Buying a House in the Philippines: A How-To Guide

Ever since the Spanish-American War,

We've been fascinated by the Philippines ever since the Spanish-American War. This archipelagic nation is technically a collection of more than 7,000 islands bordered by Taiwan to the north, the Pacific Ocean to the east, Indonesia and Malaysian Borneo to the south, and the South China Sea to the west. Tourism here increased 14 percent to 2.8 million visitors in the first five months of 2017, according to the Department of Tourism.

The country attracts more than just tourists, however. The Philippines is home to a large and welcoming community of expatriates who enjoy the low cost of living, inviting beaches, beautiful flora and fauna, tropical climate and friendly locals—to name just a few of the amenities (For more, see: Retiring In The Philippines: Pros & Cons). 

InternationalLiving.com, a publishing group, specializing in retiring overseas, estimates that most expats can live comfortably in the Philippines for around $1,000 a month, including food, activities, basic healthcare and housing costs.    

Like anywhere in the world, housing makes up a large percentage of the budget. While many expats rent, it can be more cost effective to buy, particularly if you’re planning to stay in the country for more than a few years (or perhaps want a second home there). In general, foreigners are prohibited from owning land in the Philippines, but they can legally own a residence. Here are some options.

Perhaps the easiest option is to purchase a condominium, a hybrid type of ownership that falls outside traditional structures. With traditional property, you own the structure, plus the land on which it sits. If you buy a condo, however, you only own the condo unit itself – not the land beneath it. The Philippine Condominium Act specifies that foreigners can own condominium units, as long as 60 percent of the units in the building are owned by Filipinos.

As we mentioned, foreigners can legally own houses (and other types of buildings), but they are prohibited from owning the land on which it sits. To work around this, you can buy a freestanding house, but lease the property. Under the Investor’s Lease Act of the Philippines, a foreign national can enter into a lease agreement with a Filipino landowner for a long-term lease with an initial period of up to 50 years, with a one-time option to renew for 25 years.  

If you are married to a Filipino citizen, you can buy property in your spouse’s name. While your name won’t be on the title, it can be included in the contract to buy the property. If you legally separate, or your spouse passes away, the land can’t be transferred to you (because you are still prohibited from owning land), but you’ll have a “reasonable” amount of time to sell the property and collect the proceeds. Otherwise, the property will pass to your spouse’s heirs and/or relatives.      

Corporations can own land in the Philippines, provided Filipino citizens own 60 percent or more of the company; the rest can be owned by a foreign partner or partners. Corporations that meet this equity stake requirement must be registered with government Board of Investment (BOI) for permission to buy, sell or act as an intermediary in a real estate transaction. 

As a foreigner, the largest piece of residential land you can own – either with your Filipino spouse or through a corporation – is 1,000 square meters of urban land (just under a quarter acre), or one hectare of rural land (about 2.5 acres).  

Real estate transactions always involve more than just the price tag. If you buy property in the Philippines, you can expect to pay several fees, including:

• Capital Gains Tax – 6% of the residence's sales price, zonal value or fair market value, whichever is highest. This is normally paid by the seller, but it some instances the buyer pays it, or it ends up rolled into the sales price.
• Documentary Stamp Tax – 1.5% of the sales price, zonal value or fair market value, whichever is highest.
• Transfer Tax – 0.5% to 0.75% of the sales price, zonal value or fair market value, whichever is highest.
• Title Registration Fee – varies according to a published registration fee table; generally around 0.25% of the sales price.   

Just like anywhere in the world, property prices vary greatly in the Philippines, depending on location, size, condition and features. In most cases, though, you can expect to get a lot more “house” for your money than you would back home: Think brand-new beachfront condo, for example, for less than $100,000 (Fore more, see: Buy A Beach Condo In The Philippines).

Once you pick the general area where you want to settle down, it can be helpful to work with an experienced real estate agent who can show you various properties, help narrow down your choices and provide general guidance throughout the process. Your agent can also help you understand the rules regarding property ownership, and what you can – and can’t – purchase as a foreigner.

When purchasing a home overseas, conduct the transaction in a way that will protect your property rights. In the U.S., homebuyers receive title to the property; however, this distinction may not be as clear in every country – or in every corner of a country.  To help ensure that everything goes as smoothly as possible, and to protect your rights, consult with an experienced real estate professional and an attorney. (See also: Do You Get U.S. Tax Deductions on Real Estate Abroad?)