In the Philippines, being an Overseas Filipino Worker (OFW) equates to being a modern-day hero. Making sacrifices to seek greener pastures in an unfamiliar territory and enduring the loneliness of being away from your loved ones require boldness and bravery. Some even have to take on jobs that are unrelated to their fields of expertise, and most have to scrimp on their budget so that they can save and make the most of their hard-earned money.
When it comes to growing your finances and personal wealth, one of the most recommended ways is investing in real estate. Many Filipinos have actually decided to work abroad just to be able to afford a residential property.
There’s more to consider, however, in terms of purchasing or owning real estate.
Pandemic State of Real Estate
COVID-19 has posed more challenges in the medium term. For various real estate sub-sectors, different sources of growth of demand were affected by the pandemic. However, new trends continue to rise, showcasing more opportunities for the real estate industry’s future growth. According to a survey conducted by Cushman & Wakefield Philippines, the majority of property developers expect the return of the real estate industry’s pre-pandemic vibrancy in just a short amount of time, possibly in two to three years. Local real estate developers have also began tapping into the real estate investment trust (REIT) market due to the success of recent listings.
The unexpectedly rapid growth of e-commerce gave way to more opportunities to the already diverse real estate sub-sectors, more significantly in retail and hospitality. The constant advancement of technology has created a growing demand for Big Data analytics. Various business ventures are now utilizing technology more and more in recording and analyzing consumer data to optimize marketing campaign efforts. The demand for data centers is also growing in emerging markets.
One of the prevailing bright spots in the economy is the highly diversified consumer market of the Philippines, and it will continue to be significant as vaccination programs continue to cover a higher percentage of the population. Also, around five quarters have passed since the onset of COVID-19, and the Philippine economy has finally departed from the recession brought about by the pandemic.
While The Iron is Hot
In spite of the challenges and setbacks brought about by the global health crisis, the Philippine real estate ecosystem remains abundant with opportunities. Favorable circumstances continue to arise even when there are devalued market conditions, declining rents, and increasing vacancy rates. Segments that were once neglected are now expanding like wildfire.
Not only does the spectrum of opportunities cater to residential investors, but also to retail, industrial, and office. For the residential market, mortgage rates remain to be competitive. In retail, having a physical store is as vital as having an active social media presence. In terms of the office market, various companies and business ventures are constantly adapting and expanding. This especially involves the healthcare, e-commerce, logistics, and industrial sectors.
Although the prolonged pandemic might lead most investors to stay put and minimize risks, the perceptions involving quality and necessity have a high possibility of emerging. Another point to consider is that the monetary policies stated by the Bangko Sentral ng Pilipinas are in favor of the rising number of real estate investments, as well as increasing capital values. These crucial factors help create and sustain a more profitable environment for investing.
The Value of Valuation
Appreciation in land is one of the most common ways real estate investments offer you profit specifically when it is developed as well as the adjacent properties. As cities and neighborhoods continue to expand, any unoccupied land surrounding these areas become more valuable. This is because of their increasing potential to be acquired by developers, thus leading to the construction of more homes and commercial establishments. It’s all a matter of location, improvement, and development.
Over time, inflation can also play an important role when it comes to increasing the value of a property. Moreover, if you are looking for other investment alternatives within the real estate ecosystem, you can count on REITs, mortgage investment corporations (MICs), mortgage-backed securities (MBSs), as well as real estate investment groups (REIGs).
Warren Buffett, the renowned and legendary investor, considers diversification as a “protection against ignorance.” For anyone who is striving to make the most out of a long-term investment, a strategy of diversity will help reach a wide range of markets. It can likewise minimize risks and maximize returns.
Now the question is: How can you further diversify your investment portfolio? One way would be adding bonds, which generally offer lower returns compared to stocks, but are also a low-risk possibility. Another option is investing in real estate. With home prices catering to different markets, finding deals that would offer favorable returns and appreciation is relatively more feasible.
Harnessing Home Equity
At some point in your investment journey, you have probably encountered the concept of equity and how owning a property can help build it. Equity helps in eliminating high-interest debts and paying large amounts of fees. In another context, though, what exactly is equity? How can it be used or utilized to make values grow?
Equity is basically the difference between your mortgage debt and the current value of your home. For example, when you have a mortgage loan with a value of ₱7,000,000 and your home’s worth is ₱9,000,000, therefore you have ₱2,000,000 of equity. Your home’s equity increases whenever you pay down mortgage, as well as when your home’s value rises. However, equity can also fall if the value depreciates faster than how frequently the mortgage is paid down. You can find out what your home’s official worth is in today’s market through the guidance of a real estate appraiser.
A Relatively Low-Risk Investment
To make sure that your returns can be maximized, here are the two crucial factors you must focus on: low risk and high profitability. If investment opportunities are what you’re looking for, then real estate can be a good foundation. This is also where the most cost-effective low-risk investments are made.
Here are the reasons why:
— Since real estate properties are actual properties, they are considered as tangible assets. Because of this, you can always have other options rather than just losing all the money you spend on improvement and maintenance.
— As a landlord, you can earn monthly rental income through real estate.
— The worth of a real estate property can appreciate through time.
— The demand for real estate has no decline, as people will always need a place to live, work, and even play.
— There are various types of real estate insurance, and you can choose one according to your needs and preferred terms.
Investing in real estate is perfectly similar to starting a family. You will need a huge amount of time, commitment, and of course, money. Nonetheless, you will soon harvest what you plant today.
If there’s a property platform where you can start, it’s Enta. The possibilities and resources are all yours to explore, especially when it comes to home-buying tips and how-to guides. Want to know more? Make the most of your real estate investment by reaching out to us via [email protected] You can also visit our social media pages on Facebook, Instagram, and LinkedIn.