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:

In July, the Philippines government revised its 2008 growth forecast down to 5.7-6.5% from its previous target of 6.3-7.0%. But in September, the secretary of the Philippines' National Economic and Development Authority (NEDA) further reduced the 2008 forecast for Gross Domestic Product (GDP) down to between 4.4-4.9%. GDP growth projections for 2009 have also been reduced to a lower range of 4.1-5.1%.

The Economist Intelligence Unit (EIU) predicts 2008 GDP to be 4.5% with 2009 dropping to 3.9%. The five year forecast is for growth however, with 2013 figure predicted to be 5.7%.

Inflation is another issue facing the Philippines. According to the Philippines national statistics office, the latest monthly figure (September 2008), shows headline inflation of 11.9%. 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.

4.

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.

5.

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.

6.

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.

7.

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.

8.

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.

9.

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.

10.

The Philippines remains hampered by its poor international image as a country to do business, as evidenced in its low ranking in the 2008 Corruption Perception Index by Transparency International. The Philippines ranked equal 141st 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 Philippines real estate, call our Singapore office at (+65) 67350120 or contact at email@healyconsultants.com