buy a house in the Philippines l Moneymax

Rent takes up a huge portion of the household budget. You need to set aside at least PHP 5,000 to pay for a standard-size house. Of course, the rent will go higher if you need more rooms or a bigger garage for your cars, bikes, or motorcycles. 

If you’ve been paying for a house you don’t own for years, maybe it’s time to stop renting and start owning. But the important question to ask is, “Are you ready to buy a house in the Philippines?” 

Buying a house is not as quick and easy as buying stuff online. With all the options and factors to consider, it requires time, research, and money. Here are some things to check if you’re financially ready to own a house.   

Signs You’re Ready to Buy a House in the Philippines

Buying a house is a journey that requires your financial readiness. Here are the signs you’re ready to become a homeowner. 

You Have a Low Debt-to-Income Ratio

Home ownership is still a debt but in a different form. Unless you’re paying in cash, buying a house in the Philippines is generally tied to a bank or Pag-IBIG financing. This means if you’re still paying a huge credit card balance or a car loan, then it might be difficult for you to take on a new financial responsibility. 

Before you purchase one of those homes for sale, think about your debt-to-income ratio, which is the percentage of your gross monthly income that goes to paying your monthly debt payments.[1] Ideally, your debts each month should not be more than 40% of your income. So do the math first. If your debts are considerably lower than your monthly income, then you can start shopping  for a new abode. 

You Have Enough Savings 

buy a house in the Philippines - You Have Enough Savings

Before you buy a house in the Philippines, make sure you have enough savings to cover any kind of financial emergency or future expenses. Your savings or emergency fund is important if you want to be financially secure before making that down payment on a house for sale in the Philippines. 

You Have a Stable Job or Source of Income

If you purchase a house or a condo unit, this will entail monthly amortizations. And to pay for the monthly amortizations, you need to have a stable source of income. 

Financial stability is one of the things that banks and lenders check. This is the reason they require employment and income documents before approving a housing loan.  

If you’re planning to buy a house in the Philippines, you should have permanent employment for at least a year or have a business that’s been operating for at least two years.

Read more: Should You Buy or Rent Your First Home?

You Have Extra Money for the Down Payment or Renovation

buy a house in the Philippines - You Have Extra Money for the Down Payment or Renovation

A bank or Pag-IBIG housing loan covers a significant portion of the cost of a house in the Philippines. But you also need to have cash to cover the down payment, the equity, or renovation. 

If you’re buying a condo unit, prepare at least 5% of the unit’s cost as down payment. For instance, a studio apartment costs around PHP 1.5 million, so have around PHP 75,000 for your down payment, which may be a one-time payment or spread out into several months. 

On the other hand, homes for sale that are under Pag-IBIG financing will not require you to pay any down payment. However, there may be some processing fees. Also, take note that some housing units for sale may have been abandoned for a while or have not been fixed or renovated. You may need at least PHP 100,000 to make it habitable or ready for occupancy.

You’re Planning to Stay in the Same Location for Good

Buying a house also means deciding to stay in the same location permanently. Your long-term plans should be aligned with your home ownership, unless you plan to have the unit rented and move someplace else. 

Before you buy a house in the Philippines, consider your goals for the next ten years, or more. Aside from planning which living space to buy, you also should think about the kind of life you want to live in the future. 

You Can Still Live Comfortably Even With a Mortgage 

Your finances are a huge factor when deciding to buy a house. A lot of people become “house poor,” which is being short on cash because most of their money is tied up in their homes,[2] because they failed to know the actual numbers until they started paying their mortgage.   

When you’re house poor, you end up depriving yourself of life’s comforts because you have a house to pay. Again, it’s worth doing the math before getting a housing loan. Your mortgage shouldn’t compromise your budget for the essentials. 

How Much Does a House in the Philippines Cost?

If you’re ready to buy a house in the Philippines, the next thing you should do is decide what type of house you want to buy. Note that housing costs in the country are affected by several factors. 

Location

The property’s location affects housing prices. For instance, if you want to buy a house in Metro Manila, you should know that it’s the third most expensive city to live in Southeast Asia.[3]

If you want to buy a house in the Philippines and you’re currently looking for the best place to live for the long term, then it’s best to know the population and the cost of living in these cities. 

