Mexican Homebuilders Set for Growth Under Calderon
 Reuters
| | Shares in top Mexican homebuilders Geo, Homex, Urbi and Ara, which mass-produce thousands of houses at a time and sell most of them for less than $40,000 each, are closely watched by Wall Street. |
Homebuilders in Mexico, already enjoying a boom, are poised for more strong growth with president-elect Felipe Calderon's promise to expand mortgage lending to low-income segments.
Construction companies that specialize in selling low-cost housing should increase their revenues by between 15 percent and 17 percent annually over the medium term, analysts said.
"We see it as a sector to invest in over the next six years," Gonzalo Fernandez, an analyst at Santander, said in Mexico City. "Despite the significant increase in the number of mortgages granted, we believe there is still a huge unsatisfied demand for mortgages and homes in Mexico."
Shares in top Mexican homebuilders Geo (GEOB.MX), Homex (HOMEX.MX), Urbi (URBI.MX) and Ara (ARA.MX), which mass-produce thousands of houses at a time and sell most of them for less than $40,000 each, are closely watched by Wall Street.
They saw explosive growth under President Vicente Fox, who delivered economic stability that made it possible for widespread mortgage lending for the first time since the early 1990s.
Fox's pledge on taking office to almost triple house building and finance up to 750,000 units per year was a boon for homebuilders.
Many took advantage of the good times to list on the stock market, where their shares quickly became investor favorites.
Calderon's promise to build a million new houses a year and launch subsidies to help Mexico's very poor buy homes will deliver more double-digit revenue growth for homebuilders, analysts say.
"An important change is that there will be more access to credit for cheaper houses with Calderon," Fernandez said. "Those people that didn't have access to credit with Fox, will now be able to get it."
GROWTH POTENTIAL
Currently, the government offers home credits to people earning between $270 and $450 per month through various programs. Calderon wants to lower the bar to reach Mexicans who earn just $180 per month, Fernandez said.
Giving subsidies to people with no access to housing credit today could help 350,000 families by the end of Calderon's term in 2012, said Merrill Lynch analyst Carlos Peyrelongue.
Experts say the housing sector has potential to keep growing for another 25 years in Mexico, where there is a deficit of around 5 million homes.
Growth should also be supported by increased credit from specialized mortgage lenders and the country's big banks, which are starting to expand aggressively after a financial crisis devastated them a decade ago.
The construction and housing sub-index (.IH) of the Mexican stock exchange has risen 25 per cent so far in 2006, in line with gains in the benchmark IPC index (.MXX).
Calderon is also likely to push for faster