RESIDENTIAL REAL ESTATE MARKET IN MEXICO - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

RESIDENTIAL REAL ESTATE MARKET IN MEXICO - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Mexican residential real estate market was valued at USD 30.98 Billion in 2018, and it is projected to value USD 60.0 billion by 2025, With a CAGR of more than 9.91% from 2019 to 2025.

The Mexican economy is expanding at a moderate pace, underpinned by a robust macroeconomic framework and exports tied to the country's deep integration into global value chains. In 2018, house prices increased robustly by 4.32%.

The incentives created by governmental reforms and attractive interest rates are projected as an area of opportunity for real estate investment in the residential markets in Mexico.

Almost all the new large-scale projects incorporate mixed-use developments. There are these key trends, such as an increase in mixed-use developments and medium-sized and small-sized real estate developers rising in strategic regions of the country.

Mexico's rising middle class continues to increase the housing market. In 2018, the country's middle class was estimated to account for almost half of the total households, at about 16 million. They are expected to continue growing, with about 3.8 million more households projected to move into the middle class by 2030. Moreover, most Mexicans who move generally prefer to buy rather than to rent. Around 82% of Mexicans want to buy a property, as opposed to 18% that prefer to rent, according to a survey in 2018.

The growing middle class has an increasing purchasing power. Mexico's annual demand will increase by ~1 million homes per year. After a high magnitude earthquake that stunned Mexico City (and surrounding states of Mexico, Morelos, and Puebla), there is a demand increase for modern buildings that are considered structurally sound. Buildings with conditioned or furnished space are receiving increasing demand from displaced Class B and C building occupiers.

While the general outlook for the Mexican housing market remains robust, the country's ailing economy, coupled with the uncertainties surrounding the ratification of NAFTA (now rebranded as USMCA) and the ongoing US-China trade dispute, might impact the market in the coming year.

Key Market TrendsIncreasing Residential Real Estate Demand by Young People

The Mexican residential real estate industry is growing due to young people demanding a place to live. The housing demand projected for the next few years will be driven by people under 30 years (representing 55% of the country’s population). The Bajio zone, formed by Aguascalientes, San Luis Potosí, Guanajuato, and Querétaro, as well as the northern region of Mexico, are areas of special interest.Cities, like Monterrey, are currently growing because of the demand for corporate and residential spaces. The growth of tourism in destinations, such as Cancun, Los Cabos, and Puerto Vallarta, also encourage real estate developments.

Increase in Average Housing Price in Mexico

The graph shows an increase in Mexico's average housing prices in 2019, quarters 1 and 2, compared to the previous year. In the second quarter of 2019, Mexicans paid, on average, 1.07 million Mexican pesos to acquire a residential property. Compared to the same period of the previous year, the nominal price increased by more than 30%.Mexico City registered the highest price for this type of property, with an average exceeding three million pesos per residential unit as of the second quarter of 2019.

Competitive Landscape

The Mexican residential real estate market is fragmented due to the presence of many players in the market. The housing market is not driven by speculators. There are many developers, and the market is highly competitive. Access to financing has become an indispensable component of the Mexican residential market, with public institutions and private banks having a key role. Public mortgage providers include INFONAVIT and the Housing Fund for the Institute of Social Security and Services for State Workers (Fondo de la Vivienda del Instituto de la Seguridad y Servicios Sociales de Los Trabajadores del Estado, FOVISSTE). The banking sector provides several options for the sections of the market, not included in government financing schemes.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

Companies Mentioned

IBM Corporation
Oracle Corporation
Internap Corporation
Packet Inc. (An Equinix Inc. Company)
Scaleway Inc.
Amazon Web Services Inc
Rackspace Inc.
CenturyLink, Inc.
LightEdge Solutions, Inc

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