Is Now The Best Time to Invest in Philippine Real Estate? 6


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Philippine Real Estate Investing

A lot of people is asking me, when is the best time to invest in Philippine real estate?
For the record, I’m not a certified property consultant, a real estate broker nor a property guru, but I’m posting this article to give you an insight on the possibilities and enormous opportunities that we can achieve in investing in Philippine real estate today!

century-azure-urban

Besides trading the Philippine stocks, I’d say, my other “hobby” is investing in real estate, specifically in condominiums. If your goal in life is to become a millionaire in the next five to ten years, then you should include rental properties in your portfolio. Why rental properties? Based from Robert Kiyosaki’s best selling book Rich Dad, Poor Dad,says that “Your house is not an asset… your house is a liability.” You might be asking “Why is my newly bought house and lot or landed property a liability?” Because it is unable to generate income or cashflow, and you have to pay for the mortgage, real estate tax and upkeep every year if not every month. That’s why I reject the idea that owning a house and lot is an asset, instead, owning a rental property is a worthwhile investment.

TrumpTowerPhilippines

How to Earn from Philippine Real Estate

In my opinion, just like stocks, there are two ways we can earn from real estate investing, first is by capital appreciation and second by rental income.

Capital appreciation is when you buy a property, renovate it, then sell it at a higher price. Alternatively, buy a pre-selling condominium unit, at a lower cost, then selling it during the turnover date at a higher price.

Invest in Philippine Real Estate

Rental income is income received from rental properties which I consider a passive income. Since you have an income received on a regular or monthly basis with little effort to maintain it. Bear in mind that a rental income is much better if a rental yield in that country or location is high.

But first, let’s define a rental yield. Rental yield is the annual net income that a property generates divided by the purchase price of the property. Rental yield can be expressed on a gross or a net basis.

Read more: eHow.com http://www.ehow.com/how_5057727_calculate-rental-yield.html#ixzz2EZEJSB6X

The formula is as follows:
Net Rental Yield (%) = (Net Annual rent/purchase price) x 100%

Why are Philippine Properties Attractive?

Based from GlobalPropertyGuide.com, as of October 2012, the Philippines’ Gross rental yield is 8.62%, which is top 2 in Asia.

GrossRentalYield-PHL compared to Asia

http://www.globalpropertyguide.com/Asia/Philippines/rent-yields

Note: Only resale apartments and houses are researched. Yields for newly-built properties are not included.

The table below shows the countries where buy-to-let property earns the highest returns

GrossRentalYield

http://www.globalpropertyguide.com/investment-rating

Colliers International’s Report

Based from the 2nd Quarter 2012 Report of Colliers International, “Capital values for residential condominiums in makati CBD are currently pegged at pHp114,000 per sq m. This exceeds the Bonifacio Global City,BGC, average value (P113,500 per sq m) since the second quarter of 2011. In the next 12 months, prices in both locations are expected to level off at PHP121,000 per sq m, driven by the introduction of new premium supply.”

CapitalValues

“Luxury 3BR rental rates in the makati CBD increased by 6% in 2Q12. Rents are currently at pHp700 per sq m, which translates to pHp175,000 monthly for a 250 sq m unit. Nonetheless, prime rates may expand by 6.6% in 2Q13 due to a lack of supply. On the other hand, prime rates in rockwell and BGC grew by over 1% quarterly to pHp785 and pHp695 per sq m per month, respectively.”

ResidentialRents

Source: Colliers.com

Colliers International is a leading commercial real estate services company offering comprehensive expertise to investors, owners and tenants around the world. Their services include brokerage sales and leasing, property and project management, investment services, research and valuation.

Based on Colliers’ research, we may be experiencing an oversupply of studio and one-bedroom unit condominiums. While a 3-bedroom condo unit have a limited supply available for lease.

CBRE Philippines Market Research

Here’s another noteworthy 2nd Quarter 2012 market research from CBRE Philippines.

“With outsourcing and off-shoring and multinational companies still growing, the influx of expatriates has not waned giving a boost to the luxury residential sector.

LuxuryResidentialStats

The high level of capital values has remained in the second quarter as the demand for luxury residential condominiums continues to support the prevailing selling prices of existing projects. More investors are looking at real estate options and luxury residential projects prove to be among the productive opportunities available as the stability of recurring income is secured by the consistent high occupancy
rates of existing developments.”

 CBRE-NewCondoSupply

“Pre-selling condominium projects continue to load up the supply pipeline in the residential market with more development companies being formed to join the fray. As of June 2012, the number of upcoming residential condominium units has reached 143,123. Given the convenience provided by the locations of projects and the payment flexibility offered by developers to buyers, condominiums particularly pre-selling developments have dominated the transactions on acquisition of new dwellings.”

Source: CBRE.com.ph

CBRE Philippines is part of CBRE Group, Inc, a Fortune 500 and S&P 500 company headquartered in Los Angeles, and the world’s largest and recognized commercial real estate services firm with over 300 offices and 31,000 employees across the globe.

Top 3 Reasons for Philippine Real Estate Appreciation

Here are my top 3 reasons why the Philippine real estate will continue to appreciate for the next 5 to 10 years.

ManilaBayCity_A-11

1. The government will unveil Entertainment City Manila, also known as PAGCOR City Manila on an eight-square kilometer reclaimed lot of Manila Bay, in the first quarter of 2012.
http://newsinfo.inquirer.net/311133/gambling-boom

2. The Philippines, the World’s New Call Center Capital
http://www.theepochtimes.com/n2/business/the-philippines-the-world-s-new-call-center-capital-318797.html

3. OFW remittances keep PH real estate boom
http://www.rappler.com/business/16482-outsourcing,-remittances-keep-ph-real-estate-boom-going

My Thoughts and Optimism

In summary, property prices usually double in value, on average, within 7-10 years. Even if this is wrong, even if it takes 20 years, you still gain a significant amount from your investment. Another change of mindset to share, if you’re thinking that it would take you 15-20 years to pay off your mortgage and you would be in debt for the rest of your life, dismiss that idea.

If inflation is your enemy against your cash, in property investing, inflation is your friend. Why? Do you think that a PhP 4M condo unit today would still cost the same 10 years from now? Of course not! Costs of goods will eventually become higher due to inflation, this includes the average salary, rental and not to mention, property prices. So by the 10th year, I’d assume that you’ve already fully paid your mortgage with the help of inflation.

Here’s a quote appropriate for this article.

“Well, real estate is always good, as far as I’m concerned.” -Donald Trump

I hope you find this article informative.

If I were to ask you, would you invest in Philippine real estate? I’d appreciate if you give me your comments on the comments section below.

Property Photos from:
azure.com.ph, trumptowerphilippines.com, manilabaycity.com

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