Best Posts in Thread: Land / house prices

So they get the foreigners to buy property for their citizens! Sounds like a great way for a country to aid their people onto the housing ladder.

 

First to say that most property prices are completely overrated. The market value is currently around double of the real value if it is a house and lot property. Try to get the prices down as much as possible. If you pay the asked price you pay far too much.

 

Don't actually agree with that - based on personal experience (plus of many other people I know) and whether rented or purchased, the property is still a "place to live". This would be affected by the particular country's housing market but I paid x for a house and sold it 20 years later for 5x - in that time I would have paid about 2x in rent. The interest from the x if not used to buy the house would have been a total of about x over those 20 years - so at the end of 20 years of renting I would have had a net zero in cash (my original x plus the x obtained in interest minus the 2x rental, even less in fact as my capital would have been eroded to pay the rental each month) - but by owning I had a net 4x (the sale for 5x minus the x original cost). Obviously the next house costs more than the original one bought 20 years before but a person in retirement could take that 4x profit and rent if he wished, having spare cash to spend on essentials (create your own list). There are maintenance costs of owning but in my case the x represents the purchasing cost plus updating the property to modern standards at the time - the maintenance cost was minimal over the 20 years. I also bought another house for x and sold it for 2x three years later.

There is no doubt that buying can produce a very high profit if bought at the correct time and renting can be a loss. To put that in Philippine terms is difficult as many say prices there are already excessive - however, many markets go from excessive to hyper-excessive before they eventually fall (and even then they recover to hyper-excessive and beyond eventually).

But, as stated in my earlier post, luck is a big factor - Japan suffered a huge decrease in property values a very long time ago and not all sectors and areas have recovered.

 

But that bit of cheating is not well-known. The fellow and his aunt are filipino. I imagine purchasing a unit, "cozy" to begin with, in advance of occupancy. And excitedly ordering furniture to fit, accounting for every inch of space. Only to discover... (One good thing about the Philippines, you can order furniture, made to order, as cheap or cheaper than store-bought. My house is full of it.)

 

I think there are other factors involved - some of which are down to luck! Firstly, we need to think about the loss of potential income from that Php6 million (in this example) - that depends on interest rates where it is invested OR anything else you could have invested in and that makes it impossible to give an exact figure, but at 3% p.a. it means a 'loss' of Php15,000 per month. Then there is the effect of inflation in general (decreasing the spending value of your return from investing the Php6 million) and in property values in particular (possibly increasing the value of your Php6 million). Also, residual value: as you say, the 50 year rule applies especially to condos, but other property will have some value after 50 years, not least in the lot itself which, without a catastrophic occurrence, should be worth something (and probably in excess of the original Php6 million).

So renting v buying (a common theme on the forum) comes down principally to how people feel about having something that is theirs and then their beneficiaries and about the possible security it gives them. The long-term loss due to renting something which returns no value is an issue but the outcome cannot be determined with certainty, especially when living in a foreign country that provides no long-term citizenship security.

 

This is How I do it for instance

 

Prices seem totally out of whack to me. They have to be dependent on foreign buyers, so few Filipino's can afford that range. It certainly isn't the only place that I think prices are out of whack and that is the thing about markets, they don't have to make sense to any one person, they just have to make sense to two people, the buyer and the seller.

 

Php2000 per sqm is the going price in Valencia, slightly cheaper the further you go up and away from the main roads. As long as you aren’t buying prime lots across the National Highway, Bacong is still selling at Php1000 to Php1500. The further you go from the city, the cheaper it will get. Dumaguete is selling at Php8000 for residential and this was last year.