The Philippine capital markets remained stable through the third quarter of 2025 despite global and regional headwinds. With lower policy rates, resilient REIT performance, and the passage of structural reforms such as the 99-Year Land Lease Law, investors are regaining confidence in the country’s long-term prospects.

Policy Easing and Measured Optimism

The Bangko Sentral ng Pilipinas (BSP) cut policy rates for the third consecutive time this quarter, bringing the benchmark to 5.00% as of August 2025 from 6.50% a year earlier. While the BSP has signaled that rates are appropriate for now, another reduction to 4.75% remains possible before year-end or in early 2026.

Lower borrowing costs have encouraged renewed activity in both lending and investment. Market sentiment has shifted to cautious optimism, with investors monitoring inflation pressures linked to rice imports, power costs, and wage adjustments. Despite these risks, the overall macro environment continues to support a gradual, broad-based recovery.

Accommodation Values and Transactions Stay Steady

Property values in prime development areas—particularly in Makati—have remained largely stable year-to-date. The narrowing gap between buyer and seller expectations has supported a healthier level of transactions and signaled more balanced market participation.

These conditions suggest that investors are willing to re-engage at adjusted price levels, reflecting continued confidence in the long-term fundamentals of Philippine real estate.

REITs Provide Stability Amid a Soft Equities Market

The PSEi remained one of Asia’s most discounted indices, falling 18.20% year-over-year, even as neighboring markets such as Japan, China, and Vietnam posted double-digit gains. In contrast, Philippine REITs offered stability, maintaining their appeal as income-generating, asset-backed instruments.

With the BSP’s dovish policy stance, REIT dividend yields have consistently outperformed bonds, reinforcing their value as defensive investments in a volatile environment. AREIT and RCR recorded their strongest performance since 2022, supported by portfolio diversification and asset injections that improved liquidity and market capitalization.

Within diversified portfolios, REITs have proven to be an anchor of resilience. Year-over-year returns remain positive across most counters, led by RCR (+30.97%), AREIT (+19.47%), and DDMPR (+9.22%). Even those facing valuation headwinds, such as VREIT, were able to offset declines through consistent dividend payouts.

This steady REIT performance underscores the sector’s growing role as a reliable investment class that balances yield, risk, and asset-backed security—a crucial factor at a time when the equities market is still finding its footing.

99-Year Lease Law Paves the Way for Long-Term Investment Growth

The enactment of Republic Act No. 12252, or the 99-Year Land Lease Law, in September 2025 is set to be the cornerstone of the country’s new investment framework. By extending land lease terms to nearly a century, the law enables foreign investors to undertake large-scale projects—particularly in tourism, industrial development, and manufacturing—with greater financing flexibility and long-term security.

The measure allows for more bankable and collateralizable assets, encouraging new capital inflows and higher-value lending. It also creates new opportunities for REIT structures, as foreign firms can now partner with local developers to lease land for income-generating assets that may later be monetized through sale-and-leaseback or REIT listings.

“The 99-year lease law aligns the Philippines’ strong fundamentals—including one of the fastest-growing economies and the youngest workforce in ASEAN—with its capacity to attract long-term foreign capital. It gives investors the clarity and time horizon needed for multi-decade commitments.” — Renzo De Guzman, Manager for Investment Sales at Leechiu Property Consultants

For the Philippines, the law establishes the necessary foundation, but the immediate task for legislators is to align and streamline complementary regulations to truly maximize the sector’s ability to spur national growth. For foreign investors, the next step is to focus on identifying prime local growth opportunities and gaining a deeper understanding of the country’s real estate and investment regulations.

Outlook: Gradual Recovery into 2026

Despite near-term underperformance in equities, the Philippine capital markets remain on a path toward gradual recovery. The combination of easing monetary policy, steady accommodation values, and policy clarity is restoring confidence among both domestic and foreign investors.

With a young workforce, stable macro fundamentals, and an increasingly supportive investment environment, the Philippines is well positioned to sustain long-term growth and attract more institutional capital across multiple asset classes.