More rich Filipinos investing in offshore real estate to hedge risk

The appetite to invest in offshore property assets is increasing among affluent Filipinos seeking to diversify their assets and preserve their wealth amid a record-low interest rate environment and lockdown uncertainties during this prolonged pandemic, a property expert from consulting firm KMC Savills said.

In a recent interview with Inquirer, Michael McCullough, managing director of KMC Savills, said his firm was finding an increasing number of high-networth Filipino individuals and families wanting to scout for offshore property investments within a price range of $12 million to $29 million.

“They are now saying, why don’t we start looking at deals overseas—Europe, United States, Australia—where they are able to get yields and use a legal system, which is transparent and quicker than the Philippines,” McCullough said.

Top of mind for those scouting for offshore property assets is the office segment, which can generate recurring yields, he said.

“But now they’re [also] looking at multi-family residential assets or apartment blocks,” he added.

These high networth individuals and families “feel that they want to hedge their bets,” he said.

These affluent Filipinos are seen willing to accept yields of 8 to 12 percent on their overseas investments, even if they could generate higher yields of 12 to 20 percent in the Philippines. “They just feel like—you know what, we have enough exposure here,” he said.

This implies that competition is heating up not just among and within local upscale developers but also with sellers of property assets outside the country. Local developers are thus increasingly being challenged to come up with compelling products.

This diversification is also seen as a way to make these rich people’s excess cash generate better returns. If they would otherwise park all their money in bank deposits, he said a 0.5-percent annual interest rate would not look too appetizing when the inflation rate is at the 4-percent levels.

But because these people are awash with cash, it doesn’t mean that they will stop investing locally altogether as they are capable of investing in multiple markets, McCullough added.

Based on live discussions with clients who want to diversify and pick up offshore assets, he said these people were asking for real estate available in markets like Madrid, Sydney and New York City.

The interest in Madrid may have something to do with the Philippines’ historical ties with Spain, which colonized the country for three centuries.

“It’s kind of bragging rights as well. At one point in time you could go and invest 500,000 euros, live there, get citizenship after two years,” he said.

New York, on the other hand, is seen as a very liquid market.

“You could buy a property today, you know, and potentially sell it in 30 days,” McCullough said. “It’s also one of those places that you can talk about—oh yeah I have a property in in New York City as well. So these are just like trophy locations,” he said. INQ