Here are the top 15 best cities to live in the Philippines according to Livingcost.org.[4] 

CityCost of LivingPopulation
MakatiPHP 47,850630,000
Quezon CityPHP 33,4002.96 million
ManilaPHP 43,4001.85 million
MandaluyongPHP 36,200426,000
AngelesPHP 33,050463,000
General TriasPHP 25,600451,000
DavaoPHP 32,3501.78 million
CebuPHP 36,550964,000
Santa RosaPHP 33,700415,000
MuntinlupaPHP 32,350543,000
MarikinaPHP 33,600456,000
BinanPHP 29,450407,000
TaguigPHP 47,250887,000
Las PinasPHP 30,200606,000
CalambaPHP 25,500540,000

It’s tempting to buy a property in these cities. But remember that a home’s proximity to schools, employment opportunities, public transportation, and shopping and entertainment destinations can hugely impact its price.  

Buying an apartment in a city like Makati or Taguig can roughly cost an average of PHP 115,000 per square meter,[5] while it costs an average of PHP 66,000 per square meter in areas outside the metro, like Santa Rosa or Calamba in Laguna. 

Read more: Upfront and Hidden Home Ownership Costs You Need to Prepare For

Type of House

buy a house in the Philippines - Type of House

Whether you’re opting to buy a condo unit, an apartment, a townhouse, or a detached property, consider the number of bedrooms and floors, as well as the house’s overall aesthetic. 

According to property website Lamudi, the cost of building a house will depend on the type and the size. Standard homes with one or two bedrooms usually cost PHP 25,000 to PHP 31,000 per square meter.[6] You may spend a minimum of PHP 50,000 per square meter for detached houses and modern residential spaces. 

Moreover, the bahay kubo is the cheapest to build. For approximately PHP 20,000, you can already cover the cost of labor and materials. However, if you include the expenses for building plans, permits, and other expenditures, the cost of building a simple bahay kubo can go up to  PHP 80,000.

Environment, Community, and Security

The type of community where your house will be located may not directly affect the price of your new home. However, it pays to know that some locations which offer security, exclusivity, and  amenities like pools, basketball courts, parks, and cafes will require higher monthly association dues. 

Association dues[7] are fees collected from tenants and homeowners to ensure the continuity of operations and provision of amenities within the subdivision, the building where the condo unit is located, or of an entire gated village. 

Read more: How Much Do I Need to Buy a House in the Philippines?

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Can a Foreigner Buy a House in the Philippines?

Foreigners who wish to reside in the country for good can buy a house, but not the land in which the house stands. Based on Republic Act 4726 or the Condominium Act, foreign nationals can purchase condominium units, but only up to 40% of the total number of units within a property.[8]

As a result, foreign nationals can opt for a long-term lease of property for up to 50 years, renewable for a period that will not exceed 25 years. 

The Investors’ Lease Act[9] also allows foreign nationals to lease out a piece of land for the following purposes only:

  • Building of industrial estates, factories, and processing plants
  • Land development for tourism
  • Agro-industrial enterprises

What are the Fees Involved When You Buy a House in the Philippines?

Aside from paying for the unit itself, there are other charges you need to pay, which include the following:

Capital Gains Tax

The capital gains tax is a levy on the profit from an investment that’s incurred when the investment is sold.[10] Home ownership is a form of investment that entails a 6% capital gains tax on the  property’s zonal value, fair market value, or selling price. Usually, it’s the seller who shoulders this tax. But there are also instances when the buyer pays for it. 

Documentary Stamp Tax

The Documentary Stamp Tax (DST) is applied on the Deed of Absolute Sale between the buyer and the seller. It’s equivalent to 1.5% of the zonal value, fair market value, or the current market price of the property. Paying the Documentary Stamp Tax is important in documenting an acceptance or a sale of a property. 

Transfer Tax

The Transfer Tax is charged when the title of the property is transferred from the buyer to the seller and is usually 0.5% to 0.75% of the property’s value, depending on the location. 

Title Registration Fee

The title registration fee is around 0.25% of the property’s selling price and is charged during the final step of the home purchase when the title is under the name of the property’s new owner. 

Real Property Tax

The Real Property Tax is around 2% of the property’s market value if located within Metro Manila, and 1% of the property’s value if located outside of Metro Manila. 

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Final Thoughts

If you’re planning to buy a house in the Philippines, know that it’s a goal that needs time, research, and financial readiness. With a lot of factors to consider, you may want to solidify your home investment plan first to make sure that it’s aligned with your long-term financial goals. 

Do your research on homes for sale and shop around for the best home loan options.

If you think you’re not yet financially ready to own a home,  work for it. Invest to grow your money, or find other sources of income to save up for your down payment and renovation. 

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