5 Key Factors Affecting the Real Estate Prices in the Philippines

A few years ago, the Philippines was among the most affected country by the global health crisis. The economy went into recession, many investments didn’t push through, and many Filipinos lost their jobs. However, the real estate market in the Philippines continues to thrive even amidst the pandemic. From business to commercial real estate, this industry remains strong and profitable.

So, if you have plans to invest in the Philippine real estate market, understand the current real estate landscape.

Understanding the Philippines’ Real Estate Landscape 

While other developed countries face more severe struggles with inflation, the Philippines continues to become an attractive investment destination for foreign and local investors. Experts say that the country is predicted to hit 6.7 percent Gross Domestic Product (GDP) growth by the end of this year. Thanks to the government for fulfilling its infrastructure projects and delivering its promising developments nationwide. 

Furthermore, international remittances surge as more Overseas Filipino Workers (OFWs) earns more abroad due to high dollar currency conversion. Moreover, many expatriates and immigrants are returning to the Philippines to support the residential rental market. As a result, there’s a significant increase in demand based on real estate trends. 

Meanwhile, there is also a rising trend in the Philippines’ housing market called microcities or so-called “a city within the city.”. Microcities are a mix of residential and commercial structures clustered in one location, providing amenities like malls, supermarkets, gyms, and salons. This type of development offers spacious modern homes and state-of-the-art community facilities.  

Current data from the Philippine Statistics Authority (PSA) showed that residential buildings have the highest number of construction and approved residential building permits in the first quarter of 2022.

Types of Real Estate Property

The Philippines' real estate sector is subdivided into five (5) categories - commercial, industrial, residential, special purpose, and land property. 

 1. Industrial Real Estate

This type of real estate includes building structures used for producing, manufacturing, storing, and distributing goods and services. Examples are factories, power plants, warehouses, and oil fields.

2. Commercial Real Estate

These are used for business or commercial purposes, such as shopping malls, restaurants, hospitals, retail shops, offices, and other income-generating organizations. Apartment buildings are partly considered commercial real estate properties because owners generate income through rentals.

3. Special Purpose

If a specific property is used for the public, it is called real estate with a special purpose. These are government offices, parks, public schools, places of worship, cemeteries, and other structures controlled by the government.

4. Land Property

A piece of undeveloped or vacant land is considered land real estate property. It includes farms, ranches, orchards, pastures, and any land used for agricultural and forestry purposes.

5. Residential Real Estate

Residential property is the most common real estate category. It covers all types of residences, such as apartments, condominiums, and single-family homes. Residential properties apply to both existing properties and new residential buildings.  

5 Key Factors: What Drives Real Estate Property Prices in the Philippines

Before making an investment, it is essential to know the key factors affecting real estate to determine the best price and time to purchase. So, what influences property value in the Philippines? 

1. Location

The most critical factor affecting real estate property values is the location. The closer it is to the public facilities, the higher the price is. Thus, a property with numerous entry points to the city’s center, such as transportation lines, is relatively expensive. However, it can be a good opportunity if you plan to sell them in the future. Buyers or investors are not only buying the property because of its location; they also purchase accessibility and convenience. 

2. Economy

The health of the country’s economy is also another factor that influences real estate value. It is usually measured by economic indicators like GDP, prices of goods and services, employment data, manufacturing activities, and many others. Therefore, if the Philippines has a sluggish economy, it goes the same with real estate. But, it is the best time to invest in real estate since most properties are quite affordable. 

3. Government Policies on Real Estate Market

Another factor affecting the property’s worth is government policies, programs, and subsidies. If the government provides tax credits, tax incentives, and deductions, it can temporarily boost the demand for real estate. Viable legislation for a subsidized housing loan provider offering residential real estate loans also influences the sector.

4. Demographics

Broadly speaking, demographics are the data that describes the composition of the population. It includes age, gender, race, migration patterns, income, and population growth. This data significantly impacts the value of real estate properties. For example, young professionals prefer living in an expensive condo unit because it is closer to their work. Meanwhile, a growing family opts for an affordable house and lot for sustainability. Hence, real estate is valuated, marketed and identifies which type of properties are in demand based on demographics.

5. Interest Rates

Interest rate changes also significantly influence real estate prices and a person's ability to purchase—the lower the interest rates, the lower the mortgage cost. But, looking at its impact on equity investment, like Real Estate Investment Trust (REIT) against residential real estate, they have a relatively similar relationship with interest rates.

Why Real Estate is a Good Investment?

Investing in real estate has numerous benefits. With well-chosen properties, one can enjoy diversification and excellent returns.  

• Real estate is a tangible asset.

When you invest in real estate, expect you will walk away with profitable gains if you sell it. Note that residential property prices may increase or decrease over time, depending on the key factors affecting them. If the economy is sluggish, you can buy an affordable house and lot for sale. Or, you can sell your house and lot in the Philippines if there’s an increase in demand.

• It provides cash flow.

Real estate can also be an income-generating investment. If you plan to invest in buy-and-hold property, you can rent it out. Thus, it provides cash flow. You must work with the right property management platform or company like Airbnb. Having a house for rent closer to the most attractive destinations in the Philippines is highly recommended.

Take Control of Your Real Estate Investment

Indubitably, there are plenty of opportunities to invest in real estate. More people are turning to house rentals because they moved to a new location for a fresh start or didn't want residential mortgage loans.

Meanwhile, buying an affordable housing property is now available for every Filipino through Lumina Homes. It offers a selection of modern model homes that suits your lifestyle and needs and are strategically located at the nearest public facilities like transportation terminals, malls, and more.

So, if you haven’t invested yet, now is the right time. If you work abroad, tailor an overseas property investment strategy to take control of your asset. Contact our accredited Lumina Homes sellers nationwide for more details and inquiries.