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

By Juliana Chloe A. Gonzales

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 told BusinessWorld in a video call.

“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 via Viber.

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.