House prices in the country are rising again, as buyers become optimistic about the Philippine economy.
The average price of luxury 3-bedroom condominiums in Makati CBD rose 7% q-o-q to PHP 103,000 per (USD 2, 389) sq. m. in Q1 2011, according to Colliers International. Over the next 12 months, the average capital value is likely to increase by about 5% to P112, 700 (USD 2, 614) per sq m., says Colliers.
True, on an annual basis the figures are less positive. The average house price rose 3.84% during the year to Q1 2011. However when adjusted for inflation, average house price actually dropped 0.21% over the same period.
In Ortigas, the average land value rose by 1.05% q-o-q to PHP124, 000 (USD 2,852) per sq. m. in Q1 2011, and is expected to increase 3%-5% by end-2011.
In Bonifacio Global City Taguig, like the Makati CBD, the average land capital value now stands at PHP103, 000 (USD 2,389) per sq. m., and is expected to increase between 3% and 4% after a year.
Real estate prices are expected to rise by 3% to 5% in 2011, according to Colliers International. Makati CBD is expected to lead the way with a 5.4% y-o-y increase, while prices in other key areas of Metro Manila are expected to rise by 3%.
The total housing stock in the country is also expected to rise further this year. In key areas in Metro Manila alone, an estimated 8,900 units, or over 17 condominiums, are being built. Recent projects include One Rockwell West (504 units), The Columns Legaspi Tower 1 (390 units), Grand Emerald Tower (1,064 units), and The Fort Residences (217 units).
The total number of residential condominium units in Greater Manila’s CBD is expected to reach about 61,000 units within the next two years, twice the 2010 figure (a ‘condominium’ in Philippine parlance denotes something more upmarket than an ‘apartment’)
Rockwell Center still has the highest rentals. A condominium unit typically costs PHP736 (USD 16.9) per sq. m. per month in Q4 2010, up 3% from the previous quarter.
In Makati CBD, rents for luxury 3-bedroom condominiums are expected to increase 4% over the year. During Q1 2011, a 290-sq. m. unit rents for about PHP560 (USD 12.9) per sq. m. per month.
The Philippine housing market relies heavily on remittances from overseas Filipinos, especially mid-scale subdivisions and other housing projects in provinces adjoining Metro Manila. Condominium demand in Metro Manila is also fuelled by employees in the rapidly-expanding business-process outsourcing (BPO) industry (primarily call centres).
The growth of the housing market is held back by several obstacles. The mortgage market is relatively underdeveloped, and most houses are sold for cash or pre-sold. Property buyers also face high transaction costs, corruption and red tape, fake land titles and substandard building practices.
The implementation of the much-anticipated Real Estate Investment Trust (REIT) law, expected to increase market liquidity, is being hindered by regulatory, tax and other issues, although the implementing rules and regulations became law more than a year ago, in December 2009.
The average price of luxury 3-bedroom condominiums in Makati CBD rose 7% q-o-q to PHP 103,000 per (USD 2, 389) sq. m. in Q1 2011, according to Colliers International. Over the next 12 months, the average capital value is likely to increase by about 5% to P112, 700 (USD 2, 614) per sq m., says Colliers.
True, on an annual basis the figures are less positive. The average house price rose 3.84% during the year to Q1 2011. However when adjusted for inflation, average house price actually dropped 0.21% over the same period.
In Ortigas, the average land value rose by 1.05% q-o-q to PHP124, 000 (USD 2,852) per sq. m. in Q1 2011, and is expected to increase 3%-5% by end-2011.
In Bonifacio Global City Taguig, like the Makati CBD, the average land capital value now stands at PHP103, 000 (USD 2,389) per sq. m., and is expected to increase between 3% and 4% after a year.
Real estate prices are expected to rise by 3% to 5% in 2011, according to Colliers International. Makati CBD is expected to lead the way with a 5.4% y-o-y increase, while prices in other key areas of Metro Manila are expected to rise by 3%.
The total housing stock in the country is also expected to rise further this year. In key areas in Metro Manila alone, an estimated 8,900 units, or over 17 condominiums, are being built. Recent projects include One Rockwell West (504 units), The Columns Legaspi Tower 1 (390 units), Grand Emerald Tower (1,064 units), and The Fort Residences (217 units).
The total number of residential condominium units in Greater Manila’s CBD is expected to reach about 61,000 units within the next two years, twice the 2010 figure (a ‘condominium’ in Philippine parlance denotes something more upmarket than an ‘apartment’)
Rockwell Center still has the highest rentals. A condominium unit typically costs PHP736 (USD 16.9) per sq. m. per month in Q4 2010, up 3% from the previous quarter.
In Makati CBD, rents for luxury 3-bedroom condominiums are expected to increase 4% over the year. During Q1 2011, a 290-sq. m. unit rents for about PHP560 (USD 12.9) per sq. m. per month.
The Philippine housing market relies heavily on remittances from overseas Filipinos, especially mid-scale subdivisions and other housing projects in provinces adjoining Metro Manila. Condominium demand in Metro Manila is also fuelled by employees in the rapidly-expanding business-process outsourcing (BPO) industry (primarily call centres).The growth of the housing market is held back by several obstacles. The mortgage market is relatively underdeveloped, and most houses are sold for cash or pre-sold. Property buyers also face high transaction costs, corruption and red tape, fake land titles and substandard building practices.
The implementation of the much-anticipated Real Estate Investment Trust (REIT) law, expected to increase market liquidity, is being hindered by regulatory, tax and other issues, although the implementing rules and regulations became law more than a year ago, in December 2009.
