How today’s trade war shapes Philippine real estate

President Donald J. Trump’s proposed “Liberation Day” tariffs — an across-the-board 10% levy and a targeted 245% tariff aimed at China — are both dramatic and entirely in line with his long-standing protectionist agenda. Whether these measures are ultimately enacted, softened, or abandoned, their announcement alone has rattled global markets and highlighted the fragility of international trade. For the Philippines, the implications go beyond macroeconomics — they are beginning to register across real estate, particularly within the industrial and office segments.

THE PHILIPPINES IS LEVERAGING TRADE INSTABILITY TO POSITION ITSELF AS A SECONDARY MANUFACTURING HUB

Although global trade volatility has revived fears about the long-term future of globalization, the Philippines is actively attempting to turn crisis into opportunity. The Philippine Economic Zone Authority (PEZA) has championed the country as a “China+1+1” destination — a fallback manufacturing location for companies moving beyond China and its first-wave alternatives like Vietnam and Taiwan. This positioning is already bearing fruit. In 2024, 95% of total foreign direct investment (FDI) in the Philippines went to manufacturing, and from 2021 to 2024, the sector posted a 38.63% compound annual growth rate.

STRUCTURAL CHALLENGES CONTINUE TO WEIGH DOWN THE PHILIPPINES’ MANUFACTURING INVESTMENT POTENTIAL

Yet this momentum comes with persistent obstacles. High electricity costs, regulatory friction, and unpredictable policymaking continue to hinder the country’s ability to fully convert investor interest into sustained industrial activity. According to the Department of Energy, the Philippines has the third highest industrial electricity rate in ASEAN — behind only Cambodia and Singapore. In 2024, the country ranked 49th out of 67 in the IMD’s global anti-red tape index and 114th out of 180 in Transparency International’s Corruption Perceptions Index, with a score of just 33. International trade agencies such as the US Department of State and Export Development Canada have also pointed to regulatory inconsistency and political uncertainty as deterrents to investment.

PHILIPPINE EXPORTS ARE 16.8% US-BOUND, HIGHLIGHTING VULNERABILITY BUT ALSO ROOM TO DIVERSIFY

Mr. Trump’s tariff rhetoric has also reignited fears among Philippine exporters. The US is the Philippines’ single largest export market, absorbing 16.8% of exports in 2024 — worth over $12 billion. While electronics dominate the basket (including integrated circuits and office machine parts), the US also buys substantial volumes of coconut oil, leather goods, and agricultural products. Should a proposed 17% tariff on Philippine goods materialize, it could create headwinds across numerous industries.

Still, the Philippines’ export portfolio is not overly concentrated. Japan (14.1%), Hong Kong (13.1%), and China (12.9%) closely follow the US, suggesting that smart policy and market development could help diversify demand and cushion shocks.

A PERSISTENT PRODUCTION SHORTFALL DRIVES THE PHILIPPINES TO IMPORT 7.2 MILLION METRIC TONS OF STEEL ANNUALLY

One of the less visible, yet highly consequential, ripple effects of the trade war is its influence on construction material costs — particularly steel. The Philippines produces just 1.5 million metric tons of crude steel annually, on average, according to the World Steel Association. Domestic output covers only a fraction of national demand, forcing the country to import around 7.2 million metric tons per year. Roughly 67% of these imports come from China, based on 2024 data from the Philippine Statistics Authority.

Meanwhile, China’s share of steel exports to the United States has fallen drastically — from 8% in 2014 to just 2.1% in 2023. With US tariffs pushing Chinese suppliers out of the American market, many of those exports may be redirected to Asia, including the Philippines. As a result, input costs for developers could soften despite global tension — especially for steel-intensive projects in industrial and infrastructure sectors.

