Inflation, infrastructure freeze seen to hamper property development

MANILA, Philippines — Rising living costs, a sharp drop in public works spending, and slowing economic growth continue to drag on property development.

This was the warning issued by Senate President Sherwin Gatchalian, as fresh Senate hearings and budget deliberations bring the full weight of the downturn into focus.

In an address at the Manila Overseas Press Club, Gatchalian reported that gross domestic product growth slowed to 2.3% in the second quarter, down sharply from 5.4% a year earlier, marking the nation's weakest growth period since 2017 outside the pandemic. The downturn prompted major rating agencies and multilateral lenders, including S&P Global Ratings and the Asian Development Bank, to slash their full-year forecasts to under 3.5%.

A primary driver behind the market strain is a 32% collapse in public works construction during the second quarter, triggered by spending freezes and project delays following corruption investigations into public flood control programs. 

In recent Senate hearings, Gatchalian presented updated macroeconomic estimates indicating that these corruption-related disruptions and opportunity costs have drained roughly P2.75 trillion from the national economy since mid-2025. The abrupt halt in regional civil works has frozen land development momentum and stalled planned commercial buildouts along major growth corridors.

Simultaneously, household purchasing power is being severely eroded by elevated inflation, which reached 6.1% in August following energy price shocks caused by the Middle East conflict. At local pumps, diesel prices soared to a peak of P153.70 per liter while gasoline reached P96.50 per liter.

The mounting cost of basic goods and transport pushed real household consumption growth down to 2.8%, making families increasingly hesitant to take on long-term financial commitments like home mortgages.

The macroeconomic friction outlined by the Senate president aligns with broader industry data indicating a deepening slump in real estate. Bangko Sentral ng Pilipinas figures show that residential property price growth nationwide decelerated to a near-flat 0.4% in the second quarter, the weakest expansion since tracking began in 2019. Home values in areas outside Metro Manila contracted by 2.7% as high construction input costs and cautious buyer demand left developers grappling with growing unsold inventory. Major real estate firms have responded by freezing new project launches and shifting focus toward moving existing inventory.

The fallout from the infrastructure freeze has directly spilled over into current legislative budget reviews. Senate budget scrutiny led by Gatchalian flagged over 7,000 proposed public works projects due to incomplete site documentation, while the proposed flood control allocation for the upcoming national budget was slashed to P107.4 billion, its lowest relative level since 2019.

To stimulate economic recovery, Gatchalian urged the fast-tracking of priority legislative measures, including the Masterplan for Infrastructure and National Development (MIND) Bill, a proposed 30-year roadmap to restore infrastructure predictability and targeted tax relief initiatives, such as the proposed "Ginhawa Bill," aimed at rebuilding disposable household income. (Contributed story)