How to Buy Property in the Philippines: A Complete Guide

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Philippines has become a prime destination when investors buy real estate in Asia.

It’s not strange as it has low living costs, cheap real estate, a number of long-term visa options, a quickly growing economy, and promising demographics. Yes, it almost sounds a bit overwhelming.

Still, buying real estate is one of the biggest decisions people make and always come with some risks. This is especially the case for developing countries where laws can be fuzzy and change fast.

Thus, it’s important that you have a good knowledge about local regulations beforehand.

In this article, you’ll learn about foreign property ownership regulations, property taxes, visa options, and which places that should be of interest when you buy real estate in the Philippines.

Can foreigners buy property in the Philippines?

Philippines has many similarities to other Southeast Asian countries in terms of foreign property ownership regulations.

You can buy and own everything from condos, apartments, and houses, but not the land that these structures are built on.

Therefore, foreigners prefer to buy condos as the buying process is more swift and the units often newly built.

It’s not rare that Chinese investors snap up 30 units at a time.

There are other reasons why foreigners are so enticed to buy condos. These often come with 24/7 security, swimming pools, tennis courts, gyms, and BBQ areas, which give are more luxurious feeling. It’s the preferred option for expats, or investors who wish to reside in their units a couple of weeks every year.

Just keep in mind that foreigners can’t buy more than 40% of the units in a condominium project, or in an apartment block, as stated in the Condominium Act.

buying-property-philippines

How to buy land in the Philippines

So, foreigners can’t own land in most Asian countries. You’ll not only stumble upon this issue in the Philippines, but in places like Thailand, Cambodia, and Vietnam.

But there are ways to get around this and to indirectly own, or should I say, control land.

Here, opening a company to buy real estate is a popular option.

The same as it goes with condominium projects, Filipinos need to own at least 60% of the shares in a company.

This results in a process where you need to deal with contractual setups where you appoint yourself as a director, give yourself majority voting rights, and use different share classes.

Also, there must be at least 5 members of your company and the government’s Board of Investment (BOI) should give you permission to buy, sell, or act as an intermediary in real estate transactions.

As a part of the process, you also need to hire a lawyer and an accountant, which probably doesn’t come as a surprise.

Steps when buying land in the Philippines

Having a plot of land is a preferable choice for people who plan to stay long term in the Philippines. Might they buy or build a new house.

Also, novice investors sometimes target land plots as these can increase exponentially in value.

buying-land-philippines

If you plan to buy land, you should pay attention to following:

  • The best land to acquire is titled property
  • You need to present verified documents like a tax declaration, a tax map, and, a certified copy of the title to the relevant authorities. There should be no encumbrances and liens at the back of the title. This should be confirmed with the help of a solicitor
  • If there’s an encumbrance, like existing mortgages or similar, make sure that it’s cancelled or released before signing the contracts
  • In case you decide to make a spot cash payment, you need to provide a Deed of Absolute Sale and Acknowledgement Receipt in front of a notary public
  • If you agree to make payments in instalments, you and the seller should sign a Contract to Sell and an Acknowledgement of Receipt. Your lawyer might also provide additional documents
  • When the contract and documents are finalized, the Bureau of Internal Revenue will process the documents for payment of taxes, after, a Certificate Authorizing Registration (CAR) is issued
  • When the process is completed, transfer taxes will be paid at the City Assessor’s Office and Registry of Deeds
  • When you’ve paid the taxes, the Registry of Deeds issue the new title in your name. This is referred to as the Transfer Certificate of Title when buying land, when buying a condo, it’s referred to as a Condominium Certificate of Title

Leasing land in the Philippines

In case you want a more hassle free process when buying a house, a more common option is to lease the land, which is 100% legal.

According to the Investor’s Lease Act, foreigners can lease land for an initial period of 50 years and with an option of renewal of 25 years.

Getting a mortgage as a foreigner in the Philippines

If you need a house loan, you should contact a handful of banks earliest possible, letting them do a background check. This is needed before they can issue a so called In-Principle Approval (IPA).

During this time, the banks check your visa type, financial situation, age, employment, credit history, and more, to confirm that you’re eligible of receiving one of their loan packages.

Previously, it was very difficult for foreigners to get property loans in the Philippines, but the regulations have relaxed a bit over the years.

Unfortunately, many local banks still require that you have a visa, other than a tourist visa. Some of the most common are the SRRV (Special Resident Retiree Visa) or simply a work visa.

Being a permanent resident will increase your chances to get a loan significantly.

