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Why Apartments for Rent Are Here to Stay

By:Izak Kiefer Lim|July 23, 2019

In the Philippines, when one sees signages of apartments for rent, it usually refers to spaces inside mid-rise buildings. These buildings typically have an average height lower than condominium buildings. Apartments in the Philippines can also mean entire apartment buildings leased by their owners.

Apartments are abundant in the Philippines, just like in other countries. One can find these apartments almost everywhere from cities to provinces. These apartments cater to young people who are mostly college students and professionals.  College students who study away from home find apartments that fit their budget and that is close to their school. On the other hand, young professionals who just started working are still finding the best place to live in. At this early point in their lives, they are not thinking of buying a house yet. Thus, apartments give them flexibility and mobility, without the long-term commitment.

Comparing apartments and condominiums

Since apartments have lower rates than condominiums, this means that they have fewer amenities. You won’t find a pool, gym, or lobby in apartment buildings. In some apartment buildings, parking spaces might be limited, if they have one at all. Most apartments for rent come with a bed, closet, cabinet, and bathroom fixtures. Some have a kitchen, but most do not. The furnishings in apartments are not as beautiful compared to condominium furnishings.

Both apartments and condominiums usually have a long-term lease period of six months or a short-term lease period of three months. In either case, it is prohibited under Philippine law to have a lease that lasts for more than 99 years. However, lease terms in apartments are mostly short term since people who rent apartments move around in a few months. Students have to go back home after each semester or when they graduate. Young professionals find jobs in a different place as they change jobs or get reassigned.

In an apartment setting, the owner usually pays for renovations while the tenant pays for rent, electricity, water, and parking spaces. On the other hand, a condominium owner can paint and decorate the inner surfaces of his own unit and bear the cost of doing so.

In the Philippines, apartments are buildings composed of multiple units owned by the landlord. In most cases, apartment buildings are bought by one owner and its units cannot be sold separately as with condominiums. On the other hand, condominium owners under the Condominium Act have the absolute right to sell their unit. However, if there is a provision in the master deed which says that the owner first has to offer it to other condominium owners within a reasonable time before offering it to outside parties, then they are bound to respect such agreement in the contract.

Apartments owners generally have no voting rights in contrast with condominium owners who have shared voting rights over common areas such as lobbies, stairways, hallways. In an apartment, only the landlord decides. In contrast, condominiums are buildings composed of multiple units owned by different owners, who become members of the condominium corporation once they buy their units. Their rights with respect to the common areas are governed by the rules of co-ownership.

Under the Condominium Act, Condominium owners have a say when the project will be sold. If for instance the condominium project or a material part of it has been expropriated, one owner can bring an action on behalf of the other owners to divide the property, sell it, and divide the proceeds of the sale between them. This is on the condition that the condominium owners who together make up more than 70% of the interest in the common areas do not want to continue with the co-ownership of the condominium.

Why rent apartments

The most compelling reason to rent an apartment is the price which is considerably lower than that of a condominium. Apartments also have less stringent payment terms than condominiums. For the business-minded, they can even be a source of passive income.

Having only basic amenities drives the price down and make apartments more affordable for the tenant. According to Dot Property, the median rent price for condominiums in Cebu is PhP39,291. On the other hand, the median rent price for apartments in Cebu is PhP22,653. However, one can find apartments for as low as PhP8,000 in Cebu City. 

Having affordably priced apartments is important because tenants enjoy certain safeguards given by the Rent Control Act of 2009. When you live in Metro Manila and other highly urbanized cities and pay a monthly rental of PhP1 to PhP10,000, you are covered under the Rent Control Act of 2009. For all other areas, you need to have a monthly rent of PhP1 to PhP5,000 to be covered by the law. The law covers both apartments and condominiums for as long as your rent falls within the rates. But given the high prices that condominiums usually command, the Rent Control Act usually covers tenants of low-end apartments.

Under the Rent Control Act, the landlord cannot increase the monthly rental by more than 2% per year if the tenant pays PhP4,999 and below. If the tenant pays PhP5,000 to PhP8,999 monthly rent, the landlord cannot increase it by more than 7% per year, if the tenant occupies the same space. If the tenant pays PhP9,000 to PhP10,000, rental rates cannot be increased by more than 11% per year if occupied by the same tenant.

Although the prohibition on price increases by lessors lapsed in 2013, the Housing and Urban Development Coordinating Council (HUDCC) has extended the provisions of the law until December 31, 2020. 

Standard apartment lease terms also have fewer advance payments and security deposits as compared with other dwelling types. This makes them ideal for young tenants who have fewer funds and are unsure about committing to the place in the long run. Under the Rent Control Act, the landlord cannot demand more than one month of advance rent nor more than two months of advance deposit.

Lastly, building an apartment and leasing the units is a great way to build passive income. If you’re an overseas Filipino worker (OFW) or a professional who has enough capital saved up, you might want to go into an apartment rental business. It is not as easy as building an apartment and leasing it out to tenants, though. First, you need to get a building permit, occupation permit, and fire safety permit from your municipal or city hall. You also need to register the business with either the Securities and Exchange Commission or the Department of Trade and Industry. For issuing receipts when tenants pay rent, you have to get an authority to print with the Bureau of Internal Revenue (BIR). Aside from this, you have to properly screen tenants, draw up lease contracts, and track your cash flow. But with the property market seeing double-digit growth this 2019, all these efforts might be worth it and you’ll be able to recoup your investment.
For all these reasons, rental apartments won’t be going away anytime soon. Still can’t decide what type of property to rent? Check out our other article about apartments versus condos.

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Comments

One response to “Why Apartments for Rent Are Here to Stay”

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