Thursday, November 30, 2023

Effects of globalization on entire communities

As the economy continues to worsen in other parts of the world, China continues to perform excellently and thousands are transforming their lives from languishing in the middle class for years to instant millionaires, even billionaires. Many ethnic Chinese , especially those sons and daughters of major Chinese communist party members are living the high life. Most have migrated somewhere, especially now when Chinese president Jin Xin Ping announced a massive anti-corruption drive, and have carted their wealth away, investing them in foreign lands, buying condominiums, real estate and expensive items such as jewelry and cars.

These instant rich Chinese are disrupting things all over the world, especially in housing and real estate. Not only in the Philippines, but in everywhere, property prices have skyrocketed after demands from these millionaires increased. This is good to the economy, and especially to government, but it is not to the local people.

Higher property prices means higher taxes. This is no problem for a foreign investor but it is a big issue for locals. Sleepy towns which suddenly become magnets for foreign funds in real estate are prime targets by local government units for raised property taxes. The conventional wisdom is for these local governments to squeeze more monies from investors by raising property taxes, something which is terribly not at all welcome for local residents which have to pay the very same taxes as those of foreign investors.

This phenomenon is already happening everywhere, especially in the United States, Canada, the West and some first world East Asian countries. Here in the Philippines, government wants to cash in with renewed Chinese funds flowing in by raising taxes. However, government fails to realize is the huge difference between incomes of locals and foreign investors. The income of a local resident from a sleepy town who owns property may not exactly approximate that of a foreign investor and higher property prices force an increase also in property taxes so much so that it affects the lives of locals. Rising property prices may benefit locals because it also increases the value of their own properties but it also forces these locals to pay more taxes to government, the very same taxes wealthier real estate snappers do.

The phenomenon is now causing massive disruption, with whole communities disappearing, and making way for empty homes bought by foreign investors. It is entirely possible that whole cultures and traditions are disappearing alongside people living their homes and selling them to foreign interested parties.  A highly liberalized real estate market may benefit the real estate sector but it may also lead to wholesale changes in the lives of people in these markets.

A decade ago, property prices in Makati, the country’s financial center, was between 60-80,000 per square meter. Now, it is between 150-160,000 pesos per month residential square meter. Yes, this benefits Makati residents especially those whose properties are near the very heart of the financial district. However, this also causes these property owners several thousands of pesos in tax payments. A property owner with a 70 square meter property may very well migrate to some other place and sell the property instead of paying humongous real estate taxes especially those with incomes not even reaching a million every year.

Hence, expect the voter population in Makati to change as original residents leave to be replaced by others not so politically engaged with local matters. This will cause a massive social disruption and possibly affect politics in Makati. One can see it on fewer and lesser citizen’s participation in domestic and local government issues, entry of migrants into the political arena, shifting emphasis on money backing politics, and so on and so forth.



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