The Real Estate Opportunity in Mexico
Construction is one of the most dynamic industries in Mexico. One in five jobs are generated in the construction sector.
One of the most important subsectors is real estate. The rise of this is not only due to the importance of real estate developments in any economy, but to different factors that make the sector have a high dynamism in our country and that the need for capital grows every day; the most important are:
enter image description here
- Mexico has a young population that is growing. Mexico is one of the OECD countries with the youngest population. 54% of the population in Mexico is under 30 years old. Given that it is after 30 years the age in which most people acquire a home, Mexico will have a significant increase in demand not only in the following years but in the following decades.
enter image description here
- The housing deficit in Mexico. Along with population growth, the current housing deficit will require around 8 million homes in our country in the next ten to fifteen years. That is equivalent to an annual average of between 500 and 800 thousand homes, which will generate a huge need for capital. And this does not include investment in renovations!
- Growth of the middle class. Today, the middle class in Mexico is made up of 60 million people. Mexico has added 17 percentage points of its population to the middle class in the 21st century, according to data from the World Bank. This percentage grows year by year! This allows families to aspire to more dignified housing and more services, which further increases the demand for residential and commercial developments.
- Healthy mortgage market. Only Infonavit and Fovissste, the two government bodies that offer housing loans, will offer more than 619 thousand mortgage loans in 2015, both for home improvement and for the acquisition of new homes. Additionally, the mortgage credit granted by commercial banks, such as Banamex and Bancomer, thanks to the country’s healthy public finances, has grown exponentially since 2004.
- Low interest rates. Interest rates on mortgage loans in Mexico have fallen during the last 10 years (from 14.2% in 2004 to 10.6% in 2015, on average), as a result of the decrease in the benchmark rate of Banco de México, but also of lower spreads with the risk-free rate, a sign of a better health of the financial system in Mexico.
enter image description here
- Economic growth. In recent years, Mexico has become one of the most competitive industrial centers in the world, which has resulted in the exponential growth of industries such as automotive and aerospace, among others. The expansion of these sectors translates into greater employment and greater purchasing power for families, which in turn translates into greater demand for new services and businesses, reflected in greater dynamism in the commercial real estate sector.
In conclusion, the Real Estate market in Mexico today has an encouraging outlook. Knowing how to choose well where to invest, we believe that investing in real estate will generate attractive returns not only in the coming years but in the coming decades.