Priced out of a home

Many Filipinos in Metro Manila are feeling that the robust property market is not good for them. Fast rising property prices only make the dream of owning a home more elusive than ever.

Now, there is the mainland Chinese to blame. According to Leechiu Property Consultants (LPC), a surge in Chinese property buyers has led to higher prices and rental rates all over the metro region.

The boom in the country’s property market in the last few years was traced by Leechiu to demand coming from Chinese buyers and investors. But of course. That had been very obvious for some time now.

Leechiu observed that “residential sales are no longer dominated by OFW buyers, but by buyers from the Chinese mainland.

“Residential projects, notably in the Bay Area, Makati, Manila, Ortigas, and Quezon City, and in other areas near POGO (Philippine Offshore Gaming Operators) locations and existing Filipino-Chinese are experiencing brisk take-ups of 12 (condominium) units a month.”

This heightened demand from Chinese buyers “will continue to push property prices up,” most especially in the Manila Bay Area.

According to Leechiu, at least 70 percent of the tenants in the Manila Bay Area’s residential projects are mainland Chinese, compared to only 25 percent for Filipinos and five percent for other foreign nationalities.

“There is a surge in mainland Chinese buyers in the residential condominium sector, and we anticipate this to continue for the long term especially with rekindled diplomatic ties between Philippines and China,” according to Leechiu’s assessment.

LPC chief executive officer David Leechiu was quoted by GMA News as saying that demand for residential projects in select areas connected to Filipino-Chinese communities are currently experiencing “brisk” take-ups of 12 units a month.

“Assuming a constant aggregate take-up of 7,757 units, the remaining inventory in projects preferred by mainland Chinese buyers will be depleted in three months,” Leechiu said.

Indeed, the cost of rental units in the Bay Area has climbed by 80 percent in the last three years.  Chinese tenants are said to be fitting four people in one-bedroom units, and eight people in two-bedroom units.

Metro Manila residents aren’t the first in the world to start resenting the influx of Chinese investment in their property sector. This had been going on for years in the United States.

My own relatives and friends in California have long complained of how the Chinese always out bid them for a house. Not only do Chinese buyers agree to pay a higher price, but they also pay the seller in cash.

The Canadians are also feeling pushed out, specially in Vancouver. Chinese property buyers have caused property prices to rise so much that Canadians are complaining. This is why new taxes are being imposed.

When a non-resident sells a Canadian property, a Google search revealed, a new 20 percent tax is added to the Property Transfer Tax when a purchaser, who is not a Canadian citizen or permanent resident, purchases residential real estate property in Metro Vancouver.

And, if the home is not used as a primary residence or long-term rental property, and/or if the buyer does not have provincial income tax to credit the tax against, a new speculation tax might also apply on an annual basis.

The introduction of a property speculation tax was made in the hope that the tax would deter overseas buyers, mostly Chinese. But the tax didn’t seem to deter the foreign buyers much as house price gains have returned to double-digit percentages.

The “speculation tax,” also applies to so-called satellite families, a term often used for Chinese families where the non-working spouse and children live in Canada while the income-earning spouse remains at home in China.

A friend who owns a condo unit in a Vancouver suburb told me that foreign buyers like him pay a 15 percent surcharge upon buying, an annual tax of one percent plus 0.5 percent vacant home tax.

The Canadians also suspect links between money laundering, the housing market, and Asian gamblers and drug dealers. This is something our own officials should investigate.

Of course, any attempt to introduce new taxes on foreign property buyers and property speculators will raise a howl from our property sector. Some of the biggest conglomerates are heavily invested in property and they have political clout.

But something ought to be done, specially in the light of proposals to amend the Constitution to allow foreign ownership of land. Resentment from the Filipino working class who are forced to live in the outskirts, with commutes of four hours or more one way, is increasingly politically untenable.

The property conglomerates could have tempered the rising resentment if they had been more socially conscious. They could have also constructed affordable housing near the business districts. But the reverse has happened. NHA land in Quezon City meant for affordable housing has been repurposed and redeveloped as a major commercial property play.

Speculation in the condominium market is obvious at night. Windows in many fully sold buildings have remained dark, showing no one lives in those sold units.

Excessive liquidity is causing those with oodles of extra cash to park their money in condo units because these will appreciate faster than money in the bank.

While it may be argued that speculation is part of the free enterprise economy, government also has the obligation to ensure it does not harm society. Land is a finite resource that should benefit as many Filipinos as possible. Otherwise, serious social discontent is inevitable.

It is time for government to review its taxation policies to protect its citizens from abuse of economic power. Property speculation should not be encouraged. Raising new money by taxing speculation in property is more acceptable than taxing basic commodities like gasoline.

As for foreign property buyers, it is easy to justify imposing a tax when they buy property. This way, we can raise money to fund a more ambitious public housing program, something that is long overdue.

Filipinos should not be priced out of their dreams to own a home.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco