On the last day of his term, former President Enrique Peña Nieto signed the new Free Trade Agreement, now called USMCA (or T-MEC in Spanish), with his counterparts in Canada, Justin Trudeau, and Donald Trump, of the United States. For foreign investors, uncertainty was cleared. After five months of having started to develop concrete actions that determine the new course of the new Government’s policy, the protest took place as President to Andrés Manuel López Obrador. For the real estate investors, the political aspect was also clarified.
There are many factors to consider in order to know what will happen to the real estate sector. The first is interest rates, for which incidentally, the Bank of Mexico announced two weeks before the sexennial change, an increase of 25 basis points of the benchmark interest rate to reach eight percent per year, which represents the highest level in the last 10 years. We know that the automotive sector and the housing sector, which are the engines of the economy, have a high elasticity in the demand for the increase in rates, which is why we have seen setbacks in the last two years.
By generational issue it is clear that there will be important changes since the new holders of the policy in real estate matters particularly in the housing sector are very young. The new Secretary of Agrarian, Territorial and Urban Development, the so-called SEDATU, is the Architect Román Meyer Falcón, 35 years old, and for the new Infonavit Director is Carlos Martinez Velázquez, 33 years old.
Therefore, we should expect that the policy will focus on solving the needs of housing space for their peers, which according to INEGI data, 34 percent of the total population corresponds to the segment known as “Millennials”, that is, more than 40 million Mexicans. Only a quarter of the “Millennials” seek to buy a home so the majority choose to rent where to live. It is therefore to be expected that the new housing policy in the country seeks to promote mechanisms for the housing developers to offer spaces for rent to this large segment of the population.
There are two regions that we must pay close attention:
First, the region all along the 3,180 kilometers of the entire northern border strip with the United States, where the largest Free Zone in the world will be created, with a width of 25 kilometers.
The incentives are enormous in this area, since VAT (IVA), as of January 1st next year will be half, that is, eight percent. And the ISR will go down from the rate of 38 to 20 percent, also the Minimum Wages will double.
Second, the southeast region with the Maya Train project, tourism development will be promoted in the states of Yucatan, Chiapas, Campeche, Quintana Roo and Tabasco. And with the Transismic Corridor between Coatzacoalcos and Salina Cruz, as well as with the Special Economic Zones, important incentives for economic development and investments will be developed.
Jorge Paredes Guerra is an expert in the real estate sector in Mexico. He is president of the leading real estate firm in the country, Realty World Mexico, and chaired the International Federation of Real Estate Professions (FIABCI) in 2014, 2015 and 2016. Mexico Chapter.
TYT Newsroom with information from elfinanciero.com.mx