Owning Your Own Home in the Philippines.
(last updated 10 May 2017)
- 0.1 You Can Buy a Family Home In The Philippines:
- 0.2 But Caution Is The Watchword, You Can’t Just Blunder Through
- 0.3 This House Was a Very Bad Deal
- 0.4 A Second Opinion Would Have Taken Tine and Cost Money
- 0.5 So They Bought Their House, Sight Unseen. Saved Money and Beat “Old Man Inflation”
- 0.6 Flooded To The Roofline
- 0.7 Once You Bought It, You Bought It.
- 0.8 Lease a Family Home or Build on Leased Land
- 0.9 You Can Buy a Condo
- 0.10 Last but Not Least — Rent and Do the Math
- 0.11 Property Doesn’t Always Go Up
- 0.12 What Would It Take?
- 0.13 You’re Always Free To Make Your Own Choice
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Anyone who has visited here more than once can pretty much figure I am kind of down on investing in Philippine property. Actually, they’d be wrong, under the right circumstances it can be a good thing to do.
Here’s a few ways I can recommend buying property and a few alternatives to out-and-out buying that many prospective new foreign residents ought to think about.
Again, kindly remember I am not an attorney and not a qualified financial advisor. YMMV (Google is your friend if you are unsure of that acronym)
You Can Buy a Family Home In The Philippines:
If you are in a successful, stable marriage to a Filipino citizen, especially if you have children to consider, … and, pay attention, this is important … you have lived in an area a year or more and know about the weather, neighbors, traffic patterns, transportation, etc., then go ahead and buy a house in partnership with your Filipino spouse.
You can even have your name on the deed or tax certificate … although that still won’t mean you own the property. With the advice of a good attorney you can assure yourself of a lifetime equity in the home should your spouse pre-decease you.
But Caution Is The Watchword, You Can’t Just Blunder Through
The reason I am often taken to task about recommending extreme caution in buying a home for the family is, for more than twelve years now I have watched countless foreigners who ‘knew’ where they wanted to live and ‘knew’ how the markets worked, buy houses … in some cases, sight unseen … take the plunge, and then be stuck with them.
One fellow I met a while back ago at the local hospital had been working in Iraq as aUS government contractor where he met and married a lovely OFW (Overseas Filipino Worker). To ‘beat inflation’ they bought a house about two years ago in an area not far from where I live. Everybody “knows” that inflation just goes up every year and you “have” to but now to save money in the future when you come here to the Philippines to live.
Sometimes what you don’t know can hurt you. At other times what hurts is the things “everyone knows”.
This House Was a Very Bad Deal
It’s in a notorious flood area … any tricycle driver can tell you that … but most people do not understand the law … a real estate broker is required, by law, to act only in the interest of the seller.
My friend and his wife thought they were making a sound decision, after all, they were paying (through the purchase price of the house) for the services of a very competent and outgoing real estate broker. Not always the way things are done here in the Philippines, but he figured they had all their I’s dotted and T’s crossed.
So my friend didn’t ask much about the house through other sources … how could he, he was thousands of miles away? Working like a dog to beat that demon, “inflation”.
A Second Opinion Would Have Taken Tine and Cost Money
He never got any guarantees or engineer’s evaluations in writing and the broker had no duty to mention anything …in fact, she had a duty under the law not to mention any potential property flaws.
Although my friend didn’t speak out against this real estate agent, a lot of foreigners would .. she cheated him, she should have warned him, etc., etc.
Well, read the law. even in the US, an agent must act only in the interest of the one she represents … normally only the seller.
So They Bought Their House, Sight Unseen. Saved Money and Beat “Old Man Inflation”
First big rain storm our street here at my filled up to the top of the curbs … we’re on a slight rise and the rain runs off quickly. My Iraqi-retiree friend in his brand new house? A bit different story.
Flooded To The Roofline
Up to the eaves of the roof, along with all the neighbors on his end of the street … all their new furniture and appliances ruined, all the mid-East art items they had bought and shipped home for their dream house … gone into a stinking mess of mud.
When he asked his neighbors, after the flood, “What happened”?, they relied, “Oh this happens every now and then.” Normal, matter of course. Turns out a lot of neighbors on that street had added a second story to their homes and never left anything valuable downstairs. Just used the lower floor as a dirty kitchen and extended outdoor patio.
Filipinos endure and consider unavoidable, even normal, things many in the US wouldn’t even dream of.
Floods and other weather-related problems are typically seasonal. You must live in an area for at least a year or so before you can even begin to know what’s best for you.
Once You Bought It, You Bought It.
Do you homework before buying a house … buying sight unseen is fraught with peril and the market, even for good houses is very slow … it will take a long time to sell and move elsewhere.
Disclaimer: Proof reading this I want to make one disclaimer. A real estate agent may be placed under a contract as a buyer’s agent … this might be a good course of action. If acting as a buyer’s agent then indeed the agent owes you, as his/her employer the ultimate care and attention regarding disclosures about the property. Just remember, though that in the Philippines buyer’s agents are rare and the agent who lists a house, by law, can not represent both the seller and the buyer … I’m not at all down on agents here, there are some very good people in the business, but you have to remember to whom their legal duty is owed.
