More rich Filipinos investing in offshore real estate to hedge risk
The appetite for offshore real estate investments is growing among wealthy Filipinos looking to diversify and preserve their wealth in a record-low interest rate environment and uncertainties of lockdown during this ongoing pandemic, said a real estate expert with consulting firm KMC Savills.
In a recent interview with Inquirer, Michael McCullough, managing director of KMC Savills said his firm is finding more and more wealthy Filipino individuals and families looking for offshore real estate investments in the range of $ 12 million to $ 29 million.
“They say now why don’t we start looking for business overseas – Europe, US, Australia – where they can generate income and use a legal system that is more transparent and faster than the Philippines,” said McCullough.
For those looking for offshore real estate wealth, the office segment comes first, which can generate recurring returns, he said.
“But now they are [also] with a view to multi-family residential complexes or apartment buildings, ”he added.
These high net worth individuals and families “feel like they want to hedge their bets,” he said.
These wealthy Filipinos are willing to accept returns of 8 to 12 percent on their overseas investments, even though they could get higher returns of 12 to 20 percent in the Philippines. “They just feel like – you know what, we’ve got enough attention here,” he said.
This implies that competition is intensifying not only among and within local upscale developers, but also with sellers of property values outside of the country. Local developers are therefore increasingly required to develop convincing products.
This diversification is also seen as a way to bring these rich folks’ excess cash into better returns. Otherwise, if they were to park all of their money in bank deposits, an annual interest rate of 0.5 percent with an inflation rate of 4 percent wouldn’t look too appetizing.
But because these people are inundated with cash, that doesn’t mean they will stop investing locally entirely, given the ability to invest in multiple markets, McCullough added.
Based on live conversations with clients looking to diversify and acquire offshore assets, he said these people were asking for properties in markets like Madrid, Sydney and New York City.
Interest in Madrid may have to do with the Philippines’ historical ties with Spain, which colonized the country for three centuries.
“It’s kind of boasting too. At some point you could invest 500,000 euros, live there and get citizenship after two years, ”he said.
New York, on the other hand, is considered a very liquid market.
“You could buy a property today, you know, and possibly sell it in 30 days,” McCullough said. “It’s also one of those places to talk about – oh yeah, I have a property in New York City too. So these are just trophy locations, ”he said. INQ
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