SM Prime Holdings Inc. is taking a cautious approach to its residential business, with no new residential developments planned for Metro Manila for the rest of 2026 as it works through existing inventory amid wary market sentiment.
During a media briefing, SM Prime President Jeffrey Lim said the company was adopting a “wait-and-see” stance with regard to residential launches as it assesses market conditions and focuses on selling off existing inventory.
“For residential developments in Metro Manila, definitely there will be no launches yet this year,” he said.
The company had an inventory of around 29,000 residential units as of June 30, SM Prime Chief Finance Officer John Nai Peng Ong said. Of this, only 13 percent is ready for occupancy (RFO), while 87 percent is still under construction.
Ong said the company was prioritizing completion of ongoing developments, noting that RFO units tend to have faster reservation take-up, aside from focusing on reducing its inventory.
“So we’re focusing on selling off those inventories for the time being,” SM Prime Executive Vice President Cris Noel Torres said.
SM Prime’s residential reservation sales stood at around P25 billion in the first half, roughly at the same level as last year. For the second half, Lim said the company was targeting reservation sales of around P30 billion to P35 billion.
Ong noted that buyers had become “rather cautious” and selective in their spending, reducing outlays for discretionary items and focusing more on basic expenditures.
Torres said that SM Prime was working to improve the quality of its reservation sales to ensure a stronger buyer profile and fewer cancellations, noting that their high-down-payment and spot-cash sales have increased significantly year on year.
SM Prime is also focusing on completing residential projects already under construction to help reduce cancellations as units become ready for occupancy.
“When we get these developments into the RFO stage, the buyer is less likely to cancel because the buyer can move in already,” Torres said.
The company welcomed the increase in the Pag-IBIG Fund’s maximum housing loan limit to P10 million from P6 million, but said the higher loan ceiling alone may not be enough to lift current sluggish demand.
“The policy shift of Pag-IBIG is a welcome catalyst for us in the property sector, but higher loan caps address only one part of the equation,” Torres said, but emphasized that affordability, purchasing power and consumer confidence would continue to influence residential take-up.
Meanwhile, SM Prime said it saw no need to sell off non-core assets, citing steady cash flow from its commercial properties, particularly malls and offices, as well as strong collections from its residential business in the first half.
Torres said these cash flows were enough to fund the company’s capital spending and service its debt going forward.
Lim also clarified that the reduction in capital expenditures (capex) was not a deliberate move to manage cash flow or risk amid weakness in the property sector, but was rather due to project execution timing.
He said capital deployment in the previous year had been front-loaded because of construction activities at Basay 360, which were completed in October.
“Following that milestone, our capex should start pulling back,” Lim said.
Despite the cautious outlook for the residential sector, SM Prime expects its recurring businesses to remain resilient in the second half.
Lim said the company was not in the habit of providing earnings guidance but indicated that matching the previous year’s profit remained a target, supported by recurring businesses.
“I think taking aside the residential development, our other businesses, especially the recurring business, I think should continue to do well in the second half,” he said.
Ong explained that the company’s commercial properties benefited from a combination of operational and macroeconomic factors, citing the convenience and locations of its malls, tenant mix, promotions and customer experience as factors supporting performance.
High temperatures also drove consumers toward air-conditioned malls, increasing dwell time and spending on dining and entertainment.
Ong further said a softer peso and volatile fuel prices had encouraged some consumers to keep leisure spending domestic, with families opting for local staycations instead of overseas trips.
Looking ahead, SM Prime said it expected its pipeline of ongoing developments in the retail, hospitality, and meetings, incentives, conferences and exhibitions (MICE) segments to support its recurring businesses through the near term.
Among these developments are SM Horizon Plaza, further phases of SM Megamall, Park Inn by Radisson at SM City Dasmariñas, SMXCITE in Pasay, Balea at Pico Terraces, and North Towers 4 and 5 at SM North EDSA.
The company said these projects formed part of its integrated development strategy as it navigates continued challenges in the residential market.
SM Prime shares on Friday added P0.08, or 0.44 percent, to close at P18.28 each.
