Philippines Tax Authority

World Bank Philippines page

The Philippines property market remains attractive to foreign investors equipped with accurate information and awareness of the local legal regulations on foreign ownership.Philippines real estate has been impacted by the financial market turmoil. Fortunately since the start of the year, Philippines' economy has improved. Reforms and strict banking policies which the Philippines adopted after the 1997 Asian crisis has helped to avoid severe credit problems such as the US and Europe are facing and, hence, support the Philippines real estate market.The following will help you determine whether the Philippines property market is the optimum investment strategy to fulfill your objectives:

1.

Prices in the Philippines property market have slightly risen since 2009 due to its positive economic growth. The price rise in nominal terms is now positive, according to the graph from Colliers International. In early 2009, luxury condominium prices and sales both fell in Manila. Even though these prices are currently rising, the Philippines is one of the cheapest places in Asia to buy a luxury condominium unit, offering strong rental yields for investors.

In 1997, the Philippines experienced the biggest drop in property prices among all economies affected by the Asian financial crisis. Political crises contributed to a further deterioration of the Philippines property market from 1998 to 2003, until a mild recovery began in 2004. However, even with gains from 2005 to 2007, property prices were still 50% below their 1995 peak in real terms. During the year 2009  the average price increased by 4.6% to PHP 101, 000 per sq. m.

3.

Property developers are increasingly catering to local demand, including i) local Filipinos with rising incomes on the back of recent economic growth and ii) a growing professional expatriate community relocating to the Philippines for employment or retirement.

The World Bank states that bottlenecks will prevent Philippines from realising real growth. Issues effecting the economic recovery of the Philippines include: poor business environment, infrastructure and education.

The Philippines National Statistical Coordination Board and National Economic and Development Authority (NEDA) report that the economy boomed with 7.3% GDP growth in the first quarter of 2009. This is an improvement from the corresponding 0.5% GDP growth in 2009. However inflation is an issue facing the Philippines. According to the Philippines national statistics office, the latest monthly figure (April 2009), shows headline inflation of 4.8%, down 1.6 percentage points from the previous month's value of 6.4%. While the EIU predicts inflation to drop to 4-4.5% between 2010-2013, inflation can have a negative impact on Philippines real estate market by increasing the cost of borrowing and general living expenses, hence, reducing the buying power of investors.

The strong position of parts of the Philippines property market could be the result of the initiatives put in place after the financial crisis. Tighter lending rules and the requirement for a substantial up-front cash payment help to protect against mortgage problems such as the US and other countries are experiencing.

Positive aspects of the Philippines property market include i) the climate of the Philippines ii) lifestyle values of Filipinos iii) strong population growth iv) proficient English speaking country v) western legal system vi) land title reform vii) regional proximity within Asia viii) tight property supply ix) low cost of living along with others.

By law, foreigners don’t have the right to buy land in the Philippines. However, foreigners are able to invest in the Philippines property market, including the sectors of residential real estate and commercial real estate. The three ways are:

Having a Filipino spouse

Foreign ownership as Philippine corporation

Property without land such as a condominium

The Philippines is hampered by its international image as a country to do business. This image is supported in its low ranking in the 2009 Corruption Perception Index by Transparency International. The Philippines ranked equal 139st out of 180 countries on this index, a decline in the rankings from 2007 where it was equal 131st (out of 179 countries).

For more information on the Philippines property market, call our Singapore office at (+65) 67350120 or contact us at email@healyconsultants.com