Homes become 15% more expensive due to inflationary ‘perfect storm’

(Photo: Pixabay)

MEXICO, (December 22, 2021).- The global impact on the supply chain by the pandemic, as well as the inflationary effect on the Mexican economy have created ‘a perfect storm’ for the construction industry, mainly in the housing sector, whose effects have caused an increase in the price of up to 15 percent in cost increases in materials such as steel and cement.

Rodrigo Suárez, co-founder and COO of the institutional rental housing developer Hasta Capital, pointed out that these types of homes have risen in price due to higher construction costs.

“If there is general inflation, there is usually also inflation in rent, you can capture inflation in rent, so if construction costs go up, rents also go up, which helps us mitigate costs. Compared with levels prior to the pandemic, the direct cost of work probably increased by 15 percent, so it is significant, ” he said in an interview.

At the national level, the rise in construction costs was reflected in an increase in the final price of the house of 7.6 percent during the first nine months of 2021 against the same period of the previous year, however, homeowners such as Vinte, Cadu, Ara and Javer reported an average increase of 10 percent in the first nine months of the year.

“Unfortunately, with this inflation, affordable housing can hardly be done because we hear that inflation this year will even exceed 7 percent, but speaking of construction materials, the increase in inflation is going to be as high as 7 percent around 18 percent and it continues to grow ”, warned Ahumada Russek, CEO of Consorcio Ara.

Perfect storm for 2022

For his part, Ricardo Trejo Nava, general director of the consulting firm Forecastim, pointed out that, despite the fact that the industry had been recovering marginally, the brake that has put the issue of containers and the logistical crisis of the pandemic, in addition to the lack of domestic components in the materials industry, complicates the scenario for home construction in the country next year.

He added that similar to what happened in 2017 when energy prices were released, the inflationary impact reached up to 15 percent, while this time the rise is related to inputs such as steel with price growth of up to 40 percent.

“Inflation in construction is on the order of 16 and a fraction, almost 17 percent, mainly driven by increases in metals, mainly steel and what we, unfortunately, expect for next year is that we have another rise in steel,” commented Francisco Solares Alemán, national president of the CMIC.

He added that the shortage of steel due to lower production in China and also the lack of semiconductors for construction machinery threatens to extend the recovery further, a situation that could extend even beyond the second half of the coming year.

“Housing prices are going to increase towards the end of this year, it is already happening and in the first half of next year, it is all the housing that was under construction and that in the final prices will have a significant rebound compared to what was in inventory, which had already been built before material costs rose ”, concluded Eduardo Torres, general director of the ai360 consulting firm.

Source: El Financiero



Comments

comments