MANILA, Philippines – The Philippine real estate industry, already battered by a series of crises since 2019, is confronting renewed pressure from escalating tensions in the Middle East, according to a recent report from Leechiu Property Consultants (LPC).
In its first-quarter 2026 analysis, LPC warned that the conflict involving Iran poses a "fundamentally different" challenge, directly threatening oil supplies, inflation rates, overseas remittances, and expectations for future interest rates. This development jeopardizes the recent period of monetary easing and could stall the nation's fragile economic recovery.
"The window to secure cheaper financing may soon close as rate hikes return to the table," the consultancy noted, highlighting the risk that rising fuel prices could force the Bangko Sentral ng Pilipinas to reverse its policy course after cutting rates by 225 basis points since 2024.
The property sector has endured six consecutive crises, which have significantly depressed the broader economy and investor confidence. Reflecting this strain, the Philippine Stock Exchange Index has fallen 23 percent from its 2019 peak, while the property sub-index has plummeted by 45 percent over the same period. Real estate price growth nearly stalled in 2025 as economic expansion slowed to 4.4 percent.
Despite these headwinds, early signs of a rebound are emerging. Office demand surged 70 percent year-on-year in the first quarter of 2026, and residential demand increased by 19 percent. However, the market continues to grapple with high vacancy rates—17.8 percent for offices—and a substantial oversupply, with unsold condominium inventory equivalent to 31 months of sales.
Current borrowing costs of 7 to 8 percent remain above typical rental yields, creating a challenging environment for leveraged investors and slowing new capital investment. In this climate, LPC identifies industrial and retail assets as the most resilient investment opportunities, offering yields of 7 to 8 percent alongside more stable income streams.
For institutional investors, the firm recommends prioritizing logistics and industrial properties, while viewing retail assets as a defensive strategy supported by domestic consumption. Individual investors are advised to focus on prime central business districts like Bonifacio Global City, Makati, and Ortigas, where recovery appears more advanced.
LPC urged all market participants to secure financing at current policy rates before potential inflation spikes trigger tighter monetary conditions. While near-term risks are elevated, the report suggests that strategic, selective investment can still navigate the ongoing turbulence.