The other day my landlord told me that due to a raise in property tax it was also necessary to raise the rent of the apartment. So far, I didn't do any research at the city hall but I am convinced that will never be 20%. The annual inflation during year 2025 in The Philippines is lower than 2%, so any raise for that percentage or a bit higher is understandable. The rental contract has been signed in 2011 and since that date the contract has been tacitly extended. In the contract there's no reference about a percentage in the event of a yearly raise. It's understandable and acceptable that the raise of a rental is in line with the annual inflation, no discussion at all of course. But a raise of 20% is extreme. Are there any rules or regulations about raising the price of rentals in The Philippines?
I think the property taxes have not gone up 20%. If they had everyone would be screaming. If you are paying the same amount as you paid in 2011 then a 20% raise might be appropriate. That was almost 15 years since 2011.
If you decide on paying the increase, perhaps they will be amicable to adjusting the contract in a way that wont create animosity in the future.
As an example on SP's post:- If you were paying P1000 per month in 2011 then, based on inflation of 2% PA you should expect to pay around P1300 today (1000 x 1.02^13)=P1,293.607 or (1000 x 1.02^14)=P1,319.479, depending on the dates chosen. So 20% isn't a bad deal as it represents around 1.3% PA over the period.
Rent in an unregulated market like the Philippines is hardly at all dependent on general inflation, or even on increases in property tax (which is very low here, as in 1% of a value that's much lower than market value). Instead they are (in theory) very much related to the development of a. real estate prices/values b. long term interest rates c. supply/demand effects d. individual landlord market awareness If you've been paying the same rent since 2011 you're very lucky having a landlord without market awareness. In theory, people investing in real estate with the aim to rent it out will demand a rent that compensates them for the cost of financing, maintenance and taxes. Hence the relation to value and interest rates. Supply and demand has impact too, especially if there's a lot of unoccupied rentals. In an example calculation, for a smallish house (around 80-100 sqm floor area), not too far from downtown Dumaguete (let's say no more than 3 km), you'd expect to pay at least around 5m currently. Financing cost would run at around 8% (mortgage rate), so 400k p.a. Maintenance estimate 100k p.a. So, just looking at those two aspects you'd expect a rent of at least 40k a month or so. However, the landlord may have an expectation of a rising property value and there might be substantial numbers of empty rentals. Both these aspects can lower the demanded rent. Basically though, if a house could be sold for 5m, and those 5m can be invested in long term government bonds that yield 6.4% (or 5% after tax and costs), then you'd need to expect a rise in value of at least 2% p.a. to settle for a rent below 25k (even without considering the expected periods "in between renters") rather than just sell the place.
As a matter of fact the rent hasn't been raised as only in May 2023 with 1000 peso, so new rental became 10k. The fact the landlord did not raise the rent was because he is considering me as a reliable longterm lessee, always on time payment, no damage and so on. Anyway this afternoon I spoke to the representative of the landlord and we agreed upon a raise of 1000 peso and again with an additional future raise of another 1000 peso as from January 1, 2027. For both an acceptable and reasonable outcome.
I cannot deny the above mentioned. However, when talking about return to investment, the landlord has also nothing to complain about. This apartment, 5 in a row, was build in 2010 for the price of around 750.000,= peso, so lot not included. As a lessee I paid from February 2012 up till the end of this year a total sum of 1.616.000,=
The famous Mr Wrye (@Rye83) - Happy New Year wherever you are - wrote in reply to my query during Covid about property values in relation to the loss of foreigners and stated that there would be little effect if many did not return here as the property market is dominated by the Filipino middle class. Is that correct - especially in an area where there are quite a few foreigners? As an asocial hermit, I know little about what is happening around me, so what has happened since foreigners were allowed back in - did most return? Have new ex-pats come to this country in significant numbers? Obviously we see hardly any new (or even previous members) on this Forum - so is that an indicator? And does anyone have an opinion on the near future for property prices (and the economy in general) when it seems there are political rumblings in the country and the dollar is expected to rise to 60-plus pesos this year - and perhaps the same uplift for other currences (the GBP now being over 79) - making property cheaper for most foreigners? Could 2026 world events (including perhaps Trump disappearing from the scene - for one of a few reasons) lead to a world-wide decline in asset values (it seems about time a few bubbles burst)? There are often reasons to see the world economy improving or declining - that's why most forecasts are really just informative guesses, without factoring in Black Swan events!
I see the usefulness of looking into a crystal ball as completely useless. The economy in the Philippines cannot be compared to many countries in the Eurozone. If I only look at the real estate market, I apparently only see price increases that are not stopping yet. The conversion of the exchange rate Euro versus peso is on a level not being seen for years and may go up further to beat all records till now.
I happen to visit the Valencia Sunday market almost every week, and ever since the pandemic subsided not a single week goes by without seeing plenty new foreigners there (and while my memory for names is not so good, I do have good recollection of faces). Ergo, my rough estimate for the number of foreigners in our general area (Sibulan to Zamboanguita and everywhere in between) is that since I first arrived almost 10 years ago it seems to have perhaps almost doubled, from around 7k back then to at least 12k now. Yes our forum here seems to be dying, but no that's not a good indicator. "Groups" on Facebook that are geared toward foreigners in the Philippines are gaining a lot of popularity (plenty of them having 40k plus members but even the local such group for Dumaguete only has 15k members). The weak Peso is likely to continue in 2026, but the only effect that might have on the real estate market in the country is that foreigners (newcomers or otherwise) may perceive house and lot prices differently -cheaper- as the peso loses terrain against major currencies. A weakish peso is nothing new though, when I arrived 10 years ago I got 52 peso for each Euro, todays 69 means a 32% loss over this time, but the first 20% loss or so occurred even before we bought our house in 2017. Bursting asset bubbles, yes that seems likely whether or not Trump disappears. I don't dare to make predictions about the "when" though. But yeah, from the AI bubble to the real estate market in many countries, to gold and crypto, there's a lot that appears overvalued. As for the property market in our area, it is difficult to predict. Prices have gone up a lot already, but the factors going into that still seem relevant: increasing demand from both affluent locals and foreigners; rising cost of building materials and labour; decreasing supply of nice empty lots (along a wide enough concrete road, with proper drainage, without needing substantial backfill, and in a nice location -both distance and surroundings wise-) at an acceptable price.