Banks offering house loans

Some of the biggest banks you should contact include:

  • BDO UniBank
  • Metrobank
  • BPI Bank
  • Chinabank

HSBC is not as big as these banks in the Philippines, but might still be able to offer you a loan.

As mentioned, contact a handful of banks and see what options they have, and if you meet the loan requirements.

Real estate agents in the Philippines

It’s not always easy to navigate and find a property that suits your needs in a foreign country.

A local real estate agent can help you to reduce hurdles as they have a good knowledge about local regulations and the areas you’re interested in.

For example, they can tell you what prices properties have been sold for recently, which areas that have high vacancy rates, and where prices are predicted to grow the most.

Of course you can do some research on your own, but I highly recommend to hire a credible agent to help you throughout the process.

philippines-real-estate-agents

Some of the most popular agents in Manila include:

  • RE/MAX Philippines
  • Top Realty
  • Phil. Property Expert
  • Colliers International Philippines
  • KMC MAG Group (KMC Savills, Inc.)

Commission rates for agents and brokers

Broker’s charge between 3-6% of the sales value, while the rate for agents is 2-3%.

Cheaper properties will have a higher rate to assure that the broker or agent earns “sufficient” money.

Hiring a solicitor when buying property

You should try to find a reputable solicitor earliest possible to guide you through the buying process, and to handle the paperwork when finalizing the sales contracts.

Fortunately, the cost to hire a solicitor is low compared to places like Singapore and the US. But, you also face a higher risk to come across people that aren’t credible.

First of all, you can check for solicitors online. You can also check on social forums, government websites, and contact your embassy, that might help you.

The UK government has made a list of list of English speaking Solicitors, which can be useful.

Not to forget, the State Office of Court Administration can provide information about your solicitor’s background, experience, and whether the firm is authorized to help you.

You’ll notice whether the solicitor seems reasonable or not, just by checking their website. Send them an email and see if they reply timely. If the solicitor suddenly stops replying you or is hard to reach, it’s a bad sign.

Do a background check

When you’ve found a solicitor, you can prepare a handful of questions to confirm their credibility.

Some of the questions can be:

  • How long time have you served in this business?
  • How many client cases have you handled?
  • Do you have any testimonials from foreign clients?
  • Will you charge me any additional fees that I’m currently not aware about?
  • What will you help me with during the buying process?
  • Will you handle all the communication with the seller’s side?

Simply add questions for a more thorough background check.

Investment and retirement visas in the Philippines

retirement-visa-philippines

Philippines is one of a few Asian countries that offer different long-term visas.

You can find everything from retirement visas, investment visas, medical care visas, and more.

Below I’ve summarized some of the most popular visas, including a brief introduction and the conditions you need to meet for each type.

SRRV – The retirement visa

The SRRV (Special Resident Retiree’s Visa) is a preferred visa thanks to the low requirements that apply. Ironically, you only need to be 35 years old to qualify for this retirement visa, with some minor investments on top of that.

The visa has five different categories, namely: SRRV Smile, SRRV Classic, SRRV Human touch, SRRV Courtesy, and SRRV Expanded Courtesy.

The two most interesting here are SRRV Smile and SRRV Classic.

With SRRV Smile, you only need to meet two criteria: Be 35 years old or above and deposit USD 20,000 in a local bank account. It almost sounds too good to be true, doesn’t it?

The SRRV Classic, on the other hand, has the same age restriction, but with the option to invest USD 50,000 in a condominium unit, or to use the money for a long-term lease.

The cost to apply is USD 1400, while you need to add USD 300 for each dependent, if you plan to bring your family over.

SIRV – The investment visa

Unfortunately, you’re not allowed to buy real estate to get the SIRV visa. Instead, you need to invest at least USD 75,000 into a new or existing local company.

The same as it goes with the SRRV, you can include dependents such as your wife or your children when applying for the visa.

Property taxes in the Philippines

Tax rates can change fast and it’s important that you’re up to date with the latest information.

As late as December 2018, President Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) Act, which aims to make Philippines’ tax system more efficient, fair, and clear.

The new policies issued under TRAIN mainly benefit people in the low- and middle class. Real estate taxes are affected by the new policies as well.

Let’s have a look at the latest tax rates that apply when buying, holding, or selling property.

Documentary stamp tax (DST)

The Documentary Stamps Tax (DST) is set to 1.5% and multiplied with the sales value, or the zonal value, whichever is higher.

Transfer tax

In addition to the stamp duty, you need to pay a transfer tax of 0-5 – 0.75%. It’s multiplied with the sales value, or zonal value, whichever is higher.

Rental income tax

Rental incomes are treated as personal incomes in the Philippines and fall under the same tax rates.

