; check the developer's track record due to common construction delays
When considering a pre-selling property, be aware that construction delays are common.
In 2024, the market saw a significant slowdown, with only 9,300 pre-selling units sold in the first nine months, a sharp 53% drop from the previous year. This dip hints at potential delays in construction projects, which could affect your move-in timeline.
Experts note that the rise in vacancy rates, due to a glut of ready-for-occupancy units, might further delay pre-selling projects. So, even if you purchase now, you might find yourself waiting longer than anticipated to settle in.
Some developers have been asking buyers for extensions, a sign of ongoing delays. This is partly because of high mortgage rates and increased construction costs, making developers hesitant to start new projects.
It's crucial to check the developer's track record before committing. A good history can mean fewer surprises down the road, especially in a market where delays are not uncommon.
Remember, the property market is dynamic, and being informed can help you make better decisions. Keep an eye on trends and stay updated with reliable sources.
Sources: BusinessWorld Online, The Business Manual, Property Report PH
We have made this infographic to give you a quick and clear snapshot of the property market in the Philippines. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
9) Pay in cash for better deals, as sellers often prefer quick transactions over financing
In the Philippines, paying in cash for property has become a savvy move in recent years.
When you buy with cash, you often dodge extra costs like interest rates and loan fees, which can really add up. This makes cash deals attractive because both buyers and sellers can save money and time.
Cash transactions also tend to wrap up faster. Sellers love the financial stability and readiness that cash offers bring, especially in competitive markets. This speed and certainty often make cash offers more successful than those needing financing.
Another perk for sellers is that cash deals cut out the risk of financing delays. Many sellers, as noted in market reports, prefer these quick and efficient transactions.
In a bustling market, cash can be king. Sellers often lean towards cash offers because they promise a smoother, faster process, which is a big plus when time is of the essence.
So, if you're thinking about buying property in the Philippines, consider the benefits of cash. It might just give you the edge you need in a competitive market.
Sources: GlobalPropertyGuide.com, ZipMatch, This Old City
10) Build relationships in the Philippines to uncover hidden real estate opportunities, as locals often rely on word-of-mouth and personal networks
In the Philippines, real estate deals often happen informally, especially in recent years.
Many people, both locals and expatriates, find properties through personal networks rather than formal channels. This means that knowing the right people can lead you to hidden gems in the market. In Filipino culture, relationships play a big role in business, making community ties essential for successful transactions.
There's a trend of unlisted properties, or "pocket listings," which are shared through word-of-mouth instead of public platforms. Real estate agents in the country often stress the importance of local connections to access these exclusive deals. Buyers who have tapped into local advice often find themselves with unique opportunities that others might miss.
For those looking to buy property, it's crucial to understand that building relationships can uncover hidden opportunities. Locals often rely on word-of-mouth and personal networks for real estate deals, so getting to know the community can be a game-changer.
Case studies and testimonials from property buyers highlight how local recommendations can lead to successful purchases. These stories show that having the right connections can make all the difference in finding the perfect property.
Sources: Global Property Guide, Investopedia, Inquirer Business
11) Consider mixed-use developments for investment, as they are gaining popularity and offer both residential and commercial opportunities
Mixed-use developments are gaining popularity because they blend living and working spaces, especially in bustling areas like Metro Manila and Cebu.
People are drawn to these spaces for their convenience and accessibility, making them a hot commodity. The government is also on board, offering tax incentives and pouring money into infrastructure to support these projects.
This backing not only boosts the construction industry but also makes mixed-use properties more enticing for investors. They often have higher occupancy rates than traditional properties, thanks to their appeal to a wide range of tenants.
With a diverse tenant base, the risk of vacancies drops, providing a more stable income stream. Plus, people love the lifestyle perks, like having amenities and services just a stone's throw away.
Investing in these developments can be a smart move, as consumer preferences are shifting towards the convenience they offer. The trend is clear: mixed-use spaces are the future.
Sources: Inquirer Business, Talimar Financial, ResearchAndMarkets.com
Don't buy the wrong property, in the wrong area of the Philippines
Buying real estate is a significant investment. Don't rely solely on your intuition. Gather the right information to make the best decision.
12) Consider properties with sustainable features, as eco-friendly developments are increasingly in demand
Investing in properties with sustainable features is becoming a hot trend as more people seek eco-friendly homes.
