Many Filipinos hesitate to invest in property because it is costly. Add to that fact that inflation creates more pressure to invest sooner as property prices soar. But what if I told you that it is one of the best investments you can make right now, whether it’s short or long term?
Investing in property is one of the best investments because it is tangible and has increasing value that is favored by inflation. If you’re on the fence about investing in property, then this article is for you.
Here are the reasons why property is the best investment you can make right now:
Real estate value increases over time, usually
Unlike cars which depreciate over time, real estate value increases, almost always, annually. According to a recent article, the Philippines is now in its 8th year of a house price boom. In the heart of Makati’s Central Business District, property prices have risen by 128% from 2010 to 2018.
Part of the reason is the increasing population in urban centers—which spikes the demand for condos and townhouses near Central Business Districts. According to Lamudi, real estate value is guaranteed to increase in the next two years as demand remains high. This makes investing in property not only a lucrative investment, but also a safe one.
You have control over your investment
Investing in property gives you a tangible asset that you can do a lot with. You can rent it out, use it as a storage area, or live in while you wait for the market price to go higher. You basically have control over your destiny and if the market dampens, you can always keep it, or sell it at a later date.
Property has high tangible asset value
Unlike stocks which value can get to zero, or a car which decreases its value over time, a property has a high tangible asset value. This means that it has a physical form and it has a natural value. Tangible assets are beneficial against economic uncertainty since there will be always a natural value in your property. Just don’t forget to have an insurance in order to protect your property from unforeseen disasters.
Property works well with Inflation
Property and Inflation has a positive relationship towards each other. As economies expand, the demand for property drives rents higher, and so does the value of your property. Compared to the stock market which has a lot of factors that can negatively impact your investment, property and rent values tend to go up during times of high inflation.
In fact, Inflation can even help you pay back mortgage debt over time (assuming the nominal interest rate is fixed).
To understand this, you need to understand these two principles: the nominal interest rates and the real interest rates. The nominal interest rate is the rate that is advertised by the bank while the real interest rate is the nominal interest rate minus the rate of Inflation.
As the Inflation rate goes higher, the amount of your true debt will decrease. To put it simply, your P12M mortgage debt will be worth less in the next couple of years.
Although costly, investing in property is one of the best—if not the best investment you can make right now. Since properties have a high tangible asset value, you have control within your investment. You can rent it out, sell it, or keep it. Due to high demand, your property is guaranteed to increase in value for the next few years—making it a safe investment.
If you’re thinking of investing in property but don’t have enough cash? With our Home Loan, loan up to 80% of the appraised value and get approved in just 5 banking days.
For a more in-depth guide in real-estate investing, you can try Grit.ph’s Ultimate Guide to Investing in Real Estate in the Philippines.