Geopolitical tensions to recalibrate property market behavior

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MANILA, Philippines — While the ongoing conflict in the Middle East may contribute to a more cautious and cost-sensitive real estate environment, experts say the geopolitical tensions will likely recalibrate market behavior rather than fundamentally alter the sector’s trajectory.

“For a net oil importing economy like the Philippines, this introduces renewed inflationary pressure particularly through higher transport, construction and utility costs,” Savills Philippines CEO Joe Curran said in an email when asked about the impact of the ongoing conflict on the Philippine property market.

“While these dynamics do not immediately disrupt real estate activity they do contribute to a more cautious and cost sensitive operating environment for both developers and occupiers. The longer the conflict persists, the more pronounced these sensitivities will become,” he added.

Cushman and Wakefield Philippines director and head of research, consulting and advisory services Claro Cordero Jr. expressed similar sentiments noting that the recent geopolitical developments in the Middle East, particularly concerning energy transit routes, have introduced new inflationary pressures globally.

“While this may influence local construction and operational costs, the Philippine real estate sector’s strong fundamentals provide a substantial buffer for long-term investments,” Cordero said.

“The impact of the disruption will depend on how soon the conflict is resolved,” he added.

Residential demand to feel pressure

Curran noted that from a sectoral perspective, the impact is expected to be uneven, emphasizing that for the residential market, demand may experience some pressure.

“Residential demand may experience some pressure at the margin, particularly among end users navigating rising living expenses alongside mortgage obligations. The Philippines also has a large diaspora across the Middle East, many working in a decimated hospitality industry and many with residential investments in the Philippines subject to monthly loan repayments. A protracted conflict could add additional pressure to an already hurting mid-end residential segment,” Curran said.

Asked for the impact of the conflict on investor and buyer sentiment, Curran said the more probable outcome is increased selectivity rather than a broad pullback.

“Periods of geopolitical uncertainty typically encourage a more disciplined approach to capital deployment, with greater focus on asset quality, income stability and long term value preservation. Some end users may adopt a wait and see stance, particularly if elevated fuel and inflation levels persist,” Curran said.

‘”Additionally, it is important to consider the Philippines’ exposure to the Middle East through overseas remittances, which remain a key pillar of housing demand in certain segments. Any prolonged disruption could have secondary implications for residential absorption,” he added.

Colliers Philippines director for research Joey Roi Bondoc explained that the impact of the conflict on residential demand is primarily due to the effect on remittances.

“The most immediate impact would be on the residential demand because if you look at remittances, the share of Middle East, say, the top four countries, UAE, Saudi Arabia, Qatar and Kuwait, that’s 18 percent of the total remittances. So that is quite significant,” Bondoc said.

Bondoc, however, emphasized that aside from the Middle East crisis, high mortgage rates still have a bigger impact on the residential demand.

“But I think right now, another key issue, a challenge for potential buyers is increasing mortgage rates. That’s why the developers right now, they provide a lot of financing options. And given the Middle East crisis, I think one key measure from developers is to offer these promos mostly, RFO (ready for occupancy) promos aggressively to bridge that gap,” Bondoc said in a phone interview.

Efficiency and resilience

In the office sector, Curran said a continued shift toward location efficiency is anticipated, with occupiers placing greater emphasis on accessibility and proximity to labor pools.

“Some companies have already resorted to a hybrid setup or offering fuel subsidies to help the workforce through this difficult period,” he added.

Cordero echoed Curran’s sentiments, noting that specific property asset classes within the Philippines are expected to demonstrate remarkable resilience.

“For instance, the Israel-Iran conflict may drive higher operational costs and tighter client budgets for outsourcing, but it could also boost demand for cost-effective solutions, positioning the Philippine IT-BPM sector as a preferred outsourcing destination,” Cordero said.

“High-end residential properties will continue to serve as a reliable hedge against inflation, while the demand for prime logistics and industrial spaces is expected to grow, driven by the need for efficient supply chains and warehousing amidst potential global trade disruptions,” he added.

Bondoc acknowledged some impact of the conflict on the logistics sector, particularly due to the higher price of oil.

“It will be more expensive for the third party logistics providers. And then there will now be a demand for micro warehouses, meaning they are nearer Metro Manila, because the transportation will be easier,” Bondoc said, citing supplies to be delivered to malls and supermarkets, as an example.

“I think it might result in growing demand for micro warehouses that are near Metro Manila, so it will be faster and lower fuel costs for suppliers,” he added.

At the household level, Curran said sustained increases in fuel costs are likely to reinforce a structural shift toward proximity- driven housing decisions.

“As commuting becomes more expensive, demand tends to gravitate toward developments located near CBD’s, transport hubs and centers of employment. This may support rental demand, including flexible living arrangements such as dormitory style or short stay accommodations during the workweek. Over time, this dynamic further strengthens the case for transit oriented developments, particularly within Metro Manila,” Curran explained.

Crisis to recalibrate market behavior

While the current geopolitical environment introduces near term uncertainties, Curran said that it is more likely to recalibrate market behavior rather than fundamentally alter the trajectory of the Philippine property sector.

“The market remains underpinned by structural demand drivers, but stakeholders will need to navigate a more cost conscious and selective landscape in the months ahead,” he said.

For his part, Cushman and Wakefield Philippines country head Dom Frederick Andaya emphasized that headwinds do not erase opportunity, but rather reveal it.

“In a dynamic global environment, the Philippine real estate market continues to surface strategic pockets of growth that are set to stand out in 2026 for investors and developers with a disciplined, long term view,” Andaya said.

Moreover, Cordero said the completion of landmark infrastructure projects, such as the Metro Manila Subway and North-South Commuter Railway, will ensure that emerging growth hubs in the Philippines remain highly attractive for capital deployment, effectively counterbalancing temporary geopolitical headwinds.

“In the medium term, as stability returns, constrained supply pipelines are likely to spur a revival in development activity, creating renewed opportunities across key asset classes.” Cordero said.