Flexible payment terms or discounts: Which one is better for foreign investors?
Now that the Philippines is slowly easing up its restrictions, experts foresee that direct foreign investments for properties will slowly pick up again.
If you’ve read some of my articles in the past, you’d be aware that a lot of foreign property markets are in investment mode and some of their respective governments are actually recommending their people to invest outside of their country to protect their local property markets. Now, the real challenge is how to get their attention and bring their investment revenue back to the Philippines.
When it comes to foreign investors, developers and agencies must think from a macro perspective. For example, if developers are selling a high end development in Bonifacio Global City, they should focus their competitive insights on other similar projects in Kuala Lumpur City Centre or Thonglor in Bangkok, instead of those by local competitors. With that in mind, they should strategize on how to provide better incentives and promotions for investors, something that properties in Malaysia and Thailand don’t often provide.
Discounts or flexible payment terms?
Properties for sale in Thailand and Vietnam are known for offering huge discounts. This was the case even before the pandemic emerged, when their domestic markets were already showing nascent signs of a property bubble.
Huge discounts might seem wonderful for investors in the short term, but in the long run it can really hurt and devalue a property market as a whole. It also means that buyers won’t even think about purchasing a property in these markets without a massive discount incentive.
In the Philippines, most big developers only offer minimal discounts and take care not to devalue their projects, even in tougher times. This means that the market remains strong—developers are well-funded, have budgeted their future projects appropriately and have no need to scramble for quick cash. This, in turn, gives investors confidence to purchase properties for medium or long-term outlook.
Instead of providing discounts, some local developers provided attractive payment terms such as a 15 percent downpayment stretched over 60 months. Based on our experience with PropertyAccess Japan and Korea, foreign investors find this arrangement much more attractive than huge discounts, since these discounts can act as a red flag for them, especially if they can’t visit the actual development or showroom in person. The long payment period gives them the option to commit even if they haven’t physically checked the development yet because the monthly payments aren’t a big deal for them.
So, to answer the question in the title, I personally think flexible payment terms are a stronger incentive compared to discounts for foreign investors. Let me know what you think!
The author is a start-up professional with over 18 years of experience running agencies and technology companies in Australia, the Philippines and Indonesia. He is now working with PropertyAccess Philippines
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