Current Risks in Getting Involved in the Real Estate Industry

Real estate in the Philippines has a favorable market to invest in because of its significant growth in the past few years. According to the Business Monitor International’s Philippines real estate report Q4 2012 executive summary, which was published on MarketResearch.com, the direction of market development is heading upward. This is due to the remittances from the OFW’s , the influx of foreign investors for BPO outsourcing, and the improvement with the transparency of real estate policies in the country.

However, before grabbing this business opportunity, a buyer must know that like in any other business, one should be well-acquainted with the current potential misfortunes that go along with it.

Regulation of Real Estate Legislation

The system of enforcing laws relating to real estate is yet to be improved and imposes more risks to aspiring investors or homeowners. According the 2012 Investment Climate Statement made by the Bureau of Economic and Business Affairs of the U.S. Department of State, possession of deeds in the country still remain to be tedious as a result of poor regulation.

Other malpractices in the industry are also still testing real estate governing bodies’ authorities and cause problems with buyers property payment or procurement of housing titles. Some properties that have been placed in the market without approval from licensed brokers or by unlicensed real estate personnel. Cases of developers also include that some housing developers still put properties on the market even without completing specific Housing and Land Use Regulatory Board (HLURB) requirements.

Geological Hazards

The country’s topography also imposes some geologic hazards. According to the about page of the Department of Science and Technology’s Nationwide Operational Assessment of Hazards (NOAH). since the Philippines possesses a humid and tropical climate, it will always experience unavoidable climate-influenced disasters like those recently encountered. Also, with the country being an archipelago located within the Pacific “ring of fire,” experiencing plenty of rainfall, and consisting of various highlands and land masses, numerous instances of natural disasters such as floods, landslides, and earthquakes have caused both risks and actual properties to business and residential properties all over. One can know certain flood prone areas in the country through the NOAH-generated map and determine whether a property is located nearby a fault line through the Philippine Institute of Volcanology and Seismology’s (PHILVOCS) graph of Distribution of Active Faults and Trenches. Also, the Philippine Information Agency’s regional geohazard map provides a graphical representation of both flooding and landslide prone areas around the country.

Possible Oversupply

The current sprouting of residential properties such as single detached homes and condominiums in the Philippines, after being triggered by a noticeably favorable market, could eventually lead to real estate oversupply and devaluation. The International Monetary Fund (IMF) published a report on 2012 Article IV Consultaion with Philippines, explaining that the country’s increasing of vacancy rates among properties and the declining rents for certain target markets show a possible sign of budding over supply. This, according to the World Bank is a risk that needs watchful monitoring.

These risks should not discourage investors or even potential homeowners from being “hands-on” in the real estate industry. It should only boost a person’s confidence that he knows better than he did prior to reading about such potential hazards. The Philippine realty sector does provide great opportunities. Even so that one is able learn what to look out for on a favorable business venture.

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