Have you ever considered buying property in the Philippines? With the Philippines dubbed as one of the fastest growing economies in Southeast Asia, real estate in the Philippines is a good investment to look into.
According to the Asia Pacific City Investment Prospects 2017, Metro Manila is one of the top three most attractive city investment prospects in the Asia Pacific region. Makati, in particular, increased its land value by 13.85% last year.
And as of February 2018, rental yields of Metro Manila condominiums are at 7%–higher than the interest rates offered by other investment instruments like time deposits, bonds, and bank lending.
Needless to say, buying property in Manila is a wise investment choice. The only question is, how should you navigate the Philippine real estate market?
Here is a short primer on the things to remember when purchasing property in the Philippines.
Factors to Consider in Buying Properties
Purchasing a house and lot for sale in the Philippines is a huge investment decision. The following factors can help you decide on the property that’s right for you:
- Type of property
You should know the type of home that befits your lifestyle.
Do you want to have a lot of space to move around in? Then consider getting a bungalow or single attached unit ideal for beginning families.
Are you happy living by yourself in the heart of the metro? A studio or one-bedroom condominium unit might just be what you need.
Want more living space than a condo? Consider townhouses.
If you would rather design your own house, purchase a vacant lot for sale in the Philippines so that you can call the shots.
There are so many properties to choose from, so assess your needs and wants to come up with the type of property that’s best for you and your family.
To ensure the quality of your home, purchase from a top real estate developer with a proven track record, strong industry reputation, and a sizeable capital like Alveo Land.
While the competitive prices of neophyte property developers may be attractive, gambling on them might burn you in the end. This is especially true for preselling homes since you won’t be able to see what you’re purchasing beforehand.
For instance, it may be harder for industry newbies to get approved for commercial loans to fund their projects, so once the initial capital is spent, the rest of the financing will have to come from the buyers. Once the funding stops, you might experience delays in unit turnovers and receive subpar deliverables.
Perhaps one of the biggest considerations in buying property is the price. Paying off a home loan is a long-term commitment, so you need to consider your monthly income and make sure that you can handle your total monthly payables, like amortization and association dues.
Most banks have a maximum loanable amount of 80% of the selling price, but it’s mostly based on the appraised value of the property, your monthly income, and your credit history. The bank or home loan agency will only let you borrow what they think is within your capacity to pay.
As a rule of thumb, set aside at least 20% of the purchase price to pay for equity. Add 5% for other fees and miscellaneous expenses.
Choose a central location that’s close to public transportation, as well as establishments like hospitals, banks, markets, and other commercial areas. If you have kids, a home close to school is convenient. It’s also great to have your home near your workplace.
You should also consider the safety and security of your neighborhood. Is it flood-free? Is it along the fault line? Asking yourself these questions can safeguard you from natural calamities.
Many property developers offer amenities to make their properties more attractive, such as swimming pools, clubhouses, open green spaces, gyms, and playgrounds.
Ask yourself which amenities you can’t live without. However, take note that these come at an extra cost in your monthly association dues, as these facilities need to be maintained.
Taxes and Fees Involved
Keep in mind that when buying homes for sale in the Philippines, the selling price is not always the final price. There are several taxes and fees that should be taken into consideration, as these affect the total price of the transaction.
- Income Tax
The sale of real estate property is part of the seller’s additional income, so it is subject to a 30% regular income tax.
- Real Property Tax
Also known as amilyar, real property tax is the tax imposed on all forms of real property. Metro Manila properties have a tax rate of 2%, while properties located in the provinces have a 1% tax rate.
- Value-Added Tax (VAT)
The 12% VAT on properties is only applicable to house and lots and condominium units above P3,199,200, as well as vacant lots above P1,919,500.
However, VAT-exempt properties are still subjected to a 3% percentage tax.
- Capital Gains Tax (CGT)
The CGT is the tax imposed on the earnings that the seller has gained from the sale of capital assets-– properties that are not used in businesses.
CGT is equivalent to 6% of the gross selling price. It should be paid within 30 days after the transaction.
- Documentary Stamp Tax (DST)
The DST is the excise tax imposed on documents and loan agreements regarding the sale or transfer of property. It is 1.5% of the selling price.
- Transfer Tax
The transfer tax is levied on any mode conveying ownership of the property. It is 50% to 75% of the 1% of the tax base for properties located in the provinces and Metro Manila, respectively.
- Registration Fee
It is a fee paid for the registration of a Deed of Absolute Sale of a Philippine real estate for sale. It starts at P8,796 for the first P1.7 million, adding P90 for every P20,000 in excess.
- Loan Fees
If you apply for a housing loan to finance your property purchase, you incur several extra costs as well, such as appraisal fee, handling fee, mortgage redemption insurance, and fire insurance.
Tips on Buying Real Estate in the Philippines
- Make sure that the title and other documents are clean and authentic.
If you’re buying from an individual, get a Certified True Copy of the title from the Register of Deeds to make sure that the title is genuine. Verify that it’s clean, meaning all mortgages are paid, and there are no encumbrances at the back of the title.
You should also confirm that all real estate taxes are paid. Ask for a copy of the tax declaration and tax receipts.
- Verify ownership and land size.
Another thing that you have to ensure is that you’re dealing with the real owners and property.
Ask for identification papers from the sellers, such as their passport or driver’s license. If possible, talk to the neighbors about the identity and personal history of the property owner.
To verify that the actual property you’re buying matches the technical description in the title, validate it at the Register of Deeds or hire a private land surveyor.
- Check contract provisions.
If you’re buying from a developer, make sure that you check the provisions of the contract you’re going to sign, including the annexes. Your licensed real estate broker should be able to explain to you all the legal jargon and translate them into layman’s terms.
Notarize all signed documents and keep a copy for yourself.
Don’t be afraid to negotiate the different terms of your contract, such as cash-outs, monthly installments, discounts, incentives, and interest rates.
If you’re buying a condo unit, you may also discuss certain modifications, as there are developers who entertain negotiations before construction begins.
- Consult the experts.
Only deal with a licensed real estate broker or agent to help you purchase property in the Philippines. They should have a proven track record and extensive knowledge of the property.
Remember to be diligent when buying property in the Philippines. Purchasing property from a trusted developer like Alveo Land ensures that your property is of topnotch quality and design, built to stand the test of time. Its high resale value also makes it a viable real estate investment.
Visit here to find the property that’s perfect for you.