In the Philippines, the demand for energy-efficient homes has surged, especially in 2023 and 2024. This shift is fueled by a growing awareness of environmental issues and a push from companies to meet sustainability goals. Real estate developers are catching on, adding green features like solar panels and rainwater systems to new projects. The government is also sweetening the deal with incentives like tax breaks and zero VAT on renewable energy installations, making these upgrades more appealing financially.
Buyers are not just looking for any home; they want ones that are both comfortable and eco-friendly. Surveys show a clear preference for properties with sustainable features, and the real estate industry is responding. Many developers are now focusing on projects that incorporate these green elements, knowing that this is what the market wants.
Interestingly, this trend is not just about saving the planet; it's also about saving money. Energy-efficient homes can lead to lower utility bills, which is a big draw for potential buyers. Plus, with the added government incentives, the initial investment in these features can pay off in the long run.
For those considering buying property in the country, now might be the perfect time to look into these eco-friendly options. Not only are they in demand, but they also offer a chance to be part of a growing movement towards sustainability. It's a win-win situation: you get a modern, comfortable home, and you contribute to a greener future.
Sources: Billion Bricks, Business Inquirer, NAR Realtor
13) Look for undervalued properties at auctions or foreclosures, but be ready for legal and renovation challenges
Foreclosures in the Philippines have been increasing, especially in 2023 and 2024.
This rise means more chances to snag a property at a bargain, as foreclosed homes often sell below market value. Auctions are a hotspot for these deals, but remember, many of these homes need significant repairs. It's common here for foreclosed properties to be left in less-than-ideal condition, so factor in those renovation costs.
Legal issues can also pop up when buying foreclosed properties. You might have to ensure the foreclosure process was done correctly or deal with previous owners who aren't ready to move out. These challenges can make the buying process tricky, so it's crucial to be prepared.
Despite these hurdles, the potential for finding a gem at a lower price is real. Just be ready for the extra work that might come with it. Understanding the local market and legal landscape can give you an edge in navigating these waters.
In the Philippines, foreclosures can be a double-edged sword. While they offer opportunities, they also come with their own set of challenges. Being informed and cautious is key to making a smart investment.
Sources: Attom Data on Foreclosure Filings, Legal Recourse for Buyers of Foreclosed Properties, How to Buy Foreclosed Properties in the Philippines
14) Hire a reputable lawyer to conduct thorough due diligence, as property titles in the Philippines can be unclear or disputed
Buying property in the Philippines can be tricky due to unclear or disputed titles.
The Torrens System, meant to simplify ownership, sometimes complicates things when titles aren't properly registered. This can lead to disputes, especially if someone not recognized as the owner withholds the title. The Land Registration Authority often sees issues like these, even with their verification services.
To avoid headaches, it's crucial to hire a reputable lawyer who knows the ins and outs of the system. They can help ensure your property transactions are both secure and lawful, guiding you through any potential pitfalls.
In 2023, there was a notable rise in land and environmental conflicts, affecting over 70,345 hectares of ancestral domains. This highlights the importance of doing thorough due diligence before making any property decisions.
Understanding the local legal landscape is key to protecting your property rights. With the right legal expertise, you can navigate these complexities and make informed decisions.
Remember, property titles can sometimes be unclear or disputed, so always conduct thorough due diligence and hire a reputable lawyer.
Sources: Philstar, Lawyer Philippines, Lawyer Philippines
We made this infographic to show you how property prices in the Philippines compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It’s an easy way to spot where you might get the best value for your money. We hope you like it.
15) Be patient and persistent, as transferring property titles in the Philippines can be slow and bureaucratic
Transferring property titles in the Philippines can be a lengthy and bureaucratic ordeal.
Imagine you're ready to buy a beautiful piece of land, but then you find out that it might take 2-3 months just to complete the title transfer. This isn't just a one-step process; it involves verifying documents and examining titles, which can really slow things down.
One of the main reasons for these delays is the lack of manpower and resources in the offices handling these transfers. It's not uncommon to find that there simply aren't enough people to process all the paperwork efficiently.
Another hurdle is the limited digitization of records. Many of the processes are still done manually, which adds to the backlog and makes everything take longer than it should.
So, if you're planning to buy property, be prepared for some waiting. Patience and persistence are key when navigating this system. It's a bit like waiting in line at a popular restaurant; you know the meal will be worth it, but the wait can be frustrating.
Sources: Lawyer Philippines, Suntrust Properties
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility.