Property sector seen slowing in 2nd half amid oil, price pressures

The Philippine property sector is expected to slow in the second half as the Iran war, elevated oil prices and persistent inflation raise costs and weaken demand, prompting developers to delay projects and adopt a more cautious approach.

Analysts said higher fuel and construction costs, elevated borrowing rates and weaker consumer purchasing power are likely to weigh on residential, retail and hospitality segments through the rest of 2026, although industrial and outsourcing-related property demand might provide some support.

Joey Roi Bondoc, director for research at Colliers Philippines, said the impact of the war on fuel and supply chains could continue to pressure developers and buyers.

Developers have started delaying construction and marketing some projects in anticipation of weaker demand, he said.

“The Middle East covered about 18% of total remittances to the Philippines in 2025, so that is pretty significant,” he added.

Claro dG. Cordero, Jr., director for research at Cushman & Wakefield Philippines, said prolonged war in the Middle East would continue to affect oil markets even if tensions ease.

“Even if de-escalation occurs, oil production and trade through the Strait of Hormuz will take time to normalize,” he said in an e-mailed reply to questions.

He said higher oil prices would eventually filter through to transportation, utilities and consumer expenses, squeezing household purchasing power in a country heavily dependent on imports.

Cushman & Wakefield also said inflation risks could spur the Bangko Sentral ng Pilipinas (BSP) to keep benchmark interest rates elevated.

Mr. Bondoc said the BSP’s cumulative 200-basis-point policy easing has yet to translate into substantially lower mortgage rates.

“Until we see a significant reduction in mortgage rate, I think we won’t see a substantial spike in condominium take-up in the Metro Manila pre-selling market,” he said, noting that five-year mortgage rates remain at about 7.7% to 7.8%.

The condominium segment in Metro Manila continues to face a large supply overhang, with about seven years’ worth of unsold inventory, according to Colliers.

As a result, developers are increasingly shifting toward horizontal housing projects in provincial growth areas such as Cavite, Laguna and Batangas, where demand is driven more by end-users than speculative buyers.

“It doesn’t make economic sense at this point to start building more vertical projects in Metro Manila,” Mr. Bondoc said.

Colliers added that provincial house-and-lot projects continue to post strong average take-up rates of about 90%, partly because overseas Filipino workers are less likely to stop paying for homes occupied by their families.

Despite the challenges, analysts said some property segments are expected to continue performing well.

Mr. Cordero said logistics and industrial developments, information technology and business process management (IT-BPM) office spaces and the high-end residential market are likely to outperform.

“Logistics and industrial benefit directly from supply chain restructuring, as occupiers seek larger, strategically located warehousing near major transport nodes to guard against disruption,” he said.

He added that tighter budgets among global companies could still support Philippine outsourcing demand because firms continue to seek lower-cost operating locations.

John Corpus, executive director for tenant representation at Savills Philippines, said a weaker peso could further improve the country’s competitiveness for export-oriented industries and outsourcing firms.

However, he noted that many business process outsourcing firms and global capability centers remain cautious about expansion because of economic uncertainty and rapid technological change.

“As a result, occupiers are expected to remain selective and strategic in their expansion decisions,” Mr. Corpus said.

Savills also cited geopolitical risks involving Taiwan and domestic political uncertainty ahead of the 2028 election cycle as factors that could affect investor sentiment.

“Investors generally prefer stability, policy continuity, and a strong focus on economic priorities,” Mr. Corpus said.

Analysts said developers should prioritize operational efficiency and carefully phase projects instead of pursuing aggressive expansion.

They also recommended locking in material costs early and investing in energy-efficient infrastructure and renewable energy systems to reduce operating costs for tenants.

Source: Business World

Lower Interest Rates Could Spark a New Property Buying Cycle in the Philippines

After several years of elevated borrowing costs, the Philippine real estate market may be approaching a turning point. Expectations that the Bangko Sentral ng Pilipinas could continue easing interest rates are raising optimism among property investors, developers, and homebuyers. Lower interest rates typically translate into more affordable housing loans, and this shift could help trigger a new cycle of property purchases across the country.

Over the past two years, higher interest rates were introduced to control inflation. While these measures helped stabilize the economy, they also made mortgage financing more expensive. For many potential buyers—especially first-time homeowners and overseas Filipino workers (OFWs)—monthly loan payments became significantly higher, leading some to postpone property purchases.

As inflation pressures gradually ease, the central bank has signaled that interest rates could move lower. Even a modest reduction in borrowing costs can have a noticeable effect on housing affordability. Lower mortgage rates reduce monthly payments, making homes and condominiums accessible to a broader group of buyers.

Why Lower Interest Rates Matter for Real Estate

Interest rates are one of the most powerful drivers of property demand. When borrowing costs decline, several things usually happen at the same time. Buyers who delayed purchasing decisions often return to the market, developers become more confident launching new projects, and investors look to real estate as a stable long-term asset.

In the Philippine context, where many home purchases rely on bank financing or government-backed housing loans, interest rate changes can strongly influence demand. Lower borrowing costs could encourage more buyers to apply for mortgages, particularly through financing programs offered by Pag-IBIG.

For families hoping to buy their first home, the difference of even one percentage point in mortgage rates can mean thousands of pesos in monthly savings. Over the life of a housing loan, these savings can become substantial, making homeownership more achievable.