WITH US STEEL IMPORTS FROM CHINA DOWN 75%, PHILIPPINE CONSTRUCTION MAY BENEFIT FROM REDIRECTED SUPPLY

Amid rising trade barriers, Chinese steel producers are likely to seek alternative destinations for surplus inventory. As US demand drops further under tariff pressure, the Philippines could benefit from excess supply. Given that 80% of the country’s steel consumption is used in construction, lower prices could directly reduce development costs — potentially accelerating project timelines and making new industrial zones more financially viable.

This is a key consideration in assessing industrial real estate’s medium-term outlook. Falling input costs may catalyze new warehousing, logistics, and manufacturing facility construction at a time when global investors are exploring alternative supply chain routes.

THE OUTSOURCING SECTOR IS PROJECTED TO GROW LESS THAN 7% IN 2025 AMID GEOPOLITICAL UNCERTAINTY

In the services sector, particularly in office real estate, the BPO industry faces its own set of pressures. While trade tariffs don’t directly affect services, the Philippines’ strong reliance on US clients exposes the industry to secondary risks. North America accounts for 70% of Philippine outsourcing demand. The sector also contributed $7 billion — or 9% of national GDP — and drove 19% of office demand in 2024.

IBPAP forecasts slower growth in 2025, with the sector expected to expand by less than 7%. While BPO will remain foundational to the office market, risks from reshoring (returning operations to the US) and nearshoring (relocating to nearby countries) will temper expansion. Still, the sector’s fundamentals remain intact, and strategic interventions can help maintain competitiveness.

LOWERING ELECTRICITY COSTS COULD UNLOCK BROADER INDUSTRIAL CAPACITY

One policy lever that could unlock multiple benefits is addressing energy affordability. In the short to medium term, the government could consider targeted subsidies for energy-intensive industries — especially manufacturing. In 2024, 70.9% of all energy investment pledges were committed to renewable energy. While this signals progress toward long-term sustainability, short-term competitiveness will require bridging the affordability gap.

Vietnam once implemented cross-subsidization mechanisms to keep industrial power costs competitive. Germany has proposed covering up to 80% of power costs for energy-heavy sectors like steel and chemicals. A similar intervention in the Philippines could attract more foreign manufacturers and alleviate cost pressures for domestic producers.

UPSKILLING AND POSITIONING THE PHILIPPINE WORKFORCE AS ‘AI-READY’ WILL SUSTAIN BPO SECTOR GROWTH

The BPO sector’s other challenge is technological disruption. But here, the Philippines shows promise. A 2024 Microsoft Philippines and LinkedIn study found that 86% of Filipino knowledge workers use AI at work — well above the global average of 75%. This positions the country not as a laggard, but as a potential leader in human-AI complementarity.

 By investing in AI upskilling and moving up the value chain — toward healthcare, finance, and analytics — the Philippines can future-proof its BPO sector. Rather than being displaced by AI, the workforce can evolve with it.

STRATEGIC FRICTION IS A TEST — AND AN OPENING

Trade wars are a symptom of a fractured global order, but they also expose underlying weaknesses — and hidden advantages. For the Philippines, the challenge is not only to weather the storm, but to position itself for what comes after. With the right supply-side reforms, forward-looking workforce development, and sector-specific interventions, the country can convert external turbulence into long-term opportunities.

Source: Business World

Real estate lending to require closer monitoring amid rising risks

Lending to the real estate sector will need tighter supervision amid emerging risks that could impact the financial system, a Philippine central bank report showed.

“Real estate loan (REL) exposures need closer monitoring amid evolving market conditions,” the Bangko Sentral ng Pilipinas (BSP) said in its latest financial stability report.

“The high-interest rate environment, shifting consumer preferences, remote work arrangements and recent government pronouncements banning Philippine offshore gaming operators (POGO) have implications on the sector’s loan quality.”

Latest data from the BSP showed Philippine banks and trust entities’ real estate exposure ratio rose to 19.75% as of end-December from 19.55% at end-September.

The central bank monitors lenders’ exposure to the real estate industry as part of its mandate to maintain financial stability.

