Why Today Is Not The Best Time To Invest In Real Estate In The Philippines

Posted by: Nimrod Flores in Real Estate Investing On:February 28, 2016 Last updated: March 6, 2016

No, today is definitely not the best time to start to invest in real estate in the Philippines. Read on to know why.

The best time to have started investing in real estate was in the past. For example, more than a decade ago (2004), the average price per square meter of a prime 3-bedroom condominium unit in Makati CBD was only about ₱65,000. Fast forward to the late half of 2015, it’s already just a little shy of ₱150,000!

(Graph and data source from here)

That’s an appreciation in market value by 130% in just 11 years!

To put that into a better perspective, let’s say you bought a 3 bedroom condominium unit in Makati in 2004. Let’s say the total floor area of the unit is 100sqm. If the the price per square in 2004 was ₱65,000, the total price of your unit would have been ₱6.5 million. But by 2015, the market value of that unit would have been ₱15 million already. And if you sold it then, you would have made ₱8,500,000 in profits!

And that’s not yet counting the money you would have made in rentals if you had your unit rented in all those 11 years.

Am I Too Late?

Alright, so you were unable to start back then; too bad, right? No, it’s not bad either. And it was not your fault. In fact, those who only started investing in properties in 2004, were already too late also, when compared to those who started way earlier than them.

Below is the earliest research I can find, published by the International Monetary Fund. And from this page you’ll see the housing prices in selected Asian countries, including the Philippines. The following graphs show data from 1991 to 2001:

(scroll to page 29 if it didn’t automatically load page 29.)

Download from source

Further, this paper published by our very own Philippine Institute For Development Studies in 2002, also gives us another idea of the prices of real estate properties in the 90’s:

What are the households’ options in terms of available housing in the market? The minimum low-cost housing unit under government programs costs ₱150,000.

(scroll to page 41 if it didn’t automatically load page 41.)

Download from source

Now of course, the above paper from PIDS was talking about the low-cost housing units by the government and not those built by the private sector. But that’s just to show another reference and to give you a better idea on how low the prices were, during that time.

Those who started investing in properties in the 90’s have made far more profits than those who just started in 2004!

Okay, so when is the next best time to invest in real estate?

The good news is, today is the next best time to start investing in real estate in the country! Well, essentially, the earlier you start, the better.

The Philippines is still underdeveloped for the most part. And as a developing country, there is still a great opportunity for progress, the room for growth is still very wide. Especially with the recently concluded ASEAN integration, which opens up the Philippines into the whole of Southeast Asia for better and less-restricted trade activities.

If you were not able to start investing yesterday when it was the best time, today is the next best time to do so. The longer you wait, the more you’re losing in terms of appreciation in the value of your property.

There’s a good reason why everyone in the industry is very upbeat right now. More opportunities are opening up to the people right here in our country, which means more income for them. This consequently means more buying power and elevated standard of living. And we know that having a roof above our heads is one of our basic needs.

Real estate prices are only going to rise in the coming years and decades.

Alright Wait, How do I get started?

To get started, first determine if you’re ready. To help you with that, you can read this article: “Avoid Losing Your Money – Determine If You’re Really Ready To Buy A Property Today“.

Then the next thing to do is to talk with a professional in the industry. A licensed broker is preferable. The job of your broker is to help you with the purchase of your property. He will facilitate the transaction, especially with the documentations and coordination with the seller/developer from whom you’ll buy.

Your broker is supposed to be your investing partner. So you need someone knowledgeable and experienced in this field. You should expect him to provide you with after-sales support also. In most cases, there are really concerns or questions that come up after the transaction and your broker should help you with these things.

Some people already know someone they can talk to. It may be a relative or a good friend who is in the real estate business. We recommend working with them if you know you can rely on them.

However, not everyone has this friend or family. If you are one of them, you may check out our services and find out how we can help you:

See how we're different from other brokers →

ABOUT THE AUTHOR

Nimrod Flores

Nimrod is the co-founder of PPE Inc. and our Tech Officer. His experience in real estate started when he bought a tax-delinquent property auctioned by the government back in 2007. He’s currently studying law at the San Beda College of Law.

betterthanu

You are a nimrod. Manila condos are tapped out and will crash because of overbuilding within 5 years. I bought 5 places in 2007and did quite nicely but would not touch Manila right now unless I planned to live in it
- Nimrod Flores
  
  Singapore and Hongkong are just two places where “overbuilding” has been happening for decades already. I only see prices going up and investors getting rich.
Johnny

