Construction slump highlights fragile investment cycle
From AB Capital's The Opening Bell: Three Moves
Event
Approved building permits fell 12.7% YoY in Nov-25, with project values down 22.6% and floor area shrinking nearly 29%. Both resi and non-resi segments contracted, and rising construction costs (up 7% YoY) suggest cost pressures remain despite soft demand.
View
Private construction remains one of the slowest recovering components of fixed capital formation and data shows no near-term inflection. Higher average costs per sqm imply margin pressure for developers and dampens new project launches in 1H26.
Catalyst
A meaningful rebound likely requires faster public disbursements and stronger confidence after governance issues stabilize. In our view, a 50bps BSP cut by mid-2026 could ease financing costs, but sensitivity shows every 1% increase in construction costs cuts developer margins by 20-30 bps.
Action
The weak permit cycle keeps us cautious on developers heavily reliant on new resi launches. We lean toward developers with stable mall/office rentals, while using any fiscal-driven construction rebound as a tactical opportunity to rotate into higher-beta property names. ALI (O/P, TP P33.6) is our top pick in the space.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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