By Beatriz Marie D. Cruz, Reporter
A WIDENING corruption scandal involving Philippine government officials and public works contractors threatens to cool demand for luxury real estate projects, according to property analysts.
“Heightened scrutiny of public officials and politically exposed persons (PEPs) — particularly if investigations lead to asset seizures or wealth tracing, can initially cool demand in the luxury segment, especially in areas known for trophy assets like Makati, Bonifacio Global City, or upscale resort destinations,” Joe Curran, chief executive officer (CEO) at KMC Savills, said in an e-mail to BusinessWorld.
In the short term, this may result in price stagnation and a slower turnover of ultra-luxury properties, which typically range over P100 million, he said.
Some government officials and public works contractors have been embroiled in an investigation
A corruption probe into anomalous flood control projects has embroiled government officials, including senators, congressmen and the Public Works department, as well as government contractors. They face allegations of pocketing billions of pesos meant for flood mitigation projects.
The scandal has intensified following the circulation of social media posts featuring relatives of public officials and contractors who displayed their luxury homes, private jets and shopping trips, prompting widespread public criticism online.
Joey Roi H. Bondoc, director and head of research at Colliers Philippines, said there have been talk that some property developments are reporting weaker take-up since the corruption investigation began in August.
“What we have been hearing is that some of these developers that are catering to the luxury market have recorded slower sales since this flood control issue came out,” Mr. Bondoc said via telephone.
“Anecdotally, that’s what I can share — the upscale luxury developers are feeling the pinch of these investigations and have admitted that they have recorded slower sales since this issue came out,” he added.
If corruption-fueled transactions in luxury real estate become more publicized, individuals with questionable sources of income will like delay their acquisitions, Mr. Curran said.
Others may secretly liquidate their assets or redirect investments offshore, he added.
Mr. Curran also noted that many luxury brands operating in the Philippines, whether via flagship stores or retail pods in integrated resorts, are “sensitive to wealth sentiment, not just raw spending power.”
“This could affect tenant mix, marketing strategies, and the velocity of leasing in high-end commercial and mixed-use developments,” he said.
According to Mr. Curran, some luxury real estate transactions in emerging markets have historically been vehicles for wealth storage or laundering.
“If corruption probes lead to a greater public awareness of ill-gotten wealth, a cultural shift toward ‘clean money’ consumption or stricter capital flows enforcement — then the tone of luxury branding may evolve. Expect more emphasis on lifestyle, craftsmanship, legacy brands, and less on overt extravagance or display,” Mr. Curran said.
The government must also push for reforms and implement anti-money laundering and counter-terrorism financing protocols to improver confidence, he added.
The corruption crackdown should also lead to improved rule of law, which can only enhance the Philippines’ investment appeal, he added.
Developers, brokers, and investors should also follow environmental, social, and governance principles, and target high-net-worth buyers who value integrity than prestige, Mr. Curran said.
“In summary, while corruption investigations may temporarily cause unease in niche parts of the luxury real estate market, they are ultimately healthy for long-term transparency and market maturity,” he said.
SUBSTANDARD PROJECTSMeanwhile, substandard government infrastructure projects may dampen the value of property developments in nearby areas, according to a developer.
“This will generally slow down the speed of value appreciation of property developments in or near areas in dire need of infrastructure projects. These [infrastructure projects] are required to improve vehicle and pedestrian accessibility, and protection against the ever-increasing uncertainty of weather-related events,” Havitas Properties President and CEO Jonathan F. Caro said in an e-mail.
“The resulting floods are an offshoot of the result of substandard public infrastructure projects leading to flooded streets — we are seeing just now especially on social media why it is happening in the first place.”
Corruption linked to flood control projects may have cost the Philippines over P118 billion in economic losses since 2023, the Department of Finance said earlier.