Building permit approvals post steepest drop in 8 months

By Pierce Oel A. Montalvo, Researcher

THE NUMBER of approved building permits declined by 11.6% in May from a year earlier, the sharpest drop in eight months, amid rising construction costs and high borrowing rates.

Preliminary data from the Philippine Statistics Authority (PSA) showed building projects covered by the permits stood at 15,436 in May, slipping from 17,466 a year earlier.

The 11.6% drop was a reversal of the 8.5% growth seen in May 2025, and steeper than the 0.7% dip in April 2026.

The decline in May was the biggest drop since the 12.4% contraction in September 2025.

Construction projects during the month covered 3.37 million square meters (sq.m.) of floor area, down by 7.8% from the 3.66 million sq.m. a year earlier.

The approved projects were valued at P47.05 billion in May, slipping by 1.2% from the P47.64 billion in the same month last year.

Joey Roi Bondoc, director for research at Colliers Philippines, said in an e-mail that elevated interest rates have made it more expensive for developers to fund new projects.

The Bangko Sentral ng Pilipinas (BSP) raised the benchmark rate by 25 basis points (bps) to 4.75% at its June meeting. This was the highest rate in nearly a year or since the 5% in August 2025.

Mr. Bondoc also flagged the rising cost of construction materials, which has increased project costs and reduced profit margins.

PSA data earlier showed wholesale prices for construction materials rose 2.8% in May, picking up from 1.9% in April.

“As a result, some developers adopted a ‘wait-and-see’ approach and postponed construction plans and new project launches,” he said.

Residential project permits, which accounted for 65.8% of the total, fell by 15.5% year on year to 10,154 approvals.

These projects were valued at P24.73 billion, slightly higher than P24.4 billion last year.

Single houses, accounting for 85.5% of residential projects, also decreased by 15.6% year on year to 8,682. Permits for duplex/quadruplex homes and apartments slumped by 19.5% (to 206 permits) and 20% (to 1,166 permits), respectively.

“In our view, developer launches will likely remain conservative and tempered in 2026, especially with a lengthened remaining inventory life of nearly seven years in Metro Manila,” Mr. Bondoc said.

On the other hand, approved permits for nonresidential projects slid by 5.5% to 3,052 in May from 3,230 a year ago. The value of these projects reached P17.94 billion, 5.1% lower than P18.91 billion last year.

Approved permits for commercial developments, which account for 63.5% of total nonresidential projects, declined by 11.5% to 1,938 permits.

Permits granted for industrial projects rose by 12% to 317 in May, while those for institutional projects inched up by 2.1% to 573.

“While commercial construction has weakened, growth in industrial and institutional projects shows that investment is shifting toward sectors that are more stable and have long-term demand,” Mr. Bondoc said.

“Developers are now likely to focus more on projects they see as less risky and more essential, such as warehouses, schools, hospitals, and factories.”

PSA data also showed permits for agricultural construction projects surged by 78.4% to 182 in May.

Approved permits for additions, or construction that increases the height or area of an existing building, slid by 4.7% to 543.

Alteration and repair permits also declined by 11.5% annually to 1,073.

Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) accounted for 26.8% of the total permits approved at 4,144.

This was followed by Central Luzon (12.2% share with 1,888 permits) and Ilocos Region (9.1% with 1,408 permits).

“For the second half of 2026, investment in the residential and commercial segments may continue to slow, while industrial and institutional developments are likely to remain active. This trend suggests that future construction activity may expand at a slower pace unless economic conditions improve or financing becomes more attractive,” Mr. Bondoc said.

The PSA said construction statistics are compiled from the copies of original application forms of approved building permits as well as from demolition and fencing permits collected monthly by the agency’s field personnel from the offices of local building officials nationwide.