Are you planning to buy a real estate property in the Philippines? Whether for investment or to have a place you can call your own, house-and-lot remains the top choice for homeowners. Despite the big price difference, many still prefer to invest in a house and lot over condo units. Most Filipinos invest in house-and-lot properties, especially for those with bigger families or for future expansion. But is it the ideal space for you, and can you handle all the responsibilities it entails?
 
If you’re still unsure and having second thoughts about whether or not you should invest, read on as we’ve created a list of the advantages and disadvantages of buying a house and lot in the Philippines

Advantages and Disadvantages of Buying a House and Lot in the PhilippinesAdvantages

1. Wider Living Space

One of the top reasons why Filipinos like a house and lot is the wider living space. Compared to condos, house and lot property offers a wider space, from the living room, dining area, and kitchen to bedrooms and bathrooms. It’s also a great deal if you find one with a garage, dirty kitchen, laundry area, garden, and yard.

2. Full and Exclusive Rights of the Property

Investing in a house and lot in the Philippines is ideal for those who want exclusive rights to their property. This means you can do whatever you wish with your property, given it complies with the National Building Code of the Philippines. Repaint the walls, add another floor, or build extra bedrooms. Condo owners don’t have this kind of freedom.

3. Enhanced Privacy

If you value peace and privacy, consider investing in a house and lot. In general, living in subdivisions is more peaceful than condominiums. A single-detached house means you’ll have more privacy since your neighbors are distant from you. In addition, you don’t share walls, ceilings, and floors with your neighbors, making your life more tranquil and private.

4. Long-term Investment

Owning a house and lot means your property will consistently appreciate value. While condos are valuable investments, land appreciates more than residential buildings. If you invest in a condo, you only own the unit. But if you buy a house and lot, you own the structure and the land. Thus, it is a good and valuable long-term investment.

5. Possible Development in Suburban Areas

Living in Metro Manila is a dream for many as it offers countless opportunities. But in recent years, many provinces, including Baguio, Cavite, Laguna, Rizal, and Cebu, are experiencing rapid development. These suburban areas are slowly becoming urbanized. Also, these provinces offer cheaper real estate homes. So, buying a house in these areas is more economical than investing in the metro.

Disadvantages

1. Difficult to Maintain and Costly

On the downside, buying a house and lot in the Philippines means more maintenance. Since you have exclusive rights to the property, you and you alone are responsible for its maintenance. Although you can hire professionals to do the work, you’ll have to shoulder all repairs and maintenance costs.

2. Higher Utility Expenses

Another drawback of living in a larger space is higher electricity and water usage. If your house has a yard and more bedrooms and bathrooms, you’ll also need more water and electricity to use and clean these areas. As a result, homeowners pay higher utility bills than those living in condos.

3. Longer Commutes

Condos are often built near transportation links, shopping malls, office buildings, hospitals, and schools, making them a convenient choice for students and professionals. On the other hand, house and lot properties are usually located in suburbs or areas far from business districts. Therefore, living in a house and lot property demands longer commutes or travel time, especially with the Philippine's high traffic congestion.

Philippine real estate is experiencing a high demand for condominiums, which will continue in the upcoming years. Condominiums are not only in demand in Metro Manila but also in nearby provinces with urbanized cities. Because of this, many homeowners are eager to invest in condos without checking the drawbacks.
 
So, in this article, we will discuss the pros and cons of buying a condo in the Philippines and other deciding factors you should consider before investing in a property.

Pros and Cons of Buying a CondoSimilar to other investments, owning a condominium comes with advantages and drawbacks. That’s why it’s essential to understand the pros and cons of purchasing a condo in the Philippines.

Pros

1. More Affordable Compared to House and Lot

One of the top advantages of buying a condo in the Philippines is that it’s more affordable than house and lot properties. It is a cost-effective option for those who wish to reside in prime areas. In the Philippines, middle-income earners can purchase a studio unit below PHP2 million. Hence, many opt to invest in condos.

2. Prime Location

Another reason many choose to invest in a condo is due to its prime location. These residential buildings stood in the most convenient area in the city. Condos are near business districts, shopping malls, supermarkets, restaurants, schools, hospitals, and transportation systems. Thus, professionals and entrepreneurs invest in condos to enjoy accessibility and cut travel time.

