Market in Depth

Philippines Residential Real Estate Market Analysis 2023

Lalaine C. Delmendo | April 14, 2023

Philippines Residential Real Estate Market Analysis 2023 The Philippines' housing market is showing signs of improvement, amidst strong economic growth. During 2022, the average price of a luxury 3-bedroom condominium unit in Metro Manila's central business districts (CBDs) rose by a modest 3.93% to PHP 195,750 (US$3,588) per square metre (sq. m), based on figures from Colliers International. However when adjusted for inflation, prices for luxury properties in CBDs actually fell by 3.82% last year.

On a quarterly basis, house prices rose by 1.59% in Q4 2022 but declined slightly by 0.62% in real terms.

Demand is also improving. During 2022, pre-selling activity in the CBDs rebounded with 20,000 units sold, up by 54% from just 13,000 units sold in 2021, according to Colliers. Though, it remains far below the pre-pandemic sales of about 40,000 to 50,000 units.

The Philippines experienced a house price boom from 2010 to 2018, with house prices in CBDs rising by 125% (77% inflation-adjusted). But with a slowing domestic economy, coupled with the US-China trade war, the housing market slowed sharply in 2019, with house prices rising by a meagre 0.9% and falling by 1% when adjusted for inflation. In 2020 the Covid-19 pandemic aggravated the situation, sending the housing market to its knees. In fact the Philippines has been ranked as the worst performing housing market in the Global Property Guide's 2020 Global House Price Survey, with CBD house prices plunging by 13.2% (-16.1% inflation-adjusted). Housing market woes continued in 2021, with prices falling by 6.5% (-9.8% inflation-adjusted) – making it still the second weakest housing market in the Global Property Guide's 2021 Global House Price Survey.

The housing market is projected to continue its recovery this year.

“We are optimistic of better recovery prospects this year. Colliers is projecting improvement in vacancies across Metro Manila's secondary market and this should result in rebound in rents and prices,” said Mr. Joey Roi Bondoc, the Research Director of Colliers International Philippines.

“We see continued queries from expatriates while demand from local employees has been raising rents in major business districts such as Makati, Fort Bonifacio, and Ortigas. We expect developers to continue lining up new condominium projects in 2023. Over the near to medium term, developers and investors should keep an eye on persistently high inflation and its potential impact on interest and mortgage rates.”

Philippines house prices
The Philippine economy grew by 7.6% for the full year of 2022, following a 5.7% expansion in 2021 and a 9.5% decline in 2020, mainly buoyed by strong growth in wholesale and retail trade, manufacturing, repair of motor vehicles, and construction, according to the Philippine Statistics Authority (PSA). It was its best showing since 2010. Prior to the pandemic, the Philippine economy had been growing by an average of 6.4% annually from 2010 to 2019.

The Philippine government expects the economy to grow between 6% and 7% this year.

Analysis of Philippines Residential Property Market »

Rental Yields

Philippines: yields good, though lower than in recent years

The demand for property prices in the Philippines hampered. Thus, condominium property prices dropped off. Records have shown that these prices declined due to Covid-19 impact.

Makati City, as the country's financial center offers a great and modest properties. If you are planning to buy a property, Makati is one of the best neighborhoods. Legazpi Village, Salcedo Village, Rockwell Centre, name it. This city is one of the most urban areas in the Philippines.

Bonifacio Global City is also one good place to live. In this area, condominium prices are from US $3,838 to US $ 5,412. For a 45 square meter unit you can get a rental yield of 5.65% and 4.47% for a 150 square meter unit. Not bad!

Compared to other neighboring districts, condominium prices in Rockwell, Makati are still expensive. It ranges from US $5,487 to $ to US $5,526 per square metre. For some neighboring districts like in Legazpi Village, Makati condominium prices are cheaper. It ranges from US $3,803 to US $4,305. And what's interesting is that you can buy a larger size condominium much cheaper than a small one.

Round trip transaction costs are high for foreign buyers in Philippines (though the surcharge is unlikely to be permanent). See our Property transaction costs analysis for Philippines and Property transaction costs in Philippines, compared to the rest of Asia.

Read Rental Yields »

Taxes and Costs

Moderate taxes for foreigners
engaged in trade or business

Rental Income: Nonresident foreigners who are engaged in trade or business are taxed at progressive rates (0% to 35%) on their net income. Rents above PHP12,800 (US$26) per month are also liable to VAT at 12% of gross rent.

Capital Gains: Capital gains realized by nonresident foreigners from selling properties used in trade or business 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 0% to 35%. Resident foreigners and nonresident citizens are taxed on Philippine-sourced income at progressive rates.

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Buying Guide

Transaction costs can be very high in the Philippines

The total roundtrip cost of property purchase is around 4.50% to 16.25% of the property value.