The market in manila is flooded with condos. Many of them are very cheaply constructed. The only thing contributing to their market price is the lower peso value (the OFW’s, the foreigners), and rich families who need a condo in imperial Manila cause the country demands most business people go there frequently to get anything done. I don’t think that will change, but with any kind of economic shake up like the current turds running for office F’ing things up, it might get rocky for a bit.
I would say land in the Manila or nearby would be a great deal, but the corruption is just too strong. The squatter rights, the ability of shitty Filipinos to easy forge/ steal your land combined with the worst judicial system on the planet make any investment in the Philippines equivalent to a “rigged against” you casino.
– Seriously, 7 years to remove squatters from MY LAND while I’m liable for all taxes, mortgage payment, transfer tax, trash, waste, permits, court fees, etc while they live there for free (sometimes with little businesses or boarding room rentals) waiting for me to pay them to leave? WTF?!
As a Phil-Am/ former foreign investor in the Philippines, my advice is to stay as far away from the Philippines as possible. You’d be better blowing your money in a vegas casino than investing it there; you’ll lose your investment to some type of scam, corruption, or squatter type locals and you’ll spend the same amount trying to get it back in court while a stroke or heart-attack will happen sooner than the DOJ actually does something correct.
Simply retire in the Philippines with a small home/ condo and an income from another country that is steady. Invest in foreign bonds or foreign real estate and live off the dividends. The peso will only weaken when the election violence starts or next bullet planting type scam makes world news again to scare off tourists/ investors.
- Nimrod Flores
  
  The good things about your comment are that 1.) you recognize that there are rich families in the Philippines and that 2.) you still actually suggest retiring here despite all the other things you said.
  
  Here’s what I think:
  
  The fact that there are actually rich families here is proof that there is wealth to be made in this country.
  
  And how did those families become rich? I’m quite sure their great great grandfathers didn’t just wake up one day with a pile of money beside their beds. I’m inclined to think that they became rich because they made investments long ago. And those investments are paying off for them now and not only for themselves but for their whole families and for the many generations to come in their families.
  
  What we’re trying to tell people here is that they should start investing as early as now. Yes the country still has a lot to improve on. But should we just wait until everything is perfect before we start investing?
  
  Those rich families that you’ve mentioned sure didn’t wait. And they’re enjoying the fruits of their investments today.
  
  You know, our own successes or failures are most of the time not the whole picture. And they certainly don’t necessarily apply to each and everyone. While we may fail at something we’re trying to do but there are others who are succeeding at it. Just because we failed doesn’t mean everyone will fail also.
  
  When you met a lot of frustrations with your investing activities here, there were so many others who met tremendous successes. And I think the better thing to do instead of crying over a bottle of spilled milk, is to find out what those successful people did right and follow them.
- Johnny
  
  @Nimrod,
  I’m not hating on the Philippines. Many Filipinos think speaking truthfully is equivalent to hating it.
  Say someone invests in a condo in the Philippines as many have. They are on a limited budget and making mortgage payments. Well when something happens like severe water leaks or a tenant refuses to pay? That “investment” is now a bottomless pit of money being thrown into is as there is a severe lacking in property rights or liability in flawed construction. Can someone on a limited budget seriously afford to be in court for 8 years. Not to mention the double digit IQ workers at the gov’t offices/ court who start seeing someone desperate for justice and use it to demand bribes. So, besides a mortgage, HOA fees, constant repairs, damage from the non-paying tenant/ construction company defects, attorney, court costs, time from work, the person would now have to pay bribes on top of that.
  Many condo owners are having a hard time selling their units. Anyone who owns either SMDC or Megaworld can attest to the cheap, shoddy construction. They look nice but are riddled with leaks and electrical issues. However, Henry Sy and company will never be liable as they can pay off judges and prosecutors to delay the case or simply dismiss it.
  Invest in land or a farm? If its too close to the city proper or attractive area, you have to worry about squatters, shifty barangay captains, and agrarian reform if its big enough. If its further away from the city, well you now have to deal with shifty barangay captains, agrarian reform, and now the NPA demanding their cut.
  For every great investment story, there are thousands of terrible one. Not because of bad people or ideas, but because the system is so bad innocent people are never protected.
  For the rich families, it seems the 90% of them are gov’t people, politicians, former politicians, family members of politicians, those connected to the politicians,, and those who worked very hard, invested wisely, and also got lucky. Now, I will concede investing in pse stocks would have been great 10 years ago. It might be good after they elect Binay or Duterte after the pse drops 20%.
  There are better, safer ways to invest than in the philippines. Bonds in other currencies would be a great start as the peso declines, the exchange rate gets better and the money can become more valuable.
  - Nimrod Flores
    
    Yes, no one is actually hating on the Philippines. There are just people who are airing out their frustrations or disappointments. 🙂 And I understand that. I have my own share of those frustrations and disappointments myself. That’s why I readily say the country is far from being perfect.
    
    However, it can be easy to confuse “speaking truthfully” as in “this is the truth for everyone” with “speaking truthfully about my own bad experiences which do not necessarily have to be the case for every other person“.
    
    You may have had your own bad experiences and that obviously played a great part in shaping your views about the opportunities in the Philippines now. But that doesn’t mean those things will surely be experienced by each and every one also.
    
    (we are in a free market – if what you say is always true and is really happening to the majority of the participants in the market, this industry would have long stopped. I mean, think about it, if all people are as unhappy as you, there would have been chaos in this particular industry.)
    