3. Equipped with Amenities

Buying a condo unit is also a good choice for those who want to keep their lifestyle active. Condos have various amenities that residents can use, like swimming pools, gyms, and sports facilities (such as basketball, badminton, and tennis courts). Additionally, condos feature lounge areas with concierge services, function halls, and playgrounds.

4. Tighter Security

Compared to subdivisions, condos offer tighter security, making it a good investment choice. Condos come with 24-hour security with roving guards within their premises. In addition, condos come with CCTV cameras, and each unit and all the hallways have smoke detectors and fire sprinklers. That’s why condo residents can leave their units without worries.

5. Less Maintenance

If you want to reduce your maintenance responsibilities, living in a condo unit is for you. Unlike house-and-lot owners, condo residents don't have to worry about maintaining the yard or repairing the roof and gutters. Owning a condo requires less upkeep since residents only have to focus on the interior of their units while the admin handles the rest.

Cons

1. High Fees

Despite its advantages, investing in a condo unit also involves high fees due to the monthly association dues condo residents must pay, ranging from PHP1,000 to PHP8,000. While it covers the maintenance of common areas, these fees may increase over time, and residents must continue paying them even after they pay off the mortgage.

2. Limited Living Space

Before purchasing a condo unit, ensure you can adapt to a smaller living space. The average floor area of a condo unit in the Philippines is less than 50 sqm, while studio-type only measures 18 sqm. Also, be prepared to share outdoor space with other residents.

3. Property Restrictions

Owning a condo also comes with restrictions. Condo owners cannot perform extension projects since it may affect the building’s integrity. Before undertaking interior renovations, owners must seek approval from the property management office. Meanwhile, some condos prohibit pet ownership or limit the number and the type of pets you can own.

4. Lack of Peace and Privacy

Living in a condo is also not ideal for those who value peace and privacy. Since it’s a residential complex, the neighbors on the side, below, and above every unit may cause unavoidable noise. Plus, the continuous foot traffic in hallways may affect residents' privacy, preventing them from leaving their doors open.

 Whether you’re planning to purchase or sell real estate in the Philippines, there are more things to consider than looking for a buyer and agreeing on the selling price. Apart from the property’s value, you should understand the taxes you should pay when buying a property.
 
So, in this article, we will share real estate sales taxes in the Philippines to help you assess your financial responsibilities before purchasing or selling a property.

1. Capital Gains Tax

Real estate sellers who sell or exchange a property must pay capital gains tax after the transaction. You can calculate it by checking the current fair market value (FMV) and multiplying the figure by 6%. For example, a property worth PHP 1,500,000 gets a PHP 90,000 Capital Gains Tax. Based on the Bureau of Internal Revenue, the Capital Gains Tax Return (BIR Form No. 1706) must be filed and paid by real estate sellers 30 days after selling the property.
 
To pay it, they should also seek assistance from concerned agencies, such as the Authorized Agent Bank (AAB)/Revenue Collection Officer (RCO) of the Revenue District Office (RDO), where the real estate seller made the deal.

2. Creditable Withholding Tax (CWT)

CWT refers to the percentage of the property’s total purchase price that must be withheld and remitted by the buyer to the Philippine government. In short, the property seller can utilize the withheld sale tax to pay in advance their income taxes. To process the offset, the buyer should provide the BIR Form No. 2307 or Certificate of Creditable Taxes Withheld to the seller.
 
Meanwhile, the amount of CWT varies based on the property’s type and transaction value, ranging from 1.5% to 6%. However, the buyer should withhold a CWT based on the following:

• Gross selling price or total amount of the property for sale
• Current fair market value of the property

 
On the other hand, Capital Gains Tax should be applied to capital asset property since CWT is for ordinary assets only.

