You can’t throw a stone right now in Metro Manila without hitting some new condo development. From New Manila to Taguig, Makati to Quezon City, there are new condo buildings going up left and right.
Following the rise of these buildings is an army of sales agents, hanging out at malls or sidewalks, bombarding passers by with flyers and information on great rates and easy to pay options.
One commonly heard refrain is that buying a condo is a good investment. That’s just plain wrong. See why after the jump.
1. Return on investment (ROI) isn’t that great
Say you pony up PHP5M or so for a unit in Makati. For that price you could probably get a studio near Greenbelt or a larger unit in an upcoming portion of the city (say, the Circuit).
You would probably be able to rent out that unit for PHP20,000-PHP30,000 a month.
That’s an ROI of around 6% a year. Sure that’s much higher than placing your money in a savings account or time deposit. But you can generate a much higher yield if you were to place your money in stocks or even in bonds.
(Yes, at the time of this writing Philippines stocks are down, and they’ve generally taken a beating this 2015. But over a long term outlook, say 10 years, stocks generally will outperform most other investments and will give you a tidy profit.)
The estimated return on investment does not even include expenses such as association dues, maintenance expenses, setting up of the condo expenses (buying furniture, etc.) and real property taxes, which will all be incurred before you can rent the place out.
Overall renting out a condo unit only yields, at the very best, a modest return.
2. Getting any sort of return is hard work
Chief among your concerns is finding a good tenant. This is more challenging than it sounds as a lot of tenants do not pay, damage the unit, or leave with thousands of pesos in utility bills overdue.
Putting up your unit for rent also means placing classified ads, informing brokers and dealing with all the inquires and requests for viewing that come with trying to get your place rented out.
Besides the headaches of finding a tenant you also have to deal with the sundry maintenance issues of your condo unit. Nothing ruins a ceiling paint job than having the unit above you leaking water onto your ceiling. (This happens quite often, even in well constructed buildings.)
3. Condo units do not appreciate (ie. their value does not increase over time)
Unlike buying land, condo units generally do not go up in value as time goes on. So the same unit you bought for PHP5 million will still probably be around that value 5 years later.
Indeed, condo units are more likely to depreciate in value as time goes on because the unit and the building itself are subject to wear and tear while other newer developments will be shinier and more attractive to the general public.
Buy land in Metro Manila and this will most likely appreciate over time. The same cannot be said of condo units.
4. Buy it but not as an investment
There are many salient reasons why you would want to buy a condo. Say you just got married and you and your spouse are looking to have your first home. Perhaps you’re a retiree who’s tired of dealing with a house and lot wants to move into a smaller space.
But if you just have some extra cash on hand and want to invest it; don’t be tempted into buying a condo unit. There are other more profitable areas of investment for your hard earned loot.
5. Find a good broker
If you’re still keen on buying a property in Metro Manila I would suggest contacting Reality Homes, my experience with them in the past has been excellent.