    Our views are relative. Yours is inclined towards the negative because of your past experiences. So now, for every single positive thing someone points out, you can come up with a lot of negative stuff about that. Because from your position, everything about this topic is bad.
    
    The good thing is, we are all really free to decide what we want to do.
    
    And when it comes to investments, there’s no such thing as “risk free”. Those crazy things you talk about, they’re part of the risks here in the Philippines. But they certainly don’t happen most of the time (especially if you get the right kind of help).
    
    But if you’ve really been investing, I’m sure you know that the greater the risk you take, the bigger the rewards. And the smaller the risk, the smaller the reward as well. Don’t take any risk at all, there’s no reward at all for you as well.
    
    Nobody ever made any substantial wealth by staying safe. Wealth is made by taking calculated, well planned risks.
    
    Yes sure, there are other places to invest in aside from the Philippines. But claiming they are always better, is not entirely true. For instance, the majority of Filipinos may not have easy access to investments overseas. Good for you, perhaps, because you are fortunate enough to have access to that. But like the negative things you enumerated, your good experiences do not happen to everyone also.
    
    And saying that other types of investments are better than real estate, may also be a misguided perspective. I’m not saying real estate is always better. But real estate should be one integral part of your whole investing masterplan. Bonds, stocks, other paper assets? Of course you should also get into that. But rely entirely on paper assets? You should rethink that.
    
    Remember, paper assets are all concepts. Their values are all only in our collective thoughts about them. They are only good for as long as everyone thinks they are good. When everyone starts to think otherwise, your “investment” also goes down the drain faster than you can say WTF?
    
    There’s a reason why only real estate is called “real” estate. They are the only type of assets that are “real”. You can touch them, feel them, actually see them and if you’re crazy enough, you can even taste them. 😀
    
    They may at some points in time go down in value but they do not actually disappear ever because they are not mere concepts, or legal fictions that our modern society has created. They are “real” assets.
    
    And where better should you put your money when investing in real estate than in developing countries? That’s right, Philippines is one of them.
    
    If you want to invest in New York real estate, you should have done so in the 1600’s… or some time around that. Too late? No worries, there are still developing countries like our own here. Are the conditions here perfect for investing? The people who bought Manhattan Island from the American Indians a long time ago did not even have a government at all to protect them. How’s that for an investment made under imperfect conditions?
DB

Johnny and betterthanu do you guys have e-mail addresses I am very interested in both of your thoughts and ideas about these topics
Grace

What are the things that you should know if you are planning to assume a house and lot that was offered to you?
- Nimrod Flores
  
  This is going to be in another article to be published soon, about Sale with Assumption of Mortgage.
  
  In the mean time, you should ask about the following from your seller:
  
  1. How much loan balance are you going to assume?
  2. How many years is the loan repayment term? How many more years left?
  3. Does the financing institution allow the mortgage to be transferred to you? (very important!)
  4. Has your seller been prompt with his amortizations? Check for penalties and other charges.
shizuya

Hello, i would like to ask you different questions regarding investing in the philippines. Do you speak tagalog? And where could I talkt to you privately? Thank you
- Mega Star
  
  @shizuya to answer your question, if you planning to invest here in the Philippines I would suggest that you visit the Board of Investment agency from there they will definitely give you the best advise that you want to know….
- Wayan Narra
  
  Hi !Shijuya …it depends on what kind of investments you want to engage in. You can invest in Real Estate, stocks ,bonds ,golds, future trading etc .But so far the best investment you can have is through real estate. Wholesaling , retailing ,( buy fix and sell or buy fix and rent (staycation ,bed n breakfast) but these requires management on your part . In other words you are going to get your income actively.
  3 kinds of income :
  Active or earn income
  Passive income
  Portfolio income
  Real Estate wholesaling ( active)
  Real Estate retailing / flipping ,buy fix amd sell ( active)
  Buy n hold strategies ( passive)
  Buy fix and rent ,staycation ( active)
  Insiders secret :
  PR LESS TCC = TCG
  CoCR = TCG LESS TCC DIVIDED BY TCC . The power of investing is through positive cashflow , low ball offer, moratorium of amortization.. And neutral or negative gearing on some particular properties .Positive
  gearing is still the best.If you have huge capital you can invest on low yeild ,high capital growth properties
  But for first time deal makers i suggest you invest on high yielding ,low capital growth properties. I suggest stay away from foreclosure or short sales . Now a days most banks if not all banks used big data in a bigway to ensure they dont sell their REO properties below market values .So as investors avoid foreclosures and short sales .
  Banks expect to get full value out of there recovered assets for sale .As smart investors shy away from those assets for sale by the banks.
  Big data analytics and mastering Real Estate metrics are the prime
  answers for savvy investors .Look for high performing assets .Word of wisdom. You can find the gold at old boxes !!! All of new projects are low yielding , high capital growth properties .Of course some investors are looking for capital appreciation raher than cashflow …