PHL residential property recovery may take until late 2027 — S&P

A MEANINGFUL recovery in the Philippine residential property market may not emerge until the latter part of 2027, as elevated condominium inventories, inflation, and high borrowing costs continue to weigh on homebuyers, according to S&P Global Ratings. S&P Global Ratings Analyst for Corporate and Infrastructure Ratings Johann Tan said the property sector is expected to face continued pressure this year and next, with residential sales unlikely to recover significantly in the near term. “They will take some time to go away, and overall, it remains quite a weak outlook with meaningful improvement in the residential segment, only expected in the later part of 2027, where hopefully these macro headwinds die down,” he said during a webinar on Thursday. He said inflation, elevated borrowing costs, and other economic pressures have weakened residential demand, with developers reporting lower pre-sales in the first half of the year. S&P said residential pre-sales among four major Philippine developers — Ayala Land, Inc., SM Prime Holdings, Inc., Robinsons Land Corp., and Megaworld Corp. — declined by 7% year on year in the first half of 2026. The ratings agency said condominium inventories remained elevated at approximately 80,000 units, including nearly 30,000 ready-for-occupancy units, particularly in Metro Manila. Developers are responding by reducing new project launches, postponing developments, and prioritizing the sale of existing condominium inventories, according to S&P. Mr. Tan said developers may offer discounts, promotional packages, and more flexible payment terms to reduce their unsold ready-for-occupancy units and free up capital tied up in these properties. S&P also expects developers to continue focusing on more affordable residential projects and areas outside Metro Manila, where supply and demand conditions are generally more balanced. Mr. Tan said the core and affordable housing segments would likely account for the bulk of developers’ residential sales and pre-sales, while luxury developments would remain a smaller part of their portfolios. Meanwhile, the weaker residential outlook and tighter financing conditions have prompted major developers to reduce their capital expenditure budgets. S&P said the combined budgeted capital expenditure of Ayala Land, SM Prime, Robinsons Land, and Megaworld for 2026 was approximately P40 billion lower than in 2025. The ratings agency said developers were delaying project launches and reducing discretionary spending to preserve liquidity and maintain financial flexibility. At the same time, developers are expected to allocate a greater proportion of their spending to properties that generate recurring rental income, such as shopping malls and office buildings. S&P said these properties could help provide more stable earnings and cash flow while residential sales remain weak. Developers with affiliated real estate investment trust (REIT) platforms, including Ayala Land, Robinsons Land, and Megaworld, also have options to raise funds through property transfers and the sale of REIT shares. Mr. Tan said these financing arrangements could provide additional liquidity for refinancing and other funding requirements. S&P expects developers to continue adjusting their spending and project launches while waiting for residential market conditions to improve. — J.C.A. Gonzales