Makati City lowers real property tax rates

Makati City has taken a bold step to provide economic relief and boost investment growth as Mayor Abby Binay signed a landmark ordinance significantly reducing real property tax (RPT) rates in all property classes.

Binay approved City Ordinance No. 2025-047 on March 24, 2025, amending key provisions of the Revised Makati Revenue Code.

The ordinance lowers the RPT rates for residential, commercial, industrial, and special properties, marking one of the most progressive tax reforms in the city's history.

Under the new ordinance, residential properties will now be taxed at 1.0 percent, down from 1.5 percent; tax for commercial properties will be reduced from 2.0 percent to 1.5 percent, while industrial properties will remain at 1.5 percent. Special properties get the most significant cut, dropping from 1.5 percent to 0.5 percent. Moreover, the additional tax rate for residential and commercial properties has been halved from 0.25 percent to 0.125 percent, making property ownership and business operations more affordable.

The ordinance also slashes assessment levels, the basis for computing assessed property values. Residential property assessment levels have seen significant reductions. R-1 properties have been adjusted from 12 percent to 0.65 percent, R-2 properties from 12 percent to 0.30 percent, and R-3 properties from 12 percent to 0.25 percent.

For commercial and industrial properties, assessment levels have also been reduced from 40 percent to more competitive rates. Commercial classifications C-1, C-2, and C-3 now range between 2.0 percent and 0.60 percent, while industrial classifications I-1, I-2, and I-3 follow the same range. Special class properties remain at 0.70 percent in commercial and industrial zones and 0.30 percent in residential areas.

The mayor assured stakeholders that despite the anticipated short-term revenue dip, Makati's financial health remains robust.

The city's budgetary flexibility has been bolstered by an estimated P7.9 billion annual savings following the transfer of 10 Embo villages to Taguig, which previously required significant subsidies. She emphasized that the long-term benefits far outweigh the expected short-term revenue adjustments. This move reinforces Makati's commitment to a fair, efficient, and transparent tax system that benefits both businesses and residents.

To further incentivize compliance, the ordinance allows property owners who have already paid their RPT for 2025 to receive a tax credit equivalent to any excess payments, which can be applied to future tax dues.

Binay said Makati's latest tax reform is more than just a fiscal policy shift. It is a strategic move to attract more investments, encourage property development, and sustain economic momentum.

She said that by prioritizing equitable taxation and financial prudence, the city cements its reputation as a premier business hub and a model for smart governance.

Source: Manila Times

Resiliency and adaptability in the Philippine property market

According to recent reports from Leechiu Property Consultants, the economy, which showcases a gross domestic product growth rate of 6.3%, is a significant factor driving property demand in the Philippines. The said figure positions the Philippines as the second fastest-growing economy in the region, just behind Vietnam, which recorded a growth rate of 6.9%.

The country’s economic performance provides a foundation for sustained interest in the real estate sector. As the Philippines gears up to achieve upper-middle-income status by 2025, anticipated investments in the property market are expected to rise, reflecting growing confidence in the country’s economic prospects.

Investors and homebuyers alike are increasingly looking beyond Metro Manila to tap into the opportunities presented by these dynamic regions. The improvements in transportation infrastructure, such as new expressways and public transit systems, have made these areas more accessible and investor-friendly.

Stabilized demand amid declining launches

According to Colliers Property Market Report published for the third quarter of 2023, the demand for residential properties in Metro Manila remained tempered due to elevated mortgage rates. While the Bangko Sentral ng Pilipinas has initiated rate cuts, their immediate impact on consumer lending is limited.

Only 9,300 pre-selling units were sold in the first nine months of 2024, a 53% year-on-year decline. Colliers projects an annual average increase of 4,980 units in pre-selling take-up from 2024 to 2028, with a full-year growth of 6,830 units expected by the end of 2024.

Interestingly, there has been a growing preference for upscale and luxury units, which are now accounting for a larger share of overall pre-selling take-up. This trend reflects a shift in buyer profiles, as investors and high-income earners continue to fuel demand despite the economic headwinds.

Meanwhile, the supply in the Metro Manila condominium market remains constrained, with completions in the third quarter of 2024 amounting to just 830 units, bringing the year-to-date total to 9,860 units lower than the previously forecasted 11,290 units due to project delays.

The vacancy rate in Metro Manila’s secondary residential market increased to 17.4% in the third quarter of 2024, up from 17.2% in the previous quarter. The exit of Chinese Philippine Offshore Gaming Operators (POGOs) workers significantly contributed to this trend, particularly in the Bay Area.

On the rental front, recovery remains sluggish. In fact, residential rents grew marginally by 0.2% quarter-on-quarter (QoQ) and are expected to rise by 1.0% year on year by the end of 2024. Annual growth is forecasted at 2.1% from 2024 to 2028, with rental rates returning to pre-pandemic levels by the second quarter of 2028.

Capital values for residential properties grew by 0.5% QoQ in the third quarter of 2024, with an annual growth projection of 2.1% for the year.

One of the key elements sustaining demand in the residential market is infrastructure development, particularly in areas outside Metro Manila. Provinces such as Cavite, Laguna, and Batangas have emerged as focal points for growth, benefiting from enhanced connectivity and ongoing urban development projects.