Potential Impact on Property Prices

If borrowing costs decline and demand strengthens, property prices may begin rising again in certain markets. Developers and real estate analysts often watch interest rate trends closely because they can signal when a new demand cycle is forming.

Metro Manila’s condominium market, which has seen slower growth in recent years, could experience renewed interest from investors once financing conditions improve. At the same time, demand for house-and-lot properties in nearby provinces such as Cavite, Laguna, and Bulacan may accelerate as buyers search for larger homes at more affordable prices.

However, the pace of price increases will likely remain measured. The Philippine property market today is more balanced than it was during earlier boom periods, and developers are generally cautious about launching new projects unless they see clear signs of sustained demand.

Opportunities for Buyers and Investors

For buyers who have been waiting for the right moment to enter the market, a period of declining interest rates can present a valuable opportunity. Purchasing property before prices begin rising again allows buyers to lock in lower acquisition costs while benefiting from potentially cheaper financing.

Real estate investors also tend to view lower interest rate environments favorably. As borrowing costs fall, property investments can generate stronger returns compared with some traditional financial assets.

In addition, improved financing conditions may encourage developers to expand projects in emerging areas where infrastructure improvements are opening new residential corridors.

What to Watch in the Coming Months

While expectations for lower interest rates are growing, the exact timing and scale of future rate adjustments will depend on economic conditions. Inflation trends, global financial markets, and domestic growth indicators will all influence decisions by the Bangko Sentral ng Pilipinas.

For those monitoring the property market, several signals may indicate that a new buying cycle is beginning. Rising mortgage approvals, increased property listings, and stronger sales activity in both residential and condominium developments could all suggest that buyers are returning.

Lower interest rates have historically been a powerful catalyst for real estate activity. If borrowing costs continue to decline in the Philippines, the property market could enter a new growth phase as buyers regain confidence and financing becomes more affordable.

For investors, homebuyers, and overseas Filipinos considering property purchases, the months ahead may offer a window of opportunity. Watching interest rate trends closely could help identify the right moment to enter the market before demand—and prices—begin to climb again.

Philippine property sector set for steady growth in 2026

The Philippine property market is expected to sustain growth in the medium term, supported by rosier economic growth prospects, lower interest rates, and continued infrastructure development, according to the latest report by global property consultancy Cushman & Wakefield.

In its “Southeast Asia Outlook 2026: Growth Amid Global Shifts” report dated March 5, Cushman & Wakefield said the Philippines remains one of the region’s faster-growing economies despite global uncertainties.

The report projects Philippine gross domestic product (GDP) to grow by up to 5.6 percent in 2026, supported by domestic consumption and improving financial conditions. In the aftermath of the flood-control infrastructure corruption scandal, GDP grew by just 4.4 percent in 2025, the slowest annual economic expansion post-pandemic.

“Philippine GDP growth is expected to remain solid, despite threading lower than pre-Covid trend,” the report said.

“While global uncertainties and outsourcing policy risks remain, the Philippines continues to benefit from a young population, urban expansion, rapid growth of digital payment infra, and sustained infrastructure-led development,” according to Cushman & Wakefield.

Softer inflation and monetary easing are also expected to support recovery across key real estate segments.

“Lower financing costs increase mortgage accessibility and stimulate property transactions,” the report said. The Bangko Sentral ng Pilipinas (BSP) reduced its policy rate to 4.25 percent last February, down from the 6.5-percent peak in 2024.

The property sector’s resilience is also supported by steady inflows from overseas Filipino workers (OFWs), whose cash remittances reached a record-high $35.63 billion last year.

“These inflows sustain housing demand—especially mid-rise and suburban developments—and support property sector resilience despite slower overall economic growth,” Cushman & Wakefield said.

In the office segment, demand is projected to continue being led mainly by information technology and business process management (IT-BPM) firms.

“Demand remains driven by the IT-BPM sector, with flight-to-quality supporting prime and grade A buildings in major central business districts (CBDs) of Makati, Bonifacio Global City (BGC), and Ortigas,” Cushman & Wakefield said, although vacancies remain elevated in some peripheral locations.

Industrial and logistics assets are also seen benefiting from structural shifts in trade and supply chains.

The report said the sector continues to show “strong momentum,” driven by e-commerce growth, infrastructure expansion, and rising demand for modern logistics facilities.

Across Southeast Asia, industrial assets have been among the strongest-performing property classes as companies expand distribution networks and manufacturing capacity.

Cushman & Wakefield also noted that the Philippines could benefit from global supply chain diversification.

“Notably, the Philippines could emerge as a secondary China-plus-one location, particularly for industrialists seeking to expand both manufacturing and IT-BPM operations across the region.”

Retail supply growth in the Philippines is expected to remain measured, with malls increasingly repositioning themselves to attract experiential tenants.

Meanwhile, the residential segment is projected to remain resilient, particularly in high-end and horizontal developments supported by improved connectivity and better financing conditions.

Large infrastructure projects are also expected to boost property demand over the coming years.

“With major infrastructure projects such as the Metro Manila Subway, North-South Commuter Railway (NSCR), and New Manila International Airport (NMIA) underway, the Philippines’ property market remains positioned for medium-term growth,” Cushman & Wakefield said.

Source: Manila Bulletin