3. Documentary Stamp Tax (DST)

DST refers to an excise tax involving documents indicating the acceptance, assignment, sale, or transfer of rights, property, or obligation. When you sell property in the Philippines, the rate of taxes is 1.5%, which depends on the highest selling price, assessed value, or BIR zonal value. Aside from that, the following documents related to a real estate sale are taxable:

• Bank checks
• Birth certificate
• Deed of sale
• Debt instrument
• DTI business name certificate
• Lotto
• Leases
• Power of attorney
• Original issuance of stocks
• Other hiring agreements

4. Value-added/Percentage Tax (VAT)

Real estate sellers should also pay a 12% VAT after selling a property. However, as per the Tax Reform for Acceleration and Inclusion (TRAIN) law, an individual may be exempted from paying VAT given they meet any of the conditions below:

• You possess residential properties, such as house and lot
• You utilized your property for socialized housing
• You sell your property for lower than PHP 3,199,200

5. Transfer tax

This tax applies when transferring the property’s ownership via a sale, barter, donation, or other methods. The transfer tax is up to 0.50% of the property's total selling price, current fair market value, or zonal value. Nonetheless, the tax percentage varies per location, like in Metro Manila, which is 0.75%.
 
For instance, if you’re buying a property worth PHP 1,500,000 in Metro Manila, the transfer tax is around PHP 11,250. By paying this tax, you can register a deed or obtain a new title in your name. You’ll also get a new tax declaration.

If you plan to invest in the Philippine real estate market, consider the legal aspect before becoming a homeowner or a landlord. Learning about Philippine real estate laws can help prevent any legal complications from arising, so becoming familiar with them is crucial when investing.

If you’re new in this investment field, read on as we share relevant Philippine real estate laws to learn more about your obligations and rights and make well-informed decisions.

Maceda Law

The Maceda Law is also called the Republic Act 6552 or The Realty Installment Buyer. It safeguards real estate buyers via installment payments in case of disadvantageous conditions and when and how much developers should pay. This law covers residential property transactions, including lots, houses, and condominiums. If buyers can no longer pay for the property, the Maceda Law gives them two rights.

Under Maceda Law, buyers can pay outstanding installments with no added interest in a certain grace period. However, the property developer can cancel the contract if the buyer fails to settle the remaining installments within the grace period. Buyers who have paid a specific amount of the property's total value also have the right to refund for a canceled contract.

Condominium Act

The Republic Act No. 4726, or the Condominium Act, is about the Philippines' rules and regulations for condominiums. It oversees the ownership and management of condos, including owners' rights, from leasing, selling, or renovating to using common areas to prevent fraudulent developers.

This law also permits condo owners to partake and cast their votes in corporation meetings of condominiums, such as electing the board of directors and changing rules and regulations of the buildings. In short, the Condominium Act protects condo owners by ensuring they receive fair treatment to enjoy their investments.

Subdivision and Condominium Buyers’ Protective Decree

Also known as Presidential Decree No. 957, the Subdivision and Condominium Buyer’s Protective Decree encloses the legal rights of property buyers to protect them from misleading ads used by developers, such as the “no down payment” ad. It also contains crucial information that buyers should know before purchasing, like the total payment, property size, and facilities.

In addition, it protects buyers from irresponsible developers throughout the purchase, point of sale, and turnover process. With this law, buyers can file a complaint against deceptive developers, given they can provide proof that the seller is conducting illegal business practices and transactions.

Investors’ Lease Act

The Republic Act 7652, or the Investors' Lease Act, protects foreigners who wish to invest in the Philippine real estate market. It enables foreign investors to rent private land for 50 years. Once the lease agreement expires, the foreign investor can renew it once and rent it for 25 years.

Nonetheless, foreign investors can only lease land for investment purposes. Furthermore, this act allows foreign corporations to enter a lease agreement with Filipino landowners for up to 50 years, given they have over 40% foreign equity.

Rent Control Act of 2005

Formerly known as the Rental Reform Act of 2002, the Rent Control Act of 2005 is a law that protects the lower income brackets who are renting houses against unreasonable rent increases. It applies to properties within Metro Manila and other urban cities in the Philippines, charging monthly rents up to P10,000.

This law also covers all residential units with P5,000 monthly rents. It only allows all rental units a 10% yearly rate increase and permits condo owners to impose new rates when a tenant leaves the unit. This law also encloses provisions regarding down payments, advance rents, removal or eviction of tenants, penalties, and rent-to-own schemes.