What to ask when buying a lot in the Philippines

The Philippines is famous for its friendly community, tropical climate and stunning beaches. Spreading over 7000 islands, between the Pacific Ocean and the South China Sea, its also known for an extremely reasonable cost of living, making it an ideal expat destination.

If youre thinking of making the move to the island nation, whether it be for a change of setting, retirement or perhaps to start a business, then youll need to know a bit about how the process of buying a house in the Philippines will work. Read on, so you dont miss any of the basics.

• Whats the property market like in the Philippines?
• Can a foreigner own a property in the Philippines
• Buying land in the Philippines
• Make a secure Wise transfer to pay for your new property in the Philippines
• Buying real estate in the Philippines: costs
• Finding and choosing property in the Philippines

Whats the property market like in the Philippines?

Like most places, the property market in the Philippines reflects the economy. During the 2010s house pricing faced a sharp rise, even doubling value in some regions, such as Makati¹.

But, due to economical and political reasons, the housing market started to slow down at the end of the decade. The Covid-19 pandemic attenuated the situation, with prices declining in 13.2% (-16.1% when adjusted to inflation)¹.

Its safe to say that the Philippine economy is standing on shaky ground, so, if youre considering investing in property in the country, its crucial to know the market well, and have local help you can trust¹.

Can a foreigner own a property in the Philippines

Foreigners are subject to some restrictions when it comes to buying property in the Philippines². Its possible to buy a condo or flat, so long as the block remains at least 60% locally owned, but it is more difficult to own land³. Basically this means that expats can own a building but not the land on which it stands.

Can a naturalized US citizen buy property in the Philippines?

The Philippines accepts dual citizenship, thus people born in the Philippines, who later on naturalized as American citizens are still eligible to buy property and land in the country.

In case the person in question opted to abdicate their Philippine citizenship, then they shall be treated as foreigners in which case restrictions to land ownership will apply.

Additionally, for Americans entitled to Philippine citizenship that opt to follow through with the naturalization process local laws will apply as to any other national from the Philippines.

How to buy property in the Philippines as a foreigner: step by step

Foreign buyers are subject to restrictions, and the market is less regulated. Its essential that you get the right, qualified local help to ensure that the property you're buying is being sold legally.

Once youve found someone to help you out, here are the steps youll need to follow³:

Step 1. Choose the property you wish to purchase.

Step 2. Go after alternatives for getting a mortgage. You can check with local banks, or use an international mortgage lender based in the US.

Step 3. Agree with the seller on the sales price and, with the help of a lawyer, create and notarize the Deed of Absolute Sale (DOAS).

Step 4. Get the Land Tax Declaration from the Bureau of Internal Revenue (BIR) and submit it to the relevant Assessors office.

Step 5. Pay for the real estate tax on the city treasury.

Step 6. The Assessors office will analyse the value of the house.

Step 7. Youll have to pay for the transfer taxes. This has to be done to the Assessors office.

Step 8. Seller pays for the Capital Gains tax and Documentary Stamp tax (to the BIR).

Step 9. The old property title under the name of the seller is replaced by the new one on the Registry of Deeds (RD).

Step 10. Youll get a copy of the new deed and will need to request the Assessors office for tax declaration documents.

Step 11. You made it! Sit back and enjoy your new Philippine home

This process should take around 40 days to be completed.

Buying land in the Philippines

When it comes to investing in overseas property, it might seem like an option to look into buying land and building your dream home from scratch.

But in the Philippines this might be a limited alternative, as a lot of regulations are in place to preserve the countrys natural resources and environment.

Can foreigners buy land in Philippines

The short answer to this question is no³. Unfortunately, due to very protective laws, foreigners can only buy a restricted set of properties, and are not allowed to purchase lots or land.

There are alternatives if youre determined to own land, such as buying it via a corporation, or through inheritance in case you have a Filipino spouse.

If youre really inclined on finding out the steps in buying a lot in the Philippines, its better to reach out to a local lawyer or real estate specialist, as they might be able to offer you further guidance.

Make a secure Wise transfer to pay for your new property in the Philippines

After looking into international real estate, you might be wondering how to send money to pay for your overseas property. Wise offers you a quick, safe and transparent solution for sending money abroad.

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Buying real estate in the Philippines: costs

If youre thinking of buying a property in the Philippines, the price you pay will be influenced significantly by where you want to live and which type of property you wish to acquire.

Read on for how much a house will cost you in the Philippines, as well as which taxes and fees youre expected to pay when purchasing a property.

