Construction pipeline softens as building permits decline in April

From AB Capital's The Opening Bell: Three Moves

Event

Approved building permits fell 6.8% YoY in April to 13,677, reversing March's 16.9% growth. Residential permits declined 10.5%, while total floor area fell 24.8%. Project value still rose 11.3% to P47.4 billion, suggesting fewer but higher-cost projects.

View

In our view, the data points to a cautious construction pipeline as developers manage high borrowing costs, sticky building material prices, and softer residential demand. The sharper decline in floor area suggests project starts may remain selective, especially in housing and smaller developments.

Catalyst

Key sensitivities are interest rates, construction material inflation, infrastructure spending, and the pace of Middle East-related cost normalization. If financing costs ease and public works accelerate in 2H, approvals could recover. If rates and input costs stay high, residential weakness may persist.

Action

We think the read-through is mildly negative for property and construction names, especially those exposed to residential launches and cost-sensitive projects. Favor developers with strong balance sheets, pre-sold inventory, and recurring income buffers.

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.