How to buy property in the Philippines

Updated 2023-07-06 16:21

If you, like many foreigners before you, have fallen in love with the Philippines, you might be considering buying a property there so as to settle down permanently. Investing in real estate property in the Philippines can be quite complicated. Here are some guidelines to help you with the procedures.

You should know, above all, that foreigners are not authorized to buy land in the Philippines. However, they are allowed to buy apartments or condominiums. In some cases, foreigners are allowed to own land provided they are married to a Filipino national. You are, therefore, advised to seek thorough information on related formalities before proceeding.

Where to buy property in the Philippines

Location is also a key factor, city/ province. Urban/ rural.  If you choose to settle in an expat area, then Metro Manila (the cities of Makati, Parañaque, Quezon, and Taguig might be a good idea bet), Cebu, Angeles City in Pampanga, or Subic Freeport Zone.

There are several reasons why these areas are considered expat-friendly and have amassed a considerable number of foreign national residents over the years. These reasons include the convenience of their location, secured communities and villages, family-friendly establishments and institutions, and proximity to transportation hubs. Angeles City and Subic were former U.S. military installations that have retained much of their American suburban ambiance.

How to find a property to buy in the Philippines

Finding property to buy in the Philippines is best through a realtor. Here are some tried and tested accredited realtors who actively work with expats regularly:

There are, of course, properties for sale privately, which can be seen online every day.  Exercise caution and seek help from a broker, or a real estate lawyer and see the original deeds of the property, as there have been many cases of property scams in the Philippines.

Finding the right property depends on location, your budget, the market price and future investment potential, and what work needs to be done to the place.

How to finance property purchase in the Philippines

The first step is to find a home that is right for you and agree on a purchase price with the seller. A deposit of 20% is usually required to secure your purchase. Your real estate broker (if you choose to hire one) will help you with the details.

Although every individual application is subject to conditions, the good news is that expats can apply for mortgages through international and national banks in the Philippines. Please be aware that expats can own property, but not the land that it is built on!

Although it has become easier for expats to apply for mortgages in the Philippines, it is only open to expats who have the following visas: Quota or Preference Immigrant Visas, Special Resident Retiree Visas, or those with permanent residence status and working visas in some parts of the country.

Conditions to be met when buying land in the Philippines

The purchase of property by foreigners in the Philippines is regulated by a few conditions. As mentioned, foreigners are not allowed to purchase private land, but you are entitled to take a 100% interest in other forms of real property as long as you have a separate legal title for the building adhered to the land. In short, you can own a property but not the land on which it is built.

However, you can opt for the long-term lease on the land with a 50-year duration, renewable for an additional period of 25 years. You are hence advised to seek the assistance of real estate specialists on this issue, whether you are buying an old or a new property.

Good to know:

Holders of the Special Resident Retiree's Visa (SRRV), which is a non-immigrant resident retiree visa, are eligible for additional benefits besides the authorization to buy an apartment or rent a plot of land or a house. You can read more about this on the Philippine Retirement Authority website.

Purchase of land in the Philippines

If you wish to purchase land in the Philippines, you have to indicate your Filipino spouse's name on the sales deed. However, this does not mean that you will recover the land after your spouse's death.

You can also purchase land through a company that you have set up in the Philippines. Note, however, that you are not allowed to own more than 40% of the company's shares since the rule is that all businesses in the country should have at least 60% Filipino ownership. In terms of the construction of office buildings, for example, you can own specific areas in a building and at the same time have an aggregate of up to 40% ownership of the land.

In the case of the purchase of land for real estate purposes, the total area should not exceed 1,000 m² in an urban area and 1 hectare in a rural area.

It is also important to check the title for annotations, which documents that there is a certain claim to the property by another party. An example would be a bank or loan provider who writes entries (or annotates) in the land title to signify that the property is mortgaged (although ownership still resides with the owner). As a diligent property buyer, it is important to check titles for these annotations to ensure that the said property is free of encumbrances.

Buying an apartment in the Philippines

To buy an apartment in the Philippines, you will have to pay a deposit equal to 10-30% of the price of the property.

The Co-ownership Title Certificate supports the acquisition of co-ownership shares, but the transfer of ownership will be done once the full payment has been made. Remember that foreigners can own up to 40% of apartments in a residential building in the Philippines.

Title transfer in the Philippines

During the transfer of title, a lawyer will draft a Deed of Absolute Sale (DOAS) following an agreement between the buyer and the seller. The document then has to be notarized by a sworn Filipino notary.

Thereafter, a property tax statement will be issued by the Bureau of Internal Revenue (BIR). This statement then has to be presented to the nearest municipality's Assessor's office. The buyer will have to pay property tax at the City Treasurer's Office.

Once the Assessor's office has estimated the property's market value, the buyer is required to pay transfer taxes. The Capital Gains Tax and Documentary Stamp payments are made at the BIR.

Finally, the Registry of Deeds (RD) will cancel the old title and issue a new document. The buyer will, therefore, be in possession of a copy of the new title and can request a tax return from the Assessor's Office.

Good to know:

Normally, a transfer certificate of title evidences ownership of private land. In cases where the land is not covered by a transfer certificate of title, you should be able to obtain a tax declaration issued by the local government of the area where the land is situated as proof of ownership.

Costs involved in property purchase in the Philippines

Notary fees (paid by the buyer): 5-10% of the purchase price.

The local transfer tax (paid by the buyer): 0.50% of the purchase price.

The registration fees (paid by the buyer): approx. 0.25% of the purchase price.

Capital Gains Tax (CGT) and Documentary Stamp tax (paid by the seller): 6% and 1.50% of the purchase price, respectively.

Unless the real estate is considered an ordinary asset, a Value-added tax is paid at 12% of the purchase price instead of CGT.

Agency fees (paid by the seller): 3% to 5% of the purchase price.

Other taxes and fees in the Philippines

The local transfer tax is paid to municipalities at a rate varying between 0.5% and 0.75% of the sales price according to the zonal or market value (whichever is higher).

The capital gains tax applies at a rate of 6% of the gross sales or market value price (whichever is higher) of local transactions, usually based on zonal values. Payment conditions depend on an agreement between the buyer and seller. In some cases, either the buyer or the seller pays the total amount of taxes and fees. However, fees are generally charged on the sales price.

Real estate agency fees generally apply at a rate of 3% to 5% of the property value. There is no additional registration cost besides their commission.

Finally, the Documentary Stamp Tax applies at a rate of 1.5% directly on the property's sale price or market value (whichever is greater).

Useful links:

Philippine Retirement Authority

Bureau of Internal Revenue

Land Registration Authority

Oxford Business Group - Philippine Real Estate Regulations

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