For taxation purposes, properties are treated as capital assets if it is not used in trade or business, and properties are treated as ordinary assets if it is used in trade or business, such as rental property. The 6% Capital Gains Tax applies only on properties treated as capital assets and not on properties treated as ordinary assets.

It takes about 32 days to go through the nine procedures 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.

Read Buying Guide »

Landlord and Tenant

Rents are paid one year in advance in Manila

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.

Read Landlord and Tenant »


Strong economic growth, recovering tourism

The Philippine economy grew by 7.6% for the full year of 2022, following a 5.7% expansion in 2021 and a 9.5% decline in 2020, mainly buoyed by strong growth in wholesale and retail trade, manufacturing, repair of motor vehicles, and construction, according to the PSA. It was its best showing since 2010.

Prior to the pandemic, the Philippine economy had been growing by an average of 6.4% annually from 2010 to 2019.

Philippines gdp inflation
The Philippine government expects the economy to grow between 6% and 7% this year.

Tourism continues to recover. During 2022, the total number of international arrivals reached 2.65 million – sharply up from just 163,879 visitors in 2021 and 1.48 million in 2020, and exceeded the government’s 1.7 million target. However, it remains far below the 8.26 million arrivals recorded in 2019 before the pandemic.

As a result, tourism revenues soared by a whopping 2,466% y-o-y to US$3.68 billion in 2022.

“In the past, we have overcome a global pandemic and survived various calamities. The Philippine tourism industry has managed to exceed expectations and our tourism partners and frontliners continue to offer the best of Filipino grace and hospitality to the world,” said Department of Tourism Secretary Christina Frasco.

In 2022, the country posted a budget deficit of PHP1.6 trillion (US$28.91 billion), down by 3.35% from a shortfall of PHP1.7 trillion (US$30.72 billion) in 2021. As percent of GDP, the deficit was equivalent to 7.33% in 2022, down from 8.6% in 2021. Though, it remains far above the 3.4% shortfall recorded during the pre-pandemic year of 2019.

The labour market remains robust. In February 2023, the unemployment rate was 4.8%, unchanged from the previous month but down from 6.4% a year earlier, based on preliminary estimates released by the PSA. The underemployment rate also declined to 12.9%, from 14.1% a month ago and 14% in the previous year.

Philippine peso to remain weak this year
After appreciating by 5.6% in 2020, the Philippine peso depreciated to the second straight year in 2022, reaching an all-time low of PHP 58.681 = US$ 1 in October 2022, amidst aggressive rate hikes delivered by the U.S. Federal Reserve to rein in inflation last year.

The local currency has regained some value since, with a monthly average exchange rate of PHP 54.717 = US$1 in March 2023. This is mainly attributed to the BSP’s successive rate hikes, matching the U.S. Fed’s tightening measures to maintain a healthy interest rate differential.

Though market analysts expect the peso boost to be temporary. The First Metro Investment Corporation – University of Asia & the Pacific Capital Markets Research projects the peso to weaken to the PHP57 to PHP59 range against the U.S. dollar this year while Fitch Solutions expects the exchange rate to reach PHP 56.5 to US$1.

Likewise, Standard Chartered Bank also forecast the peso to depreciate further for the third consecutive year, hitting the PHP57 to US$ 1 level anew by end-2023 – about 2.2% weaker than the end-2022 level of PHP55.755 to US$1.

“I think that the sort of main underlying factor which we think will lead to higher dollar-peso this year is really the external balance story. Philippines’ current account deficit in 2023 is still projected to be wide, both by our forecasts and by the central bank’s forecasts,” said Divya Devesh of Standard Chartered Bank.

In 2022, the country posted a trade deficit of US$58.3 billion, sharply up by 38% from US$42.2 billion in 2021 and more than double the shortfall of US$24.6 billion in 2020.

Exports rose by 5.6% y-o-y to US$78.8 billion in 2022 while imports surged by 17.3% y-o-y to US$137.2 billion. As a result, the country’s balance of payments (BOP) deficit swelled to US$7.26 billion last year, a sharp turnaround from the US$1.35 billion surplus seen in 2021.

“This was due to the widening trade in goods deficit as goods imports continued to surpass goods exports,” the BSP said. “This is on the back of the increase in international commodity prices and resumption in domestic economic activities.”

Global commodity prices, particularly oil, surged in 2022 following the Ukraine-Russia war. The adverse impact has rapidly reached other commodities such as food as the tension between the two countries restricted trade across many economies.

In March 2023, the headline inflation in the country stood at 7.6%, down from 8.6% in the previous month but still up from 4% in the same month last year, according to the PSA. This is also far above the central bank’s target band of 2% to 4%. Monthly inflation averaged just 2.8% from 2012 to 2021, before accelerating to 5.8% in 2022.

The BSP forecasts inflation to remain elevated in the coming months to average at 6.1% in 2023 before easing to 3.1% in 2024.