The Mexican real estate market is on an upward trend, fueled by greater liquidity among lenders, higher per capita income and a larger flow of U.S. dollars into vacation and retirement houses. Over the last decade, the Mexican government has reformed its real-estate regulations, including changes in property and title law. As a result, both residential housing and industrial buildings are going up rapidly, creating a stronger demand for architectural paint and coatings, as well as for related building materials, like plaster board, produced by Comex, the country's largest paint manufacturer.
There are over 700 homebuilders in Mexico, among which most are publicly traded in Mexico and Comex is listed on the New York Stock exchange. Foreign investment in these companies is on the rise, particularly by U.S. and Spanish companies, the analyst notes.
Housing construction in Mexico is expected to include more than 1.5 million units per year through the medium term, according to analysts at Bancomer, a major mortgage lender. Government estimates indicate that the country has a shortage of as many as seven million housing units, with the current total stock of houses at 25.5 million, for a population of 106 million.
Mexican Finance Secretary Agustin Carstens has set out a goal to improve Mexicans' living conditions through programs that include facilitating six million housing loans during the six-year presidential term of Felipe Calderon. Indeed, Mexico's government mortgage bank, Sociedad Hipotecaria Federal, or SHF, expects its mortgage portfolio to grow by ten percent per year over the coming decade.
But lending by the private sector also is accelerating. The largest non-bank mortgage lender in Mexico, Su Casita, is planning to package mortgage securitizations worth $1 billion this year, of which close to two-thirds will be residential-mortgage-backed securities and the other third will be construction loans. This year, Su Casita expects to write approximately 50,000 mortgages worth approximately $1.5 billion, up over 50% from its lending last year.
U.S. lenders also are active in the Mexican real estate market, including Carefree/Textron Financial Corp., GMAC, M & I/Wachovia, GE Finance and Platinum Capital. There are also several U.S. title companies active in Mexico, including Texas-based Stewart Title and Arizona-based Real Estate Title.
Among large U.S. institutional investors in Mexican real estate is the California state pension fund, CalPERS, the largest public pension fund in the U.S., investment firms like Prudential Financial, and specialized real estate companies like Intramerica Real Estate Group. Intramerica, a Mexican subsidiary of G.E. Commercial Financial, now has a portfolio of $2.5 billion worth of property in the country, primarily composed of industrial and office buildings. Last year, Genworth Financial and AIG United Guaranty also were scheduled to begin operating in Mexico.
Some $2.7 billion in U.S. funds flowed into real estate in 2005, according to Mexico City daily Reforma, with close to half of that total going into industrial projects. That year the gross domestic product growth was only three percent; last year it rose to 4.8%, and this year it is holding at 3.6%, according to UBS Investment Research. Mexican workers in the United States also send home an estimated $15 billion a year, of which a substantial part may be utilized for housing, since per capita income is only approximately $8,100, according to UBS figures. In the past decade, per capita income in Mexico has almost doubled, nonetheless.
The appeal of Mexico to U.S. vacationers and retirees who might permanently move there also is strong, especially at locations like Cabo San Lucas, in Baja California state, at Puerto Vallarta, in Jalisco state, and at Cancun, in Quintana Roo state. By one calculation, one percent of the estimated 20 million American tourists who visit Mexico each year will buy a home there, according to Bruce Greenberg, a Tucson-based real estate consultant specializing in the Mexican market.