Lease a Family Home or Build on Leased Land
OK, especially to most Americans this one will sound a little fishy … but it won’t to say Hawaiian residents, where a huge percentage of ‘private property’ is leasehold rather than ‘freehold’. It won’t seem too strange to people from New York City either where a majority of the land is leasehold.
Did you know the Empire State Building is built on leased land? The whole Pennsylvania railroad (now the Metroliner) right of way from Washington to New York City is leased. The list goes on?
Unlike the problems with purchasing any foreigner of legal age and capacity can lease land with or without improvements here in the Philippines. Typically initial leases can be as long as 25 years with 25 year renewal clauses. 50 years is likely plenty long enough for me. I believe there are some provisions that can get you even longer lease terms but again you need a legal pro for that.
Now one thing you must consider … many people think you can lease land and the land owner owns the land but if you build on the property you own the building. Afraid that isn’t so. Permanent improvements like a building ‘run with the land’ … they become the property of the owner.
But when you consider the small amount you might spend to build a house in comparison to the up to 50 years to amortize the cost this might be a very viable option. It’s a heck of a lot more stable scheme than the typical dummy corporation idea, that’s for sure.
You Can Buy a Condo
I know, I know what a lot of you are going to say … “I ain’t living in no condo”. Fair enough. I don’t think I want to either. But there are a LOT of different options that masquerade under the name ‘condo’, so again, unless you have seen and evaluated how they will fit your own needs, you really can’t say.
Condos are 100% legal for a foreigner to own, properly bought they may have excellent resale values, they are often very easy to rent out short-term via on-site property management offices. They can be a very good deal.
The downside of condominium ownership, however, is that you really own nothing but air … you don’t even own the walls and floors. Every part of the physical property belongs to the condominium corporation and what you actually buy is the right to use one or more units. Not for everyone, but an alternative worth looking at.
One little ‘discussion spark’ I thought I’d throw in here. Condominium is one of those words that has come to mean actually two different things in the English language.
To most of us it means an apartment-like unit in a high-rise building, And that is certainly a viable definition.
But condominium is also a legal term for property ownership where a corporation owns the physical property and sells the rights to occupy the property. What if a corporation decided to build single-family western style homes on suburban-style streets … with a lawn, two-car attached garage, etc.? There are a few “condo” developments actually being done like this in the Philippines. 100% legally under Philippine law. Food for thought.
Last but Not Least — Rent and Do the Math
In the US most of us at least think we are fairly savvy about the housing market. Now the guy who bought my house in Colorado Springs in January 2006 and currently can’t sell it for even 50% of the price he paid may not feel so savvy … but he’s certainly not the only one who got trapped by the mantra US citizens hear from elementary school days … renting is bad, buying is good.
Property Doesn’t Always Go Up
In general, and over the long-term that advice is not bad, but the idea that has developed over the last 10 or 15 years that a person should just buy a house, stay a few years, trade up and repeat the process endlessly is like a ship hitting the rocks right now. Buy a house to live in, if you’re sure … but don’t buy a house for an investment, unless you have the patience and the capital to wait out market swings.
Here in Marilao where I currently live there are many similar small but decently built 25 year-old subdivision homes for sale at an average price of two million Pesos. My father-in-law, who has lived here 20 plus years says the average price hasn’t changed much in the last 3 or four years. A few percent per year, at most.
My rent is 7,000 pesos a month and there are many other houses for rent in that range. That’s 84,000 Pesos per year. The owner, who lives in the US and probably isn’t coming back has already dropped hints that he would sell for 2 million tomorrow if we wanted to buy. Great idea, right? Renting is always bad, buying is always good, right? Get rid of that nagging monthly rent.
What Would It Take?
To buy this house we would need at a minimum 250,000 pesos for a down payment … that would be money I could not earn any other return on, and the best loan terms we could probably get on an older house would be 12 or 14% over 12 or 15 years … a very long-term mortgage here. Usual Philippine purchase money loans run three to five years.
The monthly payment, before any escrow amount would be very close to twice what I am paying now for rent … considering interest at the end of 15 years I would have paid more than 2,800,000 pesos for a house that I can rent for the equivalent amount of time for 1,260,000 million. It would cost me twice as much to buy than to just rent.
Yes, I know the rent may go up, but by how much? And yes, I know the house may be worth more in 15 years … or the area may become a slum or run out of water or ….
You’re Always Free To Make Your Own Choice
Anyone is free to make their own judgment, but since I don’t really think this is the house I want long-term anyway, I think renting and leaving my money in high interest secure investments is a lot better deal.
Yes I’ll cover some of those secure high interest investments in the future, but in the meantime, I hope I have given you some food for thought in this discussion.
The rent or buy equation here in the Philippines is not at all like the rent or buy equation in the US … and whatever your decision, please do use your brain and not your feelings.
What else can I say about Owning Your Own Home in the Philippines?