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|Finance to Support Philippines Real Estate Investment|
|Philippines Real Estate||
Philippines real estate will be impacted by the financial market turmoil and increasing uncertainty surrounding the global economy. However, reforms and strict banking policies which the Philippines adopted after the 1997 Asian crisis will help 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 Philippines real estate is the optimum investment strategy to fulfill your objectives:
The Philippines real estate market has potential to be one of the strongest property growth markets in Asia. Dependent on continued government reform, potential advantages for the Philippines include: i) climate; 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.
Overview of Asia Property Consultants Philippines Real Estate Services
The Philippines' National Economic and Development Authority (NEDA) reports that GDP growth as of Q1 2010 is 7.3%. This value represented the highest growth rate for the first quarter in almost three decades. The brighter global economic outlook, increased business and consumer confidence all contributed to the resurgence in economic activities.
Inflation is another issue facing the Philippines. According to the Philippines national statistics office, the Q1 2010 figures show average headline inflation of 4.3%. 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.
In 1997, the Philippines experienced the biggest drop in property prices among all economies affected by the Asian financial crisis. A speculative bubble formed in the 1990s in the Philippines’ real estate market, after financial liberalization and economic reforms had attracted investment. Luxury condominium prices rose 63% between 1995 and 1997, only to drop by 18% from 1997 to 1998.
The strong position of parts of the Philippines real estate market could be the result of the initiatives put in place after the 1997 crisis. Tight lending rules and a substantial up-front cash payment requirement help to protect against mortgage problems such as the US and other countries are experiencing.
The World Bank economists have upgraded their growth forecast for the Philippines to 3.5% for 2010 due to a more positive outlook for the global economy, increased quantity of money being sent home by Filipinos abroad, increased consumption and robust government spending..
|Seeking to provide a financial security blanket to about 1.55 million low income tenants, President Arroyo signed the Rent Control Act of 2009 or Republic Act 9653 that puts caps on rental hikes.|
|According to the Colliers International Knowledge Report for Q1 2010, the office sector is improving as demand has picked up in the last six months. There is optimism that the improvements will continue over the coming 12 months.|
|According to the 2010 Global Real Estate Transparency Index, the Philippines' real estate market is ranked as having 'semi-transparency' and is the 48th least corrupt in the world (out of 81 markets). The level of transparency in a market is important to consider when transacting, owning and operating in foreign markets.|
By law, foreigners don’t have the right to buy land in the Philippines. However, this does not mean foreign ownership of Philippine real estate is impossible. Having a Filipino spouse, foreign ownership as Philippine corporation, property without land such as a condominium are ways to allow international entrepreneurs and property investors to buy residential real estate, commercial real estate, or as a property investment.
Property developers are increasingly catering to: 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. International investors are attracted by the relatively cheap prices for Philippines real estate, strong rental yields and easy payment options. The concepts of Apart-Hotel, Condotel, buy-to-Let rental properties attract many investors as these provide an investment opportunity where the owner can use the property when needed but also as a managed rental apartment when not needed, hence giving return on their investment.
Although prices in the Philippines real estate market have risen sharply since 2004, strong ongoing growth is vulnerable to: i) lower economic growth due to the US economic slowdown and reduced consumer spending; and ii) a significant depreciation of the US dollar against the Philippine peso, which would impact the ability of 8 million overseas Filipino workers to invest in Philippines real estate.
The Philippines remains hampered by its poor international image as a country to do business, as evidenced in its low ranking in the 2009 Corruption Perception Index by Transparency International. The Philippines ranked 139th out of 180 countries on this index, a slight improvement in the rankings from 2008 where it was equal 141st (out of 180 countries).
For more information on Philippines real estate, phone our Singapore office at (+65) 6735 0120 or email us here
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