Home Business-new Housing prices in Mexico are skyrocketing

Housing prices in Mexico are skyrocketing

by Yucatan Times
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Last year, the average home price increased 12% nationally. However, in cities like Tijuana, the figure increased by 14%, in Querétaro 13.6%, in Guadalajara 11.5%, in Monterrey 11.3%, in CDMX 9.6%, in León 9.2%, in Puebla-Tlaxcala 7% and in Toluca 7%, according to data from Sociedad Hipotecaria Federal.

“We are not facing a bubble, but what is true is that prices have become unjustifiably high,” warned the specialist.

“What some call ‘bubble’ can be described as a phenomenon of rising prices where the price of real estate is not supported by reality because developers are building for the investor,” he noted.

“There is so much money to invest in real estate that (developers) declare a success when their building sells out in six months, but who did they sell it to? To investors who are not going to live in those units,” said Fierro.

“This is why in some cities you see new buildings completely sold but uninhabited,” he added.

The consultant explained in an interview that the increase in real estate prices also affects investors, since they buy expensive properties and then the buyer is not willing to pay such a high price to live in those homes.

“A disparity is beginning to create and this is what we are seeing in markets like Mexico City, Guadalajara, or Tijuana where the investment returns or the capitalization that a rental property gives you is below 3%, not even inflation”, commented the real estate expert.

“You buy an apartment for five million that should be rented for 25 thousand pesos, but the reality is that an apartment in Guadalajara for five million is rented for 18 or 15 thousand pesos, so the profitability that they were promised is not happening,” he detailed.

Raúl Fierro added that this escalation of prices in the real estate sector is different from what happened in the United States in 2007 and 2008, where faced with very low interest rates, people requested mortgage loans and gave them to practically anyone, although not had the financial solvency to pay them.

“All those people were buying properties, demand increased, supply became more expensive and this inflated prices to an unsustainable degree because those people who bought did not have the money to pay their loans and that was what generated the real estate bubble in the United States. That is not happening in Mexico because interest rates here are very high,” he indicated.

Fierro believes that real estate prices are beginning to stabilize because buyers are becoming more informed and are not willing to pay such high prices. “This is already happening in Guadalajara where 30% of the developments sell their last unit cheaper than the first, that is, prices, far from increasing as the pre-sale progresses, are decreasing or the last units are being wasted. This to me is a sign that prices are taking their natural place.”

TYT Newsroom

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