Broken down, real estate loans increased by 7.9% year on year to P2.95 trillion at end-December. This as residential real estate loans climbed by an annual 9.6% to P1.1 trillion, while commercial real estate loans went up by 6.9% to P1.85 trillion.

The BSP also noted the rise in nonperforming loans in the real estate sector. Data showed the bulk or 62.5% of the NPL portfolio consists of commercial real estate.

“However, majority of the nonperforming RELs are residential RELs at 65.2% against commercial RELs at 34.8% as of September 2024,” it added.

The BSP also said that the rise in bad loans was driven by the mid- and low-cost housing segments as they account for a large share in residential loans.

“What does not show up as higher NPLs for commercial real estate are likely to be seen in the financial statements of real estate developers,” it added.

Joey Roi H. Bondoc, director and head of research at Colliers Philippines, said consumers could be struggling to pay back their loans, which is why developers are finding ways to offer more flexible payment terms.

“Based on anecdotes that we have been getting, a lot of buyers right now are scouting and looking for the most attractive payment terms or incentives, especially in the ready-for-occupancy (RFO) market,” he said in a phone call.

Mr. Bondoc said there is a “pretty substantial” number of unsold RFO units in the market, especially in the mid-income segment, which covers nearly 60% of unsold RFO units.

“Essentially, six out of 10 unsold RFO (units) are from the mid-income segment, which is heavily dependent on bank mortgages,” he added.

He noted some developers are extending downpayment terms among other measures to make financing more accessible.

“Banks should also be more cautious moving forward because the ready-for-occupancy (RFO) promos are getting sweeter, they’re getting extended, but you don’t want to see the market falling into that trap again,” Mr. Bondoc said.

The BSP noted the oversupply in the property market, especially in the condominium segment. It noted it would take 34 months for the current condominium supply to be sold.

“Despite recovery in prices, vacancies remain elevated amid the increase in residential real estate supply,” the central bank said.

The rise in new units is outpacing net take-ups in the secondary market, it added.

“It will be very interesting this first quarter because we’re seeing tepid launches. Developers are almost not launching new projects at this point,” Mr. Bondoc said.

OTHER RISKS

Meanwhile, the BSP also flagged other risks to the real estate sector.

“A potential risk is the buildup of in-house financing as reflected in the installment contract receivables of real estate developers. These contribute to revenues but also expose developers to credit risk.”

“Past due and impaired receivables remain elevated including in real estate developers exposed to POGOs,” it added.

While property developers are seeking ways to provide more enticing payment terms, Mr. Bondoc noted it is unlikely that there will be significant price reductions.

However, he noted that once the central bank continues cutting interest rates, this would result in lower mortgage rates.

“Probably that’s when we might start seeing low interest rates having a positive impact, kicking in and resulting in lower mortgage rates. Therefore, perhaps chipping in to greater take-up in the pre-selling sector.”

Housing prices rose by 6.7% year on year in the fourth quarter, according to the latest Residential Real Estate Price Index. This was a turnaround from the 2.3% decline in the previous quarter.

The Monetary Board cut the key rate by a total of 75 basis points last year.

While the central bank delivered a pause at its first meeting in 2025, BSP Governor Eli M. Remolona, Jr. has said it is still on an easing trajectory and has signaled further rate cuts this year.

Apart from lower interest rates, real estate loan demand could also be impacted by remittance flows, Mr. Bondoc said.

“I think that will be crucial because data from the central bank would also show that more remittance-receiving households are in fact allocating money for real estate requirements,” he said.

The BSP’s latest Consumer Expectations Survey also showed that 5% of households plan to buy or acquire real property in the next 12 months, up from 4.8% a year ago.

Source: Business World

The cyclical nature of the property sector

Over the last few weeks, discussions surrounding Metro Manila’s condominium sector have taken on a more cautious tone.

