The Philippines has become an increasingly popular destination for property investment in recent years. With its growing economy, young population, and undersupplied housing market, the Philippines offers attractive opportunities. However, foreign investors also face restrictions, risks and complex regulations when investing in Philippine real estate. By understanding the market conditions, legal framework and following prudent investment principles, investors can better capitalize on Philippines’ property growth potential.
Strong economic and demographic fundamentals
The Philippines has sustained strong GDP growth averaging over 6% in the past decade. It has a large, growing population with the median age of just 23.5. Yet housing supply has seriously lagged behind demand. Manila, despite having a similar population size to Shanghai, has only one-tenth of the land area of the latter, leading to severely inadequate housing.
High rental yields
Rental yields of 8-12% per annum are common for properties in Manila, the capital. Such returns are very attractive on a global scale, providing foreign investors stable recurring income. For properties below 3.2 million pesos, 12% value-added tax can also be exempted.
Restrictions on foreign ownership
Under Philippines constitution, foreign individuals and entities cannot directly own private land. The maximum foreign ownership in companies holding private land is 40%. However, foreigners can fully own condominium units registered under the Philippine Condominium Act. Typical real estate investment structures for foreigners thus involve long-term land leases paired with full ownership of properties built on the land.
Complex regulations and transfer restrictions
A mix of national laws, local regulations and restrictions apply to real estate transactions, especially those involving foreign investors. Requirements on spousal consent, shareholder approval, zoning compliance, tax clearance etc. may apply. Professional advice is essential to navigate the bureaucratic process.
While the Philippines property market has promising growth potential, foreign investors face restrictions and should act with caution. Conducting due diligence, structuring investments properly and getting professional assistance are key to effectively managing the risks.