Unlocking wealth: A beginner’s guide to real estate investing in the Philippines

At first glance, the outlook for property investment in the Philippines over the next 12 months appears rather straightforward. While many asset classes have maintained steady growth, the residential sector has witnessed a remarkable surge in activity.

I had the opportunity to experience this energy firsthand on Thursday, when Tek Samaniego, the Property Section Editor of the Philippine Daily Inquirer, graciously invited me to be one of the resource speakers at an event titled ‘Global Creations For Smart Investors.’ This event was jointly organized by Inquirer Property and Vista Residences.

To underscore the remarkable performance of the residential sector in the post-COVID-19 landscape, one needs only to observe the enthusiastic participation of 150 attendees during the event. This heightened level of engagement serves as a resounding testament to the vibrancy and dynamism characterizing the residential real estate market in the Philippines during these transformative times.

I’d like to share some key insights from our discussions in the hope that even skeptics can now recognize that the property sector, particularly the residential segment, has regained its footing. This resurgence has occurred despite the persistent external challenges that continue to shape the decisions of many stakeholders.

Real estate can be an attractive investment option for many reasons, making it a popular choice for investors. However, whether it’s your ‘best bet’ depends on your individual financial goals, risk tolerance, and investment strategy. Here are some reasons why real estate can be a compelling investment:

Potential for Appreciation: Real estate properties appreciate over time and can result in capital gains. From a Philippine context, real estate has shown historical increases in value.

Cash Flow: Real estate investments, such as rental properties, can generate regular rental income. This income can provide a steady cash flow, which can be particularly appealing for those seeking passive income streams.

Diversification: Real estate can be an effective way to diversify your investment portfolio. It has a low correlation to other asset classes like stocks and bonds, thus can help reduce overall portfolio risk.

Leverage: Real estate investments often allow for leverage through mortgages and even in-house financing. This means you can control a larger asset with a smaller initial investment.

Tax Benefits: Real estate investments come with various tax advantages, including deductions for mortgage interest, property taxes, and depreciation. Additionally, capital gains from the sale of certain real estate may qualify for favorable tax treatment.

Hedge Against Inflation: Real estate is often considered a hedge against inflation because property values and rents tend to rise with inflation. This can help protect the purchasing power of the investor.

Tangibility: Unlike other investments, real estate is a tangible asset that you can see and touch. It provides a sense of security for some investors.

Control: Real estate investors have a degree of control over their investments, such as making decisions about property management, renovations, and rental strategies.

Passive Income: For those who invest in rental properties, real estate can provide a steady source of passive income, allowing you to earn money without actively working for it.

Long-Term Wealth Building: Real estate has a track record of helping individuals build long-term wealth. Over time, property values increase, and mortgages can be paid down, resulting in a valuable asset.

While real estate offers these advantages, it’s essential to consider the potential downsides as well, such as property management responsibilities, market volatility, illiquidity (it can be challenging to sell property quickly), and the risk of market downturns.

Before investing in real estate, it’s crucial to conduct thorough research, understand your financial goals, and assess your risk tolerance. Additionally, consider consulting real estate professionals to help you make informed investment decisions that align with your overall financial strategy. Real estate can be a valuable part of a diversified investment portfolio, but it should be considered within the context of your broader financial plan.