We've been fascinated by the Philippines ever since the Spanish-American War. This archipelagic nation is technically a collection of more than 7,000 islands bordered by Taiwan to the north, the Pacific Ocean to the east, Indonesia and Malaysian Borneo to the south, and the South China Sea to the west. Tourism here increased by 7.7% to 7.1 million visitors in 2018, according to the country's Department of Trade and Industry.
The country attracts more than just tourists. The Philippines is home to a large and welcoming community of expatriates who enjoy the low cost of living, inviting beaches, beautiful flora and fauna, tropical climate, and friendly locals to name just a few of the amenities.
Publishing group InternationalLiving.com, which specializes in retiring overseas, estimates that most ex-pats can live comfortably in the Philippines for around $1,525 a month, including food, activities, basic healthcare, and housing costs. Housing makes up a large percentage of the budget. While many ex-pats rent, it may be more cost-effective to buy—particularly if you’re planning to stay in the country for more than a few years. In general, foreigners are prohibited from owning land in the Philippines, but they can legally own a residence. Here are some options.
Location, Location, Location
One of the main things about moving abroad is which part of your destination country you'll call home. There are a lot of factors to consider before you make that trek. Do you want to be close to all the hustle and bustle a lot of living abroad? Or do you truly want to leave it all behind and live without any hassles?
If you want to be in the center of it all, consider major cities like Quezon City, which has a population of nearly three million people. Manila—the capital city—with about 1.8 million, is one of the most densely populated cities in the world. Finally, Davao City at 1.6 million, is one of the country's tourism centers. These cities, along with other major metropolises, have the perks you come to expect including restaurants, nightlife, and entertainment right at your fingertips. There are also plenty of markets, as well as access to healthcare facilities. But remember, with all of these amenities come a lot of traffic and big crowds.
Perhaps you've had enough of city life, and would rather try something a little less urban. Tagaytay is a popular destination for tourists—both domestic and foreign. Situated in the mountainous region, it's known as one of the country's summer capitals because of its cooler climate. The total population is about 71,000, and there is a lot to do—from golf courses and other outdoor activities. Dumaguete, on the other hand, is a bit larger, with a population of more than 113,000. It's a principal seaport and has great beaches.
- Foreigners are prohibited from owning land in the Philippines, but can legally own a residence.
- The Philippine Condominium Act allows foreigners to own condo units, as long as 60% of the building is owned by Filipinos.
- If you want to buy a house, consider a long-term lease agreement with a Filipino landowner.
- You can also purchase a property through a corporation, provided its ownership is 60% or more by Filipino citizens.
Buy a Condo
Perhaps the easiest option is to purchase a condominium, a hybrid type of ownership that falls outside traditional structures. With traditional property, you own the structure, plus the land on which it sits. If you buy a condo, however, you only own the condo unit itself—not the land beneath it. The Philippine Condominium Act specifies that foreigners can own condominium units, as long as 60% of the units in the building are owned by Filipinos.
Remember, there are things you need to consider if you're going to buy a condo in the Philippines. Just like anywhere else, you will have condo fees to pay every month. And based on where you live, you may have to share the amenities like the pool, gardens, and common outdoor spaces.
The best thing you can do is not to wing it. Do an on-site inspection and a complete walk-through of the property before you purchase. After all, you don't want any surprises when you make your big move.
Buy a House
As we mentioned, foreigners can legally own houses and other types of buildings, but they are prohibited from owning the land on which it sits. To work around this, you can buy a freestanding house but lease the property.
Foreigners can own a home, but not the land on which it sits.
Under the Investor’s Lease Act of the Philippines, a foreign national can enter into a lease agreement with a Filipino landowner for a long-term lease with an initial period of up to 50 years, with a one-time option to renew for 25 years.
Of course, the purchase price will depend on where you buy. The closer you are to a major city, the higher the price. The average price per square foot in the city center nationally is about $164, making a 1200-square foot home $196,800. If you choose to live outside the city, it's roughly $91 per square foot, meaning that same sized home costs just under $110,000. The average interest rate for a 20-year fixed-rate mortgage is about 7.1% nationally.
Consider hiring a local agent before you buy—someone who deals exclusively with ex-pats. This person can guide you through the process and help you avoid costly mistakes. You will, naturally, have to pay a fee for the service, but it may be well worth the investment.
Marry a Native
If you are married to a Filipino citizen, you can buy property in your spouse’s name. While your name won’t be on the title, it can be included in the contract to buy the property. If you are legally separated, or your spouse passes away, the land can’t be transferred to you because you are still prohibited from owning land, but you’ll have a reasonable amount of time to sell the property and collect the proceeds. Otherwise, the property will pass to your spouse’s heirs and/or relatives.
Buy Through a Company
Corporations can own land in the Philippines, provided Filipino citizens own 60% or more of the company—the rest can be owned by a foreign partner or partners. Corporations that meet this equity stake requirement must be registered with the government Board of Investment (BOI) for permission to buy, sell or act as an intermediary in a real estate transaction.
As a foreigner, the largest piece of residential land you can own, either with your Filipino spouse or through a corporation, is 1,000 square meters of urban land—just under a quarter acre—or one hectare or about 2.5 acres of rural land.
Real estate transactions always involve more than just the price tag. If you buy property in the Philippines, you can expect to pay several fees, including:
- Capital Gains Tax: 6% of the residence's sales price, zonal value or fair market value, whichever is highest. This is normally paid by the seller, but in some instances the buyer pays it, or it ends up rolled into the sales price.
- Documentary Stamp Tax: 1.5% of the sales price, zonal value or fair market value, whichever is highest.
- Transfer Tax: 0.5% to 0.75% of the sales price, zonal value or fair market value, whichever is highest—depending on where the property is situated.
- Title Registration Fee: This varies according to a published registration fee table; generally around 0.25% of the sales price.
One of the most important things you'll have to consider in the Philippines—or anywhere abroad for that matter—is your safety. As of August 2021, the U.S. State Department has issued a Level 3 travel advisory related to the Philippines because of COVID-19, as well as crime, terrorism, civil unrest, and kidnapping.
As of August 2021, the State Department issued travel advisories urging people not to travel to the Sulu Archipelago and the Sulu Sea because of terrorism and kidnappings, while another one advised against travel to Marawi City in Mindanao, as the federal government initiated martial law against insurgent groups. A third warning was issued for travelers to other areas of Mindanao due to crime, terrorism, civil unrest, and kidnapping.
The Bottom Line
Just like anywhere in the world, property prices vary greatly in the Philippines, depending on location, size, condition, and features. In most cases, though, you can expect to get a lot more house for your money than you would back home: Think brand-new beachfront condo, for example, for less than $100,000.
Once you pick the general area where you want to settle down, it can be helpful to work with an experienced real estate agent who can show you various properties, help narrow down your choices and provide general guidance throughout the process. Your agent can also help you understand the rules regarding property ownership, and what you can and can’t purchase as a foreigner.
When purchasing a home overseas, conduct the transaction in a way that will protect your property rights. In the U.S., homebuyers receive title to the property, but this distinction may not be as clear in every country—or even in every corner of a country. To help ensure that everything goes as smoothly as possible, and to protect your rights, consult with an experienced real estate professional and an attorney.