Decline in office market growth

The office market experienced its first negative net take-up since 2021, recording a net absorption of -33,000 square meters (sq.m.) in the third quarter of 2024. This contraction was driven by the vacated spaces of POGOs following the government’s ban, coupled with rightsizing among outsourcing firms.

Notably, the vacancy rate in Metro Manila rose to 18.5% in the third quarter of 2024 from 18.3% in the previous quarter. However, demand for office space in the provinces outperformed Metro Manila, with provincial transactions accounting for 23% of total office deals during the period. Cebu and Davao emerged as key hot spots, with substantial leasing activity from outsourcing firms.

New office supply remained limited, with only 9,500 sq.m. completed in the third quarter of 2024. For the first nine months, total completions amounted to 176,400 sq.m. — a 47% drop compared to the same period in 2023. Colliers attributes this decline to construction delays, muted pre-leasing activity, and high vacancy rates in certain submarkets.

While average rents in Metro Manila declined by 0.6% QoQ, primary central business districts (CBDs) like Makati, Fort Bonifacio, and Ortigas demonstrated resilience with marginal increases. In contrast, secondary markets are likely to experience further rental declines.

Despite challenges, traditional firms drove demand in Metro Manila, accounting for 53% of transactions during the first nine months of 2024. Banking institutions, government agencies, and flexible workspaces were among the key contributors to this segment.

Shift to leisure-oriented developments

According to Leechiu Property Consultants, the full recovery of hotel, tourism, and leisure segment to pre-pandemic levels is projected by 2026, as the government and private developers invest heavily in infrastructure and accommodations.

Nationwide, the private sector has committed to 158 new hotel projects, totaling 40,084 rooms, generating P250 billion in investments, and creating 57,000 jobs.

Luzon accounts for 50% of the total pipeline, with key projects in Clark and Metro Manila. Visayas comes next with significant developments in Boracay, Mactan Island, and Panglao; while Mindanao contributes 8% of the pipeline, with notable projects in Davao City, Cagayan de Oro, and Siargao.

In response to tepid demand in Metro Manila, developers are shifting focus to leisure-oriented projects outside the capital, according to Colliers. Golf communities are gaining traction as lifestyle-oriented investments. These projects, priced between P175,000 and P590,000 per square meter, report take-up rates ranging from 43% to 100%.

Surge in retail demand

Colliers highlighted that mall operators are strategically refreshing retail spaces to entice more visitors and extend their dwell time, particularly in the run-up to the festive fourth quarter. In the third quarter of 2024, 104,800 sq.m. of retail space was absorbed, with food and beverage (F&B) brands leading the charge.

Expansion by foreign retailers, including brands from the home furnishing and personal accessory sectors, further amplified demand.

The market also saw the delivery of 86,900 sq.m. of new retail space during the quarter, including prominent developments like Opus Mall in Quezon City and expansions of SM City Caloocan and SM Bicutan.

On the other hand, developers are increasingly focusing on redeveloping existing malls to align with consumer demands for more immersive and experiential spaces.

Retail rents exhibited modest growth due to the influx of new supply, with a QoQ increase of 0.2%. Premium rents were observed in business hubs and malls with low vacancy rates.

Vacancy rates improved slightly to 15.1% in the third quarter, driven by robust retailer take-up. By yearend, vacancy is projected to inch up to 15.3% as new supply comes.

Source: Business World

UK landlords sell in a hurry amid fears of capital gains tax increase

The proportion of former rental properties for sale is the highest on record, an increase that may be driven by landlords’ fears of an increase in capital gains tax in the budget, according to Rightmove. Eighteen per cent of properties for sale were previously on the rental market, compared with 8 per cent in2010.

The property website said that landlords’ fears that the budget on October30 would result in an increase in capital gains tax — a tax on the profit made when an asset is sold — could be behind the surge.

London has emerged as a hotspot, with 29 per cent of homes for sale having previously been rental properties. Scotland and the northeast follow, with a proportion of 19 per cent. The percentage has been slowly increasing for months. The previous five year average for homes switching from the rental market to the sales market is14 per cent, according to Rightmove. Tim Bannister, its property expert, noted that while the trend was increasing, it did not signal a “mass exodus of landlords”.

The number of new properties entering the sales market has risen by 14 percent compared with a year ago, a period when the market was subdued by high inflation and peak mortgage rates.

Compared with 2019, the last year before the pandemic, the number of homes for sale this year has increased by 3 per cent. Bannister said: “In recent years it has become more attractive for some landlords to leave the rental sector rather than to continue to invest in it, due to rising costs, taxes and legislation.

We’ve seen over the last few years how the supply and demand imbalance can contribute to rising rents, so there is a worry that without encouragement for landlords to stay in rather than leave the rental sector it is tenants who will pay the price.” Sir Keir Starmer has warned that the budget will be “painful” and that those with “the broadest shoulders should bear the heaviest burden”.

Rachel Reeves, the chancellor, has declined to rule out an increase in CGT. At present CGT is levied at rates of between 10 and 28 per cent. An increase could lead to a “significant rise” in the tax burden, Marc von Grundherr, director of the estate agent Benham &Reeves, said. “This would be yet another blow to those who provide vital housing stock that is sorely needed within the rental sector, following a string of legislative changes already introduced in recent years to dent profitability

Source: The Times