The Philippines Real Estate 8-year Pricing Surge

Due to strong economic growth, the residential real estate market in the Philippines continues to perform well. From 2010 to 2018, real estate prices in Makati’s central business district increased by almost 132%. However, prices are not high, returns are good and the Philippine economy is in its eighth year of strong growth.

The median price of three-bedroom luxury apartment units in the Makati Central Business District (CBD) increased 15.55% (9.91% after inflation) in 2018 to PHP 230,000 per square meter (US $ 4,371). According to data from Colliers International, 2017 increased by 10.46% year-on-year, 2016 increased by 9.95% year-on-year, 2015 increased by 13.43% year-on-year, 2014 increased by 7.11%, 2013 increased by 14.37% year-on-year and 2012 increased year-on-year by 10.06%. In the most recent quarter, apartment prices in Makati’s Central Business District increased 5.02% in the fourth quarter of 2018 (5.55% adjusted for inflation).

Home prices in other major metropolitan areas continue to rise:

• In Rockwell Center, the median price of a three-bedroom apartment increased 10.6% (5.2% after inflation) to ₱244,500 ($ 4,650) in 2018.
• During the same period, in BGC, the average price of a three-bedroom apartment rose 17% (11.3% adjusted for inflation) to ₱205,500 (US $ 3,908) per square meter.

However, house price growth across the country has been flatter. According to data from the country’s central bank, Bangkok Sentral ng Pilipinas (BSP), in the year ending in the third quarter of 2018, the national residential property price index increased 4.4% (-2.2% after adjustment by inflation). The index fell 0.6% from the previous quarter in the third quarter of 2018 (-2.8% after adjusting for inflation). The residential real estate price index released each quarter is based on the bank’s report on residential real estate loans.

According to the type of property:

• Condo units have risen by 5.8% from the third quarter of 2018 from a year ago (the inflation is adjusted)
• In the year ending Q3 2018, for detached/attached homes, the price increased by just 0.2% (-6.1% after adjusting for inflation)
• Duplex home prices have soared by 30.7% (22.5% of inflation) Y-O-Y in the 2018 quarter
• Townhouses rose by 18.3% in the 2018 quarter (10.9% of inflation adjustment)

According to BSP, in the National Capital Region (NCR), residential real estate prices increased by 6.8% during the third quarter of 2018 (after inflation).  Outside the NCR, the price increased by 2.2% (-4.2% inflation).

Demand is still strong. According to data from Colliers International, the number of pre-sale condos in Metro Manila (including marginal areas) reached 54,000 in 2018.  This surpassed the 2017 record of 52,600. This is mainly due to strong demand from new families and young professionals, as well as the influx of mainland Chinese into the Philippines. In the last five years, the family composition has grown an average of 3% per year.

It is expected that this year’s residential demand is expected to be stable:

• “Local and foreign high net worth individuals continue to drive the residential sale market, typically securing the biggest and most expensive units from high-end and luxury brands to maximize the value appreciation in major markets,” said Jones Lang LaSalle in its 2018 report.
• “Colliers believes that pre-sales in 2019 will likely remain strong given the strong end-user demand. However, topping the 2018 sales figures might be a challenge given Colliers’ projected slowdown in launches due to the dearth of available developable land in Metro Manila and the continued acceleration of land prices in the country’s key business districts.”

According to the Philippines Statistics (PSA) amidst improving macroeconomic conditions and slowing inflation, the Philippines economy expanded about 6.2% in 2018. It is less than 6.6% from 2012 to 2017, but it still places the country in emerging Asia’s fastest-growing economy. ADB president Takeho Nakao stated that the economy is expected to increase by 6.7% this year by 6.7%.

Philippines house prices

Foreigners cannot own land but can own condo units (apartments in high-rise buildings) as long as the foreign ownership proportion does not exceed 40%. Foreigners can buy a house but not the land on which the house has been is built. Leases on land up to 50 years, renewable for another 25 years, are available.

Foreigners can buy a house, but it is not the land it is built upon. Leases are up to 50 years, 25 years renewable after.