The COVID-19 pandemic has resulted for the real estate sector worldwide, a severe blow to its numbers and returns, although an improvement is estimated.
Especially for the real estate sector in Mexico it has been uphill, motivated by unemployment and the fall in real estate operations. A 13.6% drop in housing construction was reported in the first half of 2020. This decrease in demand is due to job losses, the economic debacle and job instability.
Panorama of the real estate sector 2021
It is estimated that the incentives to the economy, together with the arrival of a vaccine against COVID-19, will revitalize the real estate sector for 2022. A stabilization of the construction sector that boosts real estate growth in Mexico is very feasible, if these incentives they are maintained with a sustained policy.
A promising real estate demand is expected, due to the fact that the number of inhabited houses increased by almost 200% from 1990 to 2015. At the same time, the average number of inhabitants per house decreased, which exhibited 4.7 to 3.7 in that period, this it would increase the demand for real estate.
It has been decided, to economically recover the sector:
- Lower interest rates to 4.25%, from 7.5% in November 2020;
- The delivery in cash, by the Federal Executive, of the mortgage loans, with the idea of giving a second wind to the Mexican real estate sector.
The objective of these initiatives is that both employees, investors and beneficiaries feel motivated to continue with their real estate negotiations. This would significantly boost the real estate market and cause a revival, which is much needed.
Prospects for the real estate sector in Mexico 2022
Undoubtedly, 2020 marked a before and after in the way we do things, from buying a good, to hearing classes and saying hello. In this sense, a contraction in the economy of up to 12.8% is expected in 2021, and a recovery of 4.6% of the Gross Domestic Product.
Even so, real estate growth in Mexico continued its course, if we take into account that buying a property is a matter of first necessity. The rental properties sector remained active, interest rates did not rise, and there are plans to revive the real estate market .
The segment that saw the most activity, in the real estate sector, was that of medium and low-income housing, which accounted for 44% of the market. We refer to homes that do not cost more than 3 million pesos, followed by the residential sector with an index of 31%.
What is expected in this market
The real estate market in Mexico has a great investment appeal, being a solid base with which to compensate for possible losses. Not in vain the real estate market has a weight of 11.1% of the Mexican GDP.
According to analysis of the real estate market and some specialists, it is estimated to place around 8 billion pesos in this segment in 2021, only in loans. At the same time, 6.17 billion pesos in deposits are foreseen, which envisions an environment of good movement for this year.
The recuperation
Analysts in this sector in Mexico estimate that the current real estate market situation will reverse by 2022 or 2023. The hardest thing has been the 10% contraction of Mexico’s GDP in 2020, the highest in the last 30 years.
During the second half of 2020, the limited opening of hotels and recreation sites was appreciated, which gave a second wind to the real estate sector. Even so, the sale of properties did not reach the rates achieved in 2018.
An interesting fact is that during the pandemic there was a migration towards the search for second homes. This movement gave a good boost to the real estate sector in places like Puerto Vallarta, Los Cabos and Acapulco.
The challenges
The current real estate market situation in Mexico is going through a phase that worsened in 2020, as a result of the pandemic. Added to the fact that there is no infrastructure plan at the national level that defines a clear course.
Lack of planning does not stimulate investment and does not help the real estate sector to reactivate, even if financing costs are low. However, slight growth is expected, as a result of the Mexico-United States-Canada Agreement (T-MEC) that promotes demand in the subsectors linked to the construction segment.
Another opportunity for reactivation is given by the drop in the price of inputs, caused by job cuts in the sector. The consequence of this is the stoppage in building projects, keeping property prices up.
Formal jobs, which determine the demand for financing in the real estate sector, would recover within two years. The current pandemic has affected many economic sectors in Mexico and the world. However, by 2022 the figures are expected to reverse and the figures and options of the real estate sector improve.