Philippines: Property Investment Profile

Should You Invest?

The Philippines is striving to become a main player in the global economy and if it continues to progress at its current rate, may soon achieve this goal. The recently re-elected government is more stable than it has been in many years and increased levels of inward investment and tourism stand the country in good stead for future growth. In addition, the amount of money and investment brought in by Filipino ex-pats is further boosting the economy.

Overseas investors will need to consider the restrictions on ownership if they wish to buy here, as non-nationals cannot own property outright, apart from in certain circumstances. Though there are ways of circumventing the law it may not suit all types of investor.

For those who do decide to invest, prices are extremely low by European standards and there is the opportunity to buy well in both city and beach locations. The distance may make it too far as a holiday-home destination for European investors without a base or links to the region and so the main attraction would undoubtedly be as a buy-to-let investment with a focus on long-term capital growth. Overseas investors will, however, need to consider the costs of owning and renting here. All income, including rental returns, earned by non-residents is charged at 25% tax. Value added tax of 12% is also added onto the overall costs if rent exceeds 10,000 PHP per month and charges associated with the employment of a management firm to organize rentals may also be incurred.

• More stable government than previous years
• Growing inward investment and tourism
• Low prices compared with European standards

Rental Yields

Rental yields for condominiums located in Makati CBD, Rockwell, Ortigas Centre and Fort Bonifacio, municipalities that make up the Metro Manila are high. Smaller apartments yield at the highest amount with studio apartments in prime areas of Metro Manila earning 13 – 15% yields. The highest yields are achievable on the smallest apartments approximately 30 square metres in size, earning 15.1% yields. A larger studio approximately 40 square metres in size is expected to achieve a lower return of 12.9%.

LOCATION TYPE OF PROPERTY	SIZE (M2)	AVERAGE PRICE TO BUY (US$)	COST PER M2 TO BUY (USS$)	AVERAGE PRICE TO RENT (US$)	COST PER M2 TO RENT (US$)	YIELD (%)
Metro Manila - Condominiums
	30	52,230	1,741	467	15.6	10.73%
	55	100,705	1,831	912	16.6	10.87%
	90	181,710	2,019	1,752	19.5	11.57%
	120	236,280	1,969	2,210	18.4	11.23%
	180	312,840	1,738	2,563	14.2	9.83%
	300+	529,500	1,765	4,263	14.2	9.66%

^{Source: Global Property Guide}

Price History

The Philippines suffered a big price drop during the 1997 economic downturn in Southeast Asia but prices have climbed overall in the past five years by just under 27%. In 2006 there was around a 4% average increase in the Philippines market with Manila seeing luxury apartments increase in value by around 9.5%. Nevertheless, prices in all areas of the Philippines are substantially cheaper then in more developed markets. Square metre prices average around 68,600Php and apartments start at under 2mPhp but much of the cheaper property will be in areas that are not necessarily attractive to the better-off tenant or future buyer. Satisfactory property in rentable locations starts at around 4mPhp for a one-bedroom apartment in a complex with facilities such as a gym, a swimming pool and 24-hour security. High-end, three- or four-bedroom apartments in swanky Fort Bonifacio or the Greenbelt area sell for around 20m to 30mPhp. The government is considering relaxing restrictions on foreign ownership and if this happens prices will probably climb at a faster rate.