January 26, 2007
Updated 23:58:27 (Mla time)
A SENIOR economist of the Global Property Guide, advised Philippine property buyers to consider the long term whenever they’re making their choices. And by the long term, it’s envisioning where they want to live or work, or retire 10 to 20 years from now.
Prince Cruz pointed out to the Inquirer that most developers will sell lands and plots with a “nature view.” However, the area might be “green” for now simply because there are no other houses.
“Always try to imagine what the place will look like if there are a thousand more like you buying a house in that area. The green, refreshing view would probably be lost,” Cruz said.
He stressed that there are also huge costs attached to buying and selling houses.
“In the Philippines, it can reach up to 35 percent of the property value, one of the highest in Asia. Because of this cost, houses, in effect, carry a ‘No Return No Exchange’ tag. Unlike other goods that carry a service warranty, houses don’t. Once turned over, all the costs for fixing and repairing the house will be paid by the new owner,” Cruz said.
Floods
Cruz warned buyers “not take their agent’s words as gospel truth.”
If the agent says that it never floods in that area, you cannot complain to him/her if it actually does when you start living there.
There are also no guarantees if the agent promises that the neighborhood is safe, and that a new church, school, MRT and mall will be built nearby in the foreseeable future.
The agent might also promise you that your prospective house’s value will increase tenfold within a few years. Again, there are no guarantees. Experience from the Asian crisis shows that the value of luxury condominiums in the Philippines fell by more than 50 percent from 1997 to 2004 (http://globalpropertyguide.com/ articleread.php?article_id=85&cid =4).
Travel time
“The amount of travel time stated in most property developers’ brochures are also often underestimated. It might be a 30-minute drive from Ortigas to Antipolo City, if and only if there is absolutely no traffic (which happens only during Good Friday). Commuting time should be considered instead. Even if you have a car, not all your friends and relatives do,” Cruz said.
It is also wise for the buyer to visit the house several times in different days and at different times of the day. The quiet neighborhood that you first visited might be dusty and smoke-filled during peak traffic hours or noisy and unruly on weekends.
Cruz cautioned buyers that other warnings that might be downplayed by your agent or developer are the risks of earthquake, landslides and flood.
Least efficient
A news release by Global Property Guide last week pointed out that the Philippine housing market is Asia’s least efficient. Exceptionally high tax, transaction and other costs discourage the provision of housing, and the Philippines’ house price to income ratio is very high, in comparative terms.
“The market cannot efficiently provide housing, if it is saddled with unnecessary costs,” Cruz said. “In the Philippines, the round-trip transaction costs of buying and selling a property can easily reach 35 percent of the property value because of the 12 percent VAT. This is on top of the 6 percent capital gains tax and 5 percent agent’s fee.”
Study
In a study involving a detailed comparison of housing purchase costs in Asia, the Global Property Guide found a clear correlation between high transaction costs and unaffordable housing (measured by house-price-to-income ratios).
Global Property Guide indicated that countries with high transaction costs tend to have expensive houses and large slum populations. The Philippines comes out bottom-of-class in the entire region.
The news release pointed out that in Manila, Jakarta, Shanghai and Seoul condominium prices are much higher (measured by house-price-to-income ratios) than in developed countries. It stated that house-price-to-income ratios are generally regarded as the best measure of housing affordability.
The Philippine government’s tax-everything-in-sight policy helps no one, according to the Global Property Guide. “To avoid the capital gains tax, at present most buyers in the Philippines bribe tax assessors to lower the appraised value of the property. This doesn’t help the government collect taxes,” Cruz said in a news statement.
“International experience suggests that reducing transaction taxes actually increases compliance and the government’s tax-take.”
Global Property Guide also stressed that the Philippines’ outdated cadastral system also greatly increases legal costs, the report adds. Only 10 million of the Philippines’ estimated 25 million land parcels are registered. It is estimated that it will take 75 years before complete titling coverage is achieved.
The Philippines also has the highest number of procedures involved in registering property, followed by Indonesia and South Korea. Both these factors increase legal and estate agent’s costs, especially for high-end properties where the risks are higher.
http://services.inquirer.net/express/07/01/27/html_output/xmlhtml/20070126-45866-xml.html
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