Analysis of Philippines Residential Property Market »
RENTAL YIELDS
Last Updated: Oct 26, 2011
Yields in Manila remain good, but somewhat lower than during the past few years (when they were excellent). This does not mean that foreign investors should necessarily rush to invest in Manila, because transaction taxes (known as ‘capital gains taxes, but not actually such), and (if observed) official income tax rates applicable to non-resident investors, are high.
Buying prices for condominiums are at around US$2,000 to US$2,500, though of course it is easily possible to pay more. Unusually, yields are not highest on the very smallest units, which suggests that smaller condominiums are oversupplied. The highest-yielding units are 70 square metre units (which have gross rental yields of nearly 10%). Yields are surprisingly good on very large condominiums (250 square metres), at around 9%, and this may be an optimal size for investment.
Buying prices for condominiums are at around US$2,000 to US$2,500, though of course it is easily possible to pay more. Unusually, yields are not highest on the very smallest units, which suggests that smaller condominiums are oversupplied. The highest-yielding units are 70 square metre units (which have gross rental yields of nearly 10%). Yields are surprisingly good on very large condominiums (250 square metres), at around 9%, and this may be an optimal size for investment.
TAXES AND COSTS
Last Updated: Mar 06, 2012
Rental Income: Nonresident foreigners who are engaged in trade or business are taxed at progressive rates (5% to 32%) on their net income. Rents above PHP10,000 (US$231) per month are also liable to VAT at 12% of gross rent.
Capital Gains: Capital gains realized by nonresident foreigners considered to be engaged in trade or business for tax purposes are taxed at the standard progressive income tax rates (5% to 32%). Taxable gains are the difference between selling price and acquisition cost of the property.
Inheritance: Non-resident foreigners pay estate tax only on property located in the Philippines at rates from 5% to 20%.
Residents: Resident citizens are taxed on their worldwide income at progressive rates, from 5% to 32%. Resident foreigners and nonresident citizens are taxed on Philippine-sourced income at progressive rates.
Capital Gains: Capital gains realized by nonresident foreigners considered to be engaged in trade or business for tax purposes are taxed at the standard progressive income tax rates (5% to 32%). Taxable gains are the difference between selling price and acquisition cost of the property.
Inheritance: Non-resident foreigners pay estate tax only on property located in the Philippines at rates from 5% to 20%.
Residents: Resident citizens are taxed on their worldwide income at progressive rates, from 5% to 32%. Resident foreigners and nonresident citizens are taxed on Philippine-sourced income at progressive rates.
BUYING GUIDE
Last Updated: Sep 28, 2007
The total roundtrip cost of property purchase is around 16.23% to 23.75% of the property value, inclusive of Capital Gains Tax (6%) and Real Estate Agent's Fee (3% to 5%). It takes about 33 days to go through the eight procedures needed to register a property in the Philippines. Pre-selling, or the selling of units during construction, is the fashion nowadays. The buyer should be careful when buying unfinished buildings or condominiums.
LANDLORD AND TENANT
Last Updated: Nov 08, 2007
The luxury rental market is generally pro-landlord. However, for the rest of the market the balance of power between landlord and tenant in the Philippines is neutral.
Rents: The parties can freely determine the amount or rent and rent increases. At the upper end of the market, the landlord receives one year’s rent in advance in post-dated cheques.
Legal System: The legal system is cumbersome. Tenant eviction can go through a long and expensive trial. In practice, the landlord’s success in evicting a tenant may depend on his influence in influencing the police (or local gang members) to apply pressure.
Rents: The parties can freely determine the amount or rent and rent increases. At the upper end of the market, the landlord receives one year’s rent in advance in post-dated cheques.
Legal System: The legal system is cumbersome. Tenant eviction can go through a long and expensive trial. In practice, the landlord’s success in evicting a tenant may depend on his influence in influencing the police (or local gang members) to apply pressure.
ECONOMIC GROWTH
Last Updated: Oct 08, 2011
Economic growth slowing
The Philippine economy is now slowing, partly due to the impact of the European debt crisis, exacerbated by weak US and Japan economies. Both the Asian Development Bank (ADB) and the International Monetary Fund (IMF) recently slashed their GDP growth forecast for the Philippines from 5% to 4.7% this year. This was in sharp contrast with the 8.9% GDP growth rate seen in 2010.
From 2000 to 2005, the average unemployment rate was 11.4%. Then it dropped to an average of 7.5% from 2006 to 2010. Now unemployment is around 7.1% (2.8 million unemployed persons), according to the National Statistics Office (NSO). But the underemployment rate (individuals who are employed but not consistent with their skills or desires) is 19.1% (about 7.1 million persons).
Inflation stood at 4.3% in August 2011. By end-2011, inflation is projected to settle between 3.7% and 4.7%, still within the Bangko Sentral ng Pilipinas (BSP)’s official target. Some economists believe inflation may rise above 5%, with rising global oil prices.
To keep inflation within the target band, BSP raised its key policy rates in August 2011, and the lending rate now stands at 6.25%.
From 2000 to 2005, the average unemployment rate was 11.4%. Then it dropped to an average of 7.5% from 2006 to 2010. Now unemployment is around 7.1% (2.8 million unemployed persons), according to the National Statistics Office (NSO). But the underemployment rate (individuals who are employed but not consistent with their skills or desires) is 19.1% (about 7.1 million persons).
Inflation stood at 4.3% in August 2011. By end-2011, inflation is projected to settle between 3.7% and 4.7%, still within the Bangko Sentral ng Pilipinas (BSP)’s official target. Some economists believe inflation may rise above 5%, with rising global oil prices.
To keep inflation within the target band, BSP raised its key policy rates in August 2011, and the lending rate now stands at 6.25%.
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