Investing in a second home
MANILA, Philippines—The Clubhouse appears to be the fruit of a million dreams, what with serene and beautiful mountain scenery overlooking the sea. In fact, singers Regine Velasquez and Ogie Alcasid chose that venue for their wedding.
Developed by Landco, “The Peak at Terrazas de Punta Fuego” is an intimate 12-hectare development and is one of the highest elevations in the area; at the same time, it nestles the morning sun on its lap.
The village is located in Nasugbu, Batangas, and it is easy to imagine the place as a vacation home for those who have more than enough, rather than a primary home for the average Pinoy. It is also a possible choice for an investor looking to buy a second home in the Philippines.
The decision to buy another house is a personal one and may include all sorts of reasons, not necessarily logical. However, for those who are looking at real property as potential investment, there also arises a need to quantify the decision.
Reversal in the US
In certain parts of the United States, there has been a reversal of property values that has completely altered lifestyles and investing habits. A few decades back, Americans could count on rising property values as a tool for getting richer or at least, a nest egg for their retirement. There was also the previous trend of purchasing subsequent homes because many Americans could easily sell property at attractive prices and move on to the next new house.
Nowadays, the apparent trend is toward building smaller homes, sometimes just the size of one room. Since the mortgage mess, many have had a hard time keeping up with mortgage payments, so they downsize instead.
A lot of luxury vacation homes are also available for sale in the market. For a certain income bracket, however, it is also an opportune time to purchase a second home given the low market values. The same is true in the Philippines.
Good time to buy?
MoneySense Editor Heinz Bulos explains, “A good time to buy a second home is when interest rates are low, like this year. This will allow you to lock in a low, fixed rate for a 25-year mortgage. This kind of rate environment exists during relatively stable economic periods, which also affect the robustness of the real estate market. So if the economy is doing well, like these days, it’s a good time to buy a second home, especially a new one. You don’t want to buy when there’s an economic crisis with spiraling interest rates and real estate projects getting stalled.”
When asked how to ascertain if buying a second home is a real investment or not, Bulos replies, “Consider a second home an investment only when you plan to make money off it, either by renting it out or selling it after several years when its market value appreciates. Otherwise, even though it’s an asset that increases your net worth, unless it’s converted into cash one way or another, it’s just a non-earning asset.”
Investing in a second home is not only calculated by numbers but is also based on a person’s need and lifestyle. Nevertheless, it is sometimes hard to say when the real needs end or if the investments pay off in the future. The growing trend toward simpler living further necessitates a re-evaluation of real estate choices, one that has long-term consequences.
Differing semantics can be confusing but the bottom line translates to weighing your decisions with utmost care.
Marie Cancio, who comes from a family of architects, suggests that you buy the second home you really want to live in so that in case you need to sell, it will be marketable. She adds, “Don’t just buy and make your money sleep. A house is a liability, not an asset.”
