The Philippines certainly has one of the best real estate markets in the world. Sure, a house or a condominium unit in Manila might not fetch nearly as much in rental income as the same in London, Sydney, or New York, but the returns on such an investment aren’t too shabby either, especially when you consider how much cheaper it is to purchase property here.
Let’s say you are an Aussie national and you’ve managed to save up for a sizeable nest egg. Property values in Sydney and Melbourne still aren’t within your budget, but your Filipino spouse brings to your attention a house or a condo in the Philippines that is. After considerable deliberation, you decide that you want to take the plunge. How do you go about it?
Wait, are foreigners even allowed to own property in the Philippines? Yes, to an extent. You can buy a house or a condominium unit, but not the land on which either of those is built upon. In the case of the latter, foreigners can only own up to 40% of a condominium’s total units.
Since we’re on the topic, condominiums are the easiest properties to buy. You would only own the unit and not the land the building is on, you can make an outright purchase and even have the title for the condo registered in your name.
To buy a condo, you would need to make a down payment of 10-30% on the list price. Once the unit is fully paid for (usually when the building is finished), a Condominium Certificate of Title or CCT with your name on it will be turned over to you.
Houses are a bit more complicated. You can own the house itself, but to get around the land ownership restrictions, you would need to enter into a long-term lease for the lot. Fortunately, the Investor’s Lease Act of the Philippines allows for lifetime leases, which last an initial 50 years and another 25 years upon a one-time renewal. So, the deed for the house can be in your name but the title for the land underneath it would remain under the Filipino-born owner’s name.
The steps in the legal procedure for transferring the titles for condominiums and houses are as follows:
The owner of the condominium or the house and the buyer agree on the sale of the property in question. A Deed of Absolute Sale is created through a lawyer and accordingly notarized.
A Land Tax Declaration is obtained from the Bureau of Internal Revenue (BIR) and turned in to the city or municipal assessor’s office.
The buyer will then pay the real estate tax for the property to the City Treasurer’s Office.
A representative from the Assessor’s office will then assess the market value of the property, and the buyer pays the transfer taxes (0.50% of the property’s market value if it is in the province and 0.75% if the property is in Manila) to them.
Capital gains tax (6% of the gross selling price or market value, whichever is higher) and a documentary stamp tax (1.5% of the gross selling price or market value, whichever is higher) are then paid to the BIR.
The Registry of Deeds will then cancel the old title and issue a new one with the new owner’s name on it.
The new owner can now obtain a copy of the new title and the new tax declaration from the Assessor’s office.
The whole process can take about 39 days to complete, so you may either extend your stay in the Philippines to see it through or invest a trusted representative with special power of attorney to transact on your behalf.
You can also purchase the property through a real estate agent. S/he will then take care of the whole registration process in exchange for a commission (usually around 3-5% of the property’s fair market value or selling price, whichever is higher).
There are also three other options available to foreigners who want to invest in Philippine property:
1. Buy property under your Filipino spouse’s name.
Provided that your spouse is still a Filipino citizen (dual or otherwise), you can purchase land and have his or her name appear on the Transfer Certificate of Title (TCT). As a foreigner, your name can’t appear on the TCT, but it can be included in the contract of sale.
However, do note that the property still can’t be in your ownership even if your spouse should die or if you two end up separating. Instead, you’ll have a law-mandated amount of time in which you can sell off the property and collect the proceeds. Past that, the property will be passed on to your spouse’s Filipino heirs or relatives.
On the other hand, if you are the legal heir (e.g., a legitimate biological child) of a Filipino citizen, you can inherit property upon the former’s death even if you aren’t a Filipino citizen.
2. Use a corporation to purchase the property.
So long as at least 60% of a corporation is owned by Filipinos (with the rest being owned by expats or foreign nationals) and is registered with the Board of Investment (BOI), it can be used to sell or buy a piece of property.
Still, the largest piece of residential land a foreigner can own (whether you purchase it under your spouse’s name or through a corporation) is a thousand square meters of urban land or a hectare or rural land.
3. Obtain a Special Resident Retirement Visa (SRRV).
This costs around USD1500 for the initial application and about USD400 for the annual renewal. You would also need to make a deposit in a local bank amounting to at least USD10,000, but this visa does give you the right to run a business or own land in the Philippines. It’s also far cheaper than having to keep renewing a tourist visa as you extend your stay.
Of course, you should only go for this option if you intend to spend much of your time living in the Philippines. (How else would you run your businesses or oversee your properties otherwise?)
A Note about OFW’s and Pag-Ibig Loan Housing:
Aussie-based Filipino-born OFW’s can avail of Pag-Ibig Loan Housing to purchase property in the Philippines. Under the Pag-Ibig Home Development Mutual Fund (HDMF), OFW’s who have consistently made monthly contributions for at least two (2) years qualify for such assistance.
Active Pag-Ibig members can borrow up to six million pesos (Php6,000,000), but the actual amount you can borrow is based on your need and your capacity to pay off the loan. The amount you can borrow is assessed once you submit the following requirements:
A valid, current employment contract or an employer’s certification with an OWWA or POEA stamp;
Proof that you would be younger than the mandatory retirement age of 65 years by the time you’ve paid off the monthly amortizations for the loan (e.g., a certified true copy of your birth certificate, passport, or any other government-issued ID or identification certificate that shows your complete date of birth, etc.).
As a rule, your monthly amortization should not exceed 30% of your actual income (as evidenced in your employment contract or employer’s certification).
So, there we have it. The process towards securing your own property in one of the most economically-promising countries in Asia certainly won’t be easy, but then again, anything worth having and holding on to never is, isn’t it?