Philippine property holds steady amid Middle East conflict
(First of two parts)
The Metro Manila residential condominium market entered 2026 with cautious optimism.
Early signs in Q1 2026 showed improving demand conditions, declining inventory life, and a resurgence in the affordable and economic segments. However, the outlook shifted rapidly as geopolitical tensions in the
Middle East, rising oil prices, elevated interest rates, and inflationary pressures began to weigh on buyer sentiment and developer activity.
And so while the market was off to a good start, optimism has become more cautious amid the Iran conflict and the ensuing rise in fuel prices.
The market itself is not in crisis, but it is clearly at an inflection point—requiring recalibrated strategies from developers, investors, lenders, and policymakers. For the latter, it’s high time to consider some form of intervention to spruce up demand despite current market challenges.
Supply: Completions normalize below historical peaks
Residential completion in Metro Manila continues to normalize and remain below the levels seen prior to the entry of Philippine offshore gaming operators (Pogos), signaling restrained developer risk appetite.
Over the next several years (2026 to 2029), annual completions are projected to average 6,200 units, lower than the 13,600 units of annual average during the peak Pogo period from 2017 to 2019, and 8,300 units from 2013 to 2016, confirming a structurally tighter supply pipeline.
Vacancy: A mixed bag across submarkets
Overall residential vacancy in Metro Manila stood at 24.7 percent as of end Q1 2026, with projections reaching 25.6 percent by yearend.
Vacancies in the Bay Area remain structurally elevated at 58 percent, driven by heavy supply additions and weak demand following the Pogo ban and pandemic disruptions. Markets with tighter future supply such as the Makati central business district (CBD), Ortigas Center, and Rockwell Center Makati are expected to normalize more quickly toward pre-pandemic vacancy levels.
Economic and affordable dominate demand
Pre-selling condominium demand in Metro Manila rebounded sharply at the start of the year.
Net take-up in Q1 2026 surged 765 percent year-on-year. On an annualized basis, 2026 take-up is projected to reach 8,000 units, well below the 22,000 units seen during the global financial crisis in 2009. This suggests that a slowdown could persist if macro headwinds, including the Middle East Crisis, intensify.
Demand in Q1 2026 was heavily driven by the economic and affordable segments (P1.8 million to P3.6 million), accounting for 74 percent of total net take-up. This shift raises a key question: Is demand recovery organic or driven by short-term affordability rather than income growth?
Lowest inventory life in 18 months
Encouragingly, remaining inventory life (RIL) improved.
Colliers data showed that as of end Q1 2026, it will take 6.8 years or 81 months to sell all condominium units in Metro Manila, down from the peak of 13.4 years recorded in Q2 2025.
This marks the lowest inventory life in 18 months, pointing to better alignment between supply and demand. The lower mid-income segment still dominates unsold ready-for- occupancy (RFO) inventory, accounting for the largest share of remaining stock.
External pressures: The Middle East crisis
Heightened geopolitical risk introduces multiple downside risks. These include rising oil prices pushing inflation higher; elevated construction material costs potentially delaying project timelines; persistently high mortgage rates constraining take-up; and remittances from the Middle East facing both upside and downside risks depending on conflict duration.
Banks are also expected to adopt more conservative lending standards, tightening credit availability.
Cautious, not crisis
The Metro Manila residential market in Q1 2026 is resilient but fragile. Fundamentals such as urban demand, demographic growth, and long-term housing needs remain intact.
However, geopolitical tensions, affordability challenges, and high interest rates will likely keep recovery uneven and segment-specific. Near-term strategy will matter more than ever—favoring affordable segments, disciplined supply releases, innovative financing, and closer alignment with government housing programs.
(To be continued)
