The risks of investing in Australian & Philippines property

Forums are a good place to get a sense of what people might be thinking when they consider investments. I of course receive all types of criticism. There are people who are so narrow or safe in their thinking that you will never convince them. Some people however recognise that risks are managed rather than avoided. If you want the best fruit you have to climb to the tree branches where people cannot reach. So some of the feedback on a particular forum was:

1. The Philippines suffers from earthquakes. For Australians the idea of living on an active geological landmass might raise fears. If you have lived in Japan, as I have, you would know that the Philippines is far more stable than Japan. Housing is designed for earthquakes , and it has no impact on land prices. This is true of volcanic eruptions as well. There are 3 volcanoes in the Philippines that erupt every 10 years, the rest are smokers every few hundred years.

2. The Philippines is an economic laggard. That has historically been true, but that is changing. Even without substantial reform the economy was able to grow at 7.2% last year . Not bad. You don't buy when everything is good, as that's when property is probably fully priced. You buy when things are stuffed, but look like getting better.

3. Poor economic prospects=bad investment': True enough, the Philippines has problems, but that is a global phenomena and those economic declines create buying opportunities.

My argument was that the Philippines is a better place to invest you money. Incomes are growing faster, population growth is far higher, economic policy is turning around. You can see my reasons by downloading the free chapter from the study I prepared. By comparison, the Australian economic outlook is ok, but property is already fully valued, and tight land supply because of zoning restrictions poses a small threat of greater land releases. More likely we could see state government efforts to encourage more densely urbanised settlement and fast-ttracking of transport services to outer-lying areas, but the state government (because of its $1 billion deficit) has since cancelled plans for a land release. We are therefore looking at stronger home prices, or land releases. Land blocks in outer Sydney costs $160-200K already when they should be $50K.

In the Philippines you have lax land regulations, but the slow adoption of the Local Government Code will change that. That means you are going to see the opposite effect, where certain land is going to greatly increase in value. Oh, and what about higher food prices in future? They will justify an increase in the value of farm lands as income yields increase. You dont' have to live there, but the Philippines is the place to invest. Oh, and there are 1.2 billion Chinese across the South China Sea who are going to want holidays when the government opens the doors in 5-10 years. In the meantime there are millions of Koreans and Japanese retiring who can't afford to live in their home country. The Philippines has the most relaxed visa rules in the world, and they just got more relaxed, not less. So you tell me - which way should your money be going?

PS: This is not intended to be a comprehensive review of the risks of investing in the Philippines or Australian property market.

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Andrew Sheldon www.sheldonthinks.com