Philippines rental yield: gross, net, and the oversupply effect.

A Philippine condo has three yields, and the listing always quotes the friendliest one. Gross yield is annual rental revenue over purchase price. It assumes maximum occupancy, ignores the association dues, ignores the BIR rental tax, and ignores Real Property Tax. It is the ceiling, not the floor.

Net yield is what actually reaches your account: realistic occupancy, minus the BIR rental-tax drag on the income, minus the association dues, minus Real Property Tax, minus management, minus a maintenance and refurbishment reserve. Realised yield is net yield after reality — the void months between tenants, the platform refund you absorbed, the two months the unit sat empty because three identical units on the same floor undercut you.

One thing the Philippine buyer gets to keep that a Vietnam buyer never does: the unit is held through a perpetual Condominium Certificate of Title within the foreign-ownership quota. There is no 50-year clock quietly draining the asset. That removes one variable — and it lets the brochure imply the only variable left is upside. It is not. The Capital Allocator optimises for realistic net, then stress-tests it against oversupply. The Lifestyle Buyer reads the gross off the deck and discovers the gap months in. I model all three. The brochure models the view. See how the cost lines stack in the Philippines fee stack.

A foreign buyer models the mortgage and the rent and stops. The line they consistently under-price is the condominium association dues — charged monthly, per square metre, whether or not the unit is occupied. The condo corporation levies them to fund building staff, security, lifts, pool, gym, common-area utilities, and the sinking fund. A mid-grade tower might charge in the region of 100–150 Peso per square metre per month; a premium BGC or Makati address can run higher still.

Put a worked number on it. On a 35 square-metre one-bedroom at 120 Peso per square metre per month, that is about 4,200 Peso a month, roughly 50,400 Peso a year. On a larger or more premium unit it climbs fast. This line does not pause when the unit is empty — which is exactly why an honest occupancy assumption matters so much.

Two more annual lines sit alongside it. Real Property Tax, the local tax assessed as a percentage of the assessed value, modest but compounding over a long perpetual hold. And the maintenance reserve every working unit needs — aircon servicing, plumbing, repainting between tenants. Get the exact current Peso-per-square-metre dues rate from the condo corporation in writing before you buy, and ask whether a special assessment is pending; a looming facade or lift-replacement levy is a five-figure surprise hiding behind a tidy monthly number. The full carry stack is walked in the fee-stack breakdown.

The same CCT can be run two completely different ways, and the choice is the single largest determinant of the realised number. Short-let (nightly, booking-platform driven) carries a higher gross per booked night and a heavier drag: platform commission running on the order of 14–18% all-in once host fees, processing, and promotions are counted, plus cleaning turnover, linen, higher wear, and a co-host fee if you are offshore. It is high-volatility and, in several metro submarkets, subject to building-association rules. Model it as a business, not a side income.

Long-let (a twelve-month residential lease) trades a lower per-night-equivalent rate for near-full occupancy in the right submarket, far lighter operating cost, and low volatility. The demand engine is structural, not touristic: the Business Process Outsourcing workforce and the longer-stay expat and professional segment put thousands of salaried, lease-signing tenants near specific business districts year-round. That demand is sticky, indifferent to tourist seasonality, and it rewards proximity to transit and to the office clusters. A unit a ten-minute walk from a major BPO concentration prices its vacancy risk very differently from an identical unit two districts away.

The Playbook position: in an oversupplied submarket, short-let is a trap — you compete on price against dozens of identical units and the platform takes its cut of a shrinking pie. The BPO-anchored long-let is the more defensible model in exactly the submarkets where short-let is weakest. Match the mode to the demand, not to the render. The verification steps live in the due-diligence framework.

Take a hypothetical worked example: a 9.8M Peso unit, roughly 169,000 USD at about 58 Peso to the dollar. Marketed at 55,000 Peso a month at full occupancy, the brochure can show a gross near 6.7%. Mathematically correct. Operationally fictional.

Underwrite it honestly, run as a long-let in a steady BPO-anchored submarket. At an honest 92% occupancy, realistic gross lands near 607,200 Peso a year. Subtract the modelled rental-tax drag, about 91,080 Peso. Subtract management, about 44,650 Peso. Subtract the fixed association dues, about 96,000 Peso. Subtract Real Property Tax, about 19,600 Peso. Subtract a maintenance and refurbishment reserve, about 49,000 Peso. Net cash to the account is roughly 306,870 Peso.

That is a net yield near 3.1% against the purchase price — computed inside the math, never as a headline figure next to a sticker. The moment a yield number sits beside a price it stops being analysis and starts being a sales claim. Modest, defensible, real, on a perpetual title with low volatility. The figure is an independent research estimate for one illustrative unit, not a promised outcome — run your own numbers against your own unit. Now hold that 3.1%: the next section drops the same headline rent into the wrong tower. The cost lines behind it are itemised in the fee stack.

Vietnam buyers underwrite a 50-year clock. Philippine buyers do not have one — the title is perpetual. The variable that replaces it is oversupply, and it operates through two channels at once. It crushes occupancy: when a submarket absorbs a large wave of near-identical units, the marginal tenant has dozens of substitutes, rents soften, void periods lengthen, and the only lever a single owner controls is price, which everyone else is also cutting. And it crushes resale liquidity: perpetual title means the asset never expires, but it does not mean it sells fast. Both are neutral market conditions — supply is high in certain submarkets because a lot of towers completed in a short window. That is arithmetic, not a verdict on anyone.

Take the same hypothetical unit. Both 9.8M Peso, both advertised at 55,000 Peso a month — identical 6.7% headline gross. Unit A sits in a steady BPO-anchored submarket: it holds 92% occupancy and the full 55,000 rent, nets about 306,870 Peso, a net yield near 3.1%, and resells in an estimated four to eight months. Unit B sits in an oversupplied tower competing against a fresh delivery: occupancy falls to about 64%, the rent has to be cut to 47,000 Peso to fill, realistic gross drops to roughly 360,960 Peso, and after the cost stack plus the heavier void, turnover, and re-letting drag of an oversupplied tower it nets about 33,400 Peso — a net yield near 0.3%, with the exit stretching to an estimated ten to eighteen months.

Same brochure. Same headline. Net yield collapses from 3.1% to 0.3%, and the exit takes two to four times as long. The asset did not change. The submarket did. I model the vacancy. The brochure models the view. If the honest occupancy and the holdable rent produce a net yield you would not accept from a bond, the perpetual title is decorating a loss — the Capital Allocator walks; the Lifestyle Buyer signs because the lobby was nice. Note that these rates and tax figures are stated neutrally and they move; confirm current treatment with a licensed Philippine tax professional. How the foreign-ownership quota shapes which towers you can even buy into sits in the 40% cap.