SINGAPORE: Property developers in parts of Southeast Asia are taking steps to strengthen their balance sheets as higher mortgage rates and weaker purchasing power weigh on residential demand, according to S&P Global Ratings.
In a report, the rating agency said residential demand in Indonesia, Vietnam and the Philippines would face pressure, with developers that have a higher proportion of recurring lease income better placed to weather weaker demand.
S&P said developers in Indonesia and the Philippines are cutting capital expenditure and seeking to increase recurring income amid weaker consumer sentiment.
While property sales in Vietnam are recovering, refinancing and liquidity risks continue to weigh on developers' creditworthiness, it said.
S&P Global Ratings credit analyst Fiona Chen said policy support could provide some cushion, including the ongoing value-added tax exemption for certain housing segments in Indonesia and clearer policies on project approvals in Vietnam.
"Policy support should provide some cushion amid these challenges. These include the ongoing value-added tax exemption for certain housing segments in Indonesia, as well as clearer policies on project approvals in Vietnam," she said.
Singapore's commercial property market, meanwhile, is expected to remain relatively resilient.
S&P said limited new commercial property supply should support occupancy and rental rates in 2027.
“Tight office and retail supply will aid rental growth for landlords, even amid macroeconomic uncertainties,” S&P Global Ratings credit analyst Chi Yang Leong said.
He said higher tourism receipts were also supporting demand in the higher-end hospitality segment.
However, S&P flagged an expected increase in supply in 2028 as a potential risk, saying it could influence tenants' re-leasing decisions during 2027, particularly in the office market.