If you’re a resident, the tax rates are as follows and applicable until 2022:

  • PHP 0 – 250,000: 0%
  • PHP 250,000 – 400,000: 20% of the excess over PHP 250,000
  • PHP 400,000 – 800,000: PHP 30,000 + 25% of the excess over PHP 400,000
  • Over PHP 800,000 – 2,000,000: PHP 130,000 + 30% of the excess over PHP 800,000
  • Over PHP 2,000,000 – 8,000,000: PHP 490,000 + 32% of the excess over PHP 2,000,000
  • Over PHP 8,000,000: PHP 2,410,000 + 35% of the excess over PHP 8,000,000

Non-resident foreigners are taxed at a flat rate of 25%, but can’t make any deductions, such as for maintenance fees or depreciations of a property’s value.

Real property tax (RPT)

Local governments collect a yearly property tax to finance public services in the local area where your property is located.

The rate is 2% in Manila and 1% in other provinces. But, the tax becomes almost negligible as it’s multiplied by merely 20% of the appraised value for residential property.

For commercial real estate, the tax rate is multiplied by 50% of the appraised value.

You can pay the property tax yearly or quarterly.

Capital gains tax

The Capital gains tax is 6% and levied on the sales value or the zonal value.

Usually, the seller pays for the tax, but it’s not rare that the buyer pays for the tax.

Sometimes, it’s also included in the sales price.

Best places to buy property in the Philippines

Philippines is a diverse country and it’s important that you get guidance to find the best areas to live and invest in property.

manila-real-estate

Let’s have a look at the two prime spots that attract foreigners the most.

Metro Manila

Manila is the capital with a population of more than 13 million people in the urban area. It can proudly claim itself to be one of the most densely populated places in the world.

Then there’s Metro Manila, which is not a city by itself, but consisting of a number of cities and municipalities. Together, the area has a total population of more than 20 million people.

To leave Metro Manila out of this list would be a no-brainer.

You have probably not gone unnoticed that Manila has a somewhat bad reputation, mainly due to its high poverty levels and the ongoing drug war.

Even if Metro Manila has problems with criminality, it’s growing fast economically, an important aspect overshadowed by negative news.

Some of the areas surrounding Manila that attract many foreigners include Makati, Quezon City, and Taguig.

Much investment takes place here and you’ll find many new or off-plan projects.

Cebu City

Cebu City is the third largest city and attracts many tourists.

Compared to Manila, it’s considered more relaxed, safe, and a great place to be if you want to practice scuba diving and visit islands (there are 167 of them in total).

Prices are lower compared to prime areas in Manila, making it a better place to reside for many retirees or foreigners who simply wants to own a holiday property abroad.

The city doesn’t rely on tourism merely, but is a large producer of ships and goods.

In fact, 80% of all the ships are built in this city, making Philippines the 4th biggest shipbuilder in the world.

FAQ

This FAQ section was created for commonly asked questions among foreign buyers.

Can foreigners buy condos in the Philippines?

As mentioned in the beginning of the article, foreigners can own condos, but only 40% of the units in a project.

Can an American citizen own a property in the Philippines?

American citizens are treated like other foreigners and can get full ownership of condos. You can also own houses, but not the land that the house is built upon, which needs to be leased.

The leasehold period is 50 years, with a chance to renew the lease for additionally 25 years.

Can foreigners get home loans in the Philippines?

You can get a home loan, but it’s difficult unless you’re a resident in the Philippines.

Banks have become less strict, but still require that you have any of the following visas when buying real estate:

  • SRRV (Special Resident Retiree Visa)
  • SIRV (Special Resident Investment Visa)
  • Work visa

Being a permanent resident gives you almost the same conditions as locals.

If you want to know more, I recommend you to read my separate article that explains how you can get a home loan in the Philippines as a foreigner.

Conclusion

Philippines is a preferred choice among foreign property investors. It grows fast economically, has promising demographics, low living costs, and a developed hospitality industry.

At the same time, property prices in prime areas in Manila and Cebu are significantly lower compared to places like Shanghai, Hong Kong, and Singapore.

You can’t own land in the Philippines as a foreigner, so the preferable choice is to buy one or more units in a condominium project. Areas of interest should be Makati, Quezon City, Taguig, and Cebu.

Philippines is also unique in the sense that it offers a number of long-term visas with low requirements. Being 35 years of age and with USD 20,000 on hand will allow you to stay here indefinitely by having the SRRV visa.

I hope you found this information useful and recommend you to read our other articles related to buying property in the Philippines.

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