Real estate in the Philippines

Buying real estate in the Philippines is becoming increasingly attractive to foreign investors and those dreaming of a cozy home under the warm Asian sun. With their favorable climate, beautiful beaches and welcoming culture, these islands are attracting those looking for not only a place to live but also a new way of life. In recent years, the government has made changes to the laws and tax rates that make buying property in the Philippines more affordable and transparent.

When choosing a real estate investment in the Philippines, location is a key factor. Here are a few of the most promising cities:

Quezon City - affordable real estate, high population density and developed infrastructure. A good option for first-time investors.
Makati - luxury apartments, business centers, offices of major companies. Attracts wealthy buyers and tenants.
Mandaluyong - popular with young people due to its central location and well-developed infrastructure.
Pasig - diverse real estate offerings, business district. Attracts professionals and students.
Pasay - tourist facilities and Ninoy Aquino Airport. Interesting for the tourism industry.
Manila - cultural attractions, universities, offices. Huge demand from tourists, students and businesses.
Iloilo - a promising area due to the construction of a new airport and the development of the IT sector.
Davao - affordable real estate option, fast growing economy.

• A tourist or business visa is sufficient for the purchase of an apartment or condominium.
• For the purchase of private houses or villas, a visa for permanent residence is required - this can be an investment visa SIRV, a retirement visa SRRV or a work visa with the right to long-term residence.

So with the right visa and in compliance with the law, a foreigner can buy a house in the Philippines and use it for vacation or rental purposes.

In the Philippines, foreign nationals can own apartments and houses, but not the land on which they are located. This system is similar to that of other Asian countries.
Therefore, the most popular option among expats is to buy condominiums - apartments in multi-story complexes. Titling is faster than for owner-occupied homes. In addition, these new complexes are usually well-equipped and have swimming pools, gyms and security guards.
Many foreigners, especially from China, buy several apartments in a residential complex as an investment. In the future, they can then rent them out and receive a stable income.
According to local law, foreigners are not allowed to own more than 40 percent of the apartments in a residential complex. It is therefore important to make sure that the quota for expats has not been exhausted before concluding a deal.
Buying property in the Philippines is therefore a good option for those who own their own home in the country and want to use it for vacation and rental income.

According to the Philippine constitution, land ownership is reserved exclusively for Philippine citizens. Foreigners cannot directly acquire land in the Philippines.

However, there are some exceptions to this rule:

• A foreigner can own land if it was acquired prior to the 1935 Constitution, which allows such acquisition.
• A foreigner can inherit land in the Philippines from a Filipino relative.
• The acquisition of apartments or condominiums is permitted, although foreigners may not own more than 40% of the units in a single condominium.
• A foreign company registered in the Philippines may purchase land. However, no more than 40% of the units may be owned by foreigners.
• A foreigner who is married to a Filipino citizen can sign over a property to his or her Filipino spouse.
• A native Filipino who has acquired a new citizenship is also eligible to own land in the Philippines.

A foreigner must therefore avail of one of these options under Philippine law if he or she wishes to acquire real estate.

When buying a piece of land in the Philippines, it is advisable to pay attention to the following aspects:

Choosing the right piece of land: the best choice is a piece of land called "freehold".

Proof of documents: Provide verified documents such as tax returns, tax cards and certified copies of title to the relevant authorities. The title must not be encumbered with a mortgage or other encumbrances, which must be confirmed by a lawyer.

Removal of encumbrances: If there are encumbrances such as mortgages, these must be removed or released before the contract is signed.

Formalization of the transaction: If you are paying cash, present the deed of sale and proof of purchase to the notary. If you agree to pay in installments, sign the purchase contract and the confirmation of receipt.

Processing the documents and paying the taxes: Once the contract and documents are finalized, the documents are processed at the tax office for payment of taxes.

Payment of real estate transfer tax: Once the process is completed, the real estate transfer tax is paid to the municipal tax authority and the land registry.

Issuing a new title: After the taxes have been paid, the Land Registry will issue a new title in your name, called a "Certificate of Transfer of Title" if you are purchasing a lot and a "Condominium Certificate of Title" if you are purchasing a condominium.

Foreign nationals can apply for a mortgage loan in the Philippines to purchase a property, although the process is different from that for local borrowers.
First, you must apply for pre-approval for the loan from several banks. Your visa, income, creditworthiness and other details will be checked.
Most banks will only grant mortgages to foreigners if they have a residence permit or work visa. A tourist visa is not suitable. Permanent resident status abroad also increases your chances.
The largest banks that lend to foreigners include BDO Unibank, Metrobank, BPI Bank, Chinabank and HSBC. You can also contact a broker who can help you find the most favorable terms.
Although it is more difficult for foreigners to get a mortgage in the Philippines than nationals, with a competent approach, you can find a good deal on buying a property on credit.

Property tax in the Philippines has changed with the signing of the Tax Reform Acceleration and Inclusion Act (TRAIN) by President Duterte in December 2018. The reform aims to improve the efficiency, fairness and comprehensibility of the Philippine tax system.

Documentary Stamp Tax (DST): The Documentary Stamp Tax (DST) is 1.5 percent and is based on the sales value or the zonal value, whichever is higher.

Land transfer tax: In addition to stamp duty, a land transfer tax of 0.5% to 0.75% is levied, also based on the sale value or zonal value.

Tax on rental income: Rental income is taxed at certain rates for residents and non-resident aliens.

Real Property Tax (RPT): Every year, local governments levy a property tax of 2% in Metro Manila and 1% in other provinces. The tax is 20% of the assessed value for residential properties and 50% of the assessed value for commercial properties.

Capital gains tax: Capital gains tax is 6% of the sales value or zonal value. It is usually paid by the seller, but sometimes also by the buyer.

To summarize, buying a property in the Philippines requires careful planning and compliance with the necessary formalities. Despite some peculiarities, such as the mandatory involvement of a lawyer and the presence of various taxes, the country offers unique opportunities for investors and those looking for a cozy place for permanent residence or vacation.
It is important to be thoroughly aware of all aspects of the process, including legal requirements, documentation and tax obligations. Compliance with all applicable regulations ensures a safe transaction. The Philippines, with its scenic beauty and welcoming atmosphere, is an attractive place to acquire property, and the right approach to the purchase will ensure satisfaction and comfort for years to come.