15/04/2026
🧐 New Properties are All Overpriced. Here's Why.
That house-and-lot or condo from a developer feels SO expensive because it's not just the property you're paying for. It's also the 12% hiding in the price.
If you're buying from a developer, you're not buying a "capital asset". You're buying an **ordinary asset**. And that changes everything.
➡️ What's the difference?
When you buy from an individual selling their personal property (a family home, an inherited lot), that's a "capital asset". The tax framework is simpler — flat 6% CGT, 1.5% DST, transfer tax, and registration fees.
But when you buy from a developer or anyone in the real estate business, the property is classified as an "ordinary asset". And ordinary assets are subject to VALUE-ADDED TAX (VAT) — 12%.
➡️ That 12% is baked into the price you're paying.
Developers don't list VAT as a separate line item the way a restaurant adds service charge. It's already built into the selling price. So when you see a condo unit listed at ₱5,000,000 — a portion of that is VAT. You're paying it. You just don't see it broken out.
And if the property price is high enough, that 12% is MASSIVE.
Quick math:
→ ₱5M unit = roughly ₱535,000 in VAT embedded in the price
→ ₱10M unit = roughly ₱1,070,000
→ ₱15M unit = roughly ₱1,607,000
That's money that doesn't go to blocks, cement, or square meters. It goes straight to the government.
➡️ "But wait — aren't some properties VAT-exempt?"
Yes. There is a threshold:
→ Residential lots selling for ₱3,600,000 and below — VAT-exempt
So if you're buying a socialized or affordable unit under these thresholds, VAT doesn't apply. But the moment the price crosses the line? 12% kicks in — and it kicks HARD.
This is why you'll sometimes see developers price units at exactly ₱3.5M. They're staying just under the threshold on purpose.
➡️ "So what about the other taxes?"
Well, here's a bit of good news for buyers purchasing from developers: most of the transactional taxes — the Creditable Withholding Tax, income tax on the gain, DST — are typically handled by the developer/seller as part of the sale. That's standard practice. You don't usually deal with those directly.
But what you DO end up shouldering as the buyer, on top of the purchase price:
→ Transfer tax (0.5%–0.75%) — paid to the local government
→ Registration fee (~0.25%) — paid to the Registry of Deeds
→ Miscellaneous processing fees — title transfer, notarial, documentary stamps on the buyer's side
Some developers offer "free title transfer" promos where they absorb these costs. Read the fine print — sometimes it's genuinely included, sometimes it's just rolled into a higher selling price.
🔑 The real takeaway:
When comparing prices between buying from a developer vs. buying from an individual owner, you're not comparing apples to apples.
The developer price has **12% VAT** potentially baked in. The individual seller's price doesn't (capital asset = no VAT).
That "cheaper" resale unit from an individual owner might actually be the smarter deal — not because the property is better, but because you're not paying a hidden 12% tax premium.
Pro tips:
→ Always ask: Is VAT included in the listed price, or will it be added on top?
→ If you're borderline on the VAT threshold, explore if the developer has units priced just below it
→ Compare the TRUE cost — developer price (with VAT) vs. resale price (without VAT) — before deciding
→ For pre-selling units, VAT is locked in at contract signing — even if thresholds change later
This is why real estate literacy matters. In many cases, the biggest tax you pay when buying property isn't one you file at the BIR. It's one that's already in the price before you even sign. 💸
Save this. Share it with anyone house hunting right now. 👇