How much is a house in the Philippines?

As mentioned below, location plays a huge role when it comes to house pricing. Here you can find and overview of average property prices in some of the most popular Philippine cities:

What are the fees and taxes for buying property in the Philippines?

Other than the purchase price for the house, you might want to look up which taxes and fees are applicable, as they can influence how much itll cost you in the end.

Below youll find some of the most common property taxes and fees:

Real estate agent fees (3% - 5%), capital gains tax (6%) and documentary stamp tax (1,5%) are applicable for the previous owner. Keep this information in mind in case you ever wish to sell your property.

Banks usually add a spread on the mid-market exchange rate and overcharge on international transfers.

Make sure to get the most PHP from your USD by using Wise, a cheap and transparent way of moving your money abroad.

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Finding and choosing property in the Philippines

Now that weve been through the steps of purchasing a property, as well as pricing and the fees youll have to pay, we can give you some more practical tips on how and where to go after your Philippine home.

What are good Philippine locations to buy property in?

Whether youre looking for large cities or beachfront properties, the Philippines has it all. When looking for a starting point for your property search, here are some options for you:

Manila

The Philippines capital, Manila, houses 1.8 million people, making it the second largest city in the country.

If youre looking for an expat lifestyle and work opportunities, this might be the right city for you.

Its also worth checking the Metro Manila area, which encompasses Manila, Quezon and several other cities, one of the largest metropolitan areas in Asia. There you should be able to find many available properties in a very urban area.

Palawan

Have you ever dreamed of living an island life? If were talking about bucket list destinations, its likely the name Palawan rings a bell.

With almost a million inhabitants and an increasing tourism market, Palawan is a popular place for foreign property investors. The UNESCO heritage site has loads of options of beaches, natural reserves and activities, so youll never get bored.

Quezon

If youre looking for a large city, Quezon is the place to go to. With almost 3 million inhabitants, Quezon is the largest city in the Philippines¹.

It also served as the countrys capital between the 40s and 70s and its home to two of the top Philippine universities¹¹.

When you think of variety, Quezon is the city for you.

Davao

Located in the south, Davao is a popular option for expats. Although this is the third largest city in the Philippines. The population of 1.6 million¹² and relatively large area make it a much less densely populated, and therefore a more liveable, place.

Which kind of properties are available?

The Philippines has a well developed real estate sector with a wide choice of apartments, condos and houses.

Foreigners can buy condos, as long as the ownership of the block remains 60% local, but it's harder to own land as a foreigner in the Philippines. Naturally, you'll find a good stock of flats and condos available in built up areas and cities, especially.

You can also lease land on a long term lease, and build a home. However, if you want to build your dream home yourself, you should talk to your lawyers about how this could be achieved.

Make sure to check the condition of the property

Its a smart idea, though not required by law, to get a survey done on any property you choose, or any land you decide to lease, before you commit. This isnt necessarily standard practice, so you should ask your lawyer about how to find a local surveyor you can trust.

How to find property or land in the Philippines

There are several avenues you can take to find land or property in the Philippines, however, youre strongly recommended to use a local property agent you can trust.

Buying a house in the Philippines can be complicated, and there are restrictions on the way that foreigners can purchase both land and property. This means its easy enough to fall foul of scams and pitfalls.

A specialist agent can also offer helpful advice and insight into the local market. Although, there will be a fee to pay for this service, they'll help you avoid costly mistakes, and might be able to negotiate with the seller better than you can alone.

Nevertheless, you should make sure youre clear on what youll get for your money, as both the packages and prices vary wildly.

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Now that weve been through the most important aspect to look out when buying property or land in the Philippines, youre ready to go after your new home.

Buying property abroad is a lengthy process, so make sure you create a free Wise account. This way, international money transfers are one less thing for you to worry about.

Get started with Wise

Sources:

1. Global Property Guide - Philippines price history
2. Sydney Philippines Consulate General - Land owning in the Phils
3. Global Property Guide - Philippines buying guide
4. Philippines Honolulu - FAQ
5. Numbeo - Property investment comparison: Manila and Quezon
6. Numbeo - Property investment comparison: Davao and El Nido
7. Wikipedia - Manila
8. Wikipedia - Metro Manila
9. Wikipedia - Palawan
10. Wikipedia - Quezon City
11. Global Property Guide - Where to buy property in Quezon
12. Wikipedia - Davao City

Sources checked on 12.17.2021