Concerns over a reported oversupply and extended absorption periods—owing to elevated interest rates and the exit of Philippine offshore gaming operators, among other factors—have prompted questions on the real state and health of this industry.

A necessary recalibration

Another perspective, however, explains the current situation as a “necessary recalibration”—one that steers the market away from speculation and toward long term sustainability.

After years of rapid expansion especially before the pandemic, this shift now offers an opportunity to reshape Metro Manila’s condominium landscape into one that is more resilient, more demand-driven, and more aligned with real end-user needs.

“Metro Manila’s condo oversupply signals a maturing and stabilizing real estate market. Increased competition is driving developers to prioritize quality, innovation, and differentiation. Rather than a setback, this oversupply acts as a natural filter, eliminating weaker projects and raising industry standards,” said Prof. Enrique M. Soriano III, executive director of W+B Advisory Group.

The current landscape, in fact, presents a number of silver linings: developers are enhancing their offerings, buyers are getting better and more attuned options, and investors are finding new opportunities in a market that is moving toward a more balanced environment.

In a real estate cycle, downturns are not roadblocks but are “resets”. And those who understand the nuances of this transition will be best positioned to thrive in the market’s next phase.

Emerging districts like Bridgetowne are expected to see sustained demand in premium residential space.

Long term value

Amid this scenario, developers are now “moving away from speculative projects and toward sustainable, mixed-use, and community-driven developments that emphasize long term value,” Soriano said.

At the same time, high-net-worth individuals, affluent empty nesters, and discerning buyers are also increasingly favoring well-located, low density, and amenity-rich developments.

This highlights the continued demand for premium properties in key business districts like Makati CBD, Bonifacio Global City (BGC), Ortigas Center and Cebu City, as well as emerging districts like Bridgetowne and Parklinks—while reinforcing the notion that prime-location investments remain among the safest bets.

Janlo delos Reyes, head of Research and Strategic Consulting at JLL Philippines, concurs, pointing out that such markets—Makati CBD and BGC—are well ahead in terms of market maturity.

“These two districts have continued to register solid take-up and stable price growth despite current market conditions,” he said, adding that other areas in the metro, which recorded periods of significant growth in the past, may still be considered as maturing.

“Nonetheless, we can expect the situation to stabilize over the long run,” delos Reyes added.

No signs of panic, just patience

Sheila Lobien, CEO of Lobien Realty Group Inc., meanwhile assured that they haven’t observed prevalent “speculative behavior” in the market.

“We sense no widespread panic among developers and those who have condo mortgages. There is no flood of second-hand condos for sale, increase in real estate non-performing loans (NPLs) or surge in repossessed condo inventory for sale in the market,” she explained.

The situation is thus unlike overheated markets, where investors offload properties en masse at the first sign of trouble.

Lobien even waxed optimistic in saying that demand is expected to “recover once benchmark rates are possibly down to 5 percent, which is expected this year or early next year. Recovery in demand is just a matter of time.”

Major CBDs are seen to continue thriving.

From oversupply to opportunity

Similarly, another expert stressed that the perception of an oversupply overlooks a crucial point: that the Philippine real estate market is no longer driven purely by speculative investments but by strategic, end-user-oriented growth.

Andoy Beltran, VP and head of Business Development at First Metro Securities Brokerage Corp., said this is a sign of a more disciplined market.

Beltran explained that in a maturing market, sustainable price growth and rental yield stability take precedence over rapid boom-and-bust cycles.

“A maturing market is characterized by developers responding more strategically to demand rather than building just for the sake of launching. The current supply situation indicates a shift from speculative development to data-driven, end-user-focused projects. This means inventory is better aligned with real demand, reducing the risk of oversupply-driven price crashes,” he said.

Instead of viewing the present inventory levels as problematic, seasoned investors and developers should recognize this as a cycle in which strategic positioning and patience will ultimately yield long term gains.

“The key is recognizing the transition points—when stabilization turns into the next growth phase,” Beltran added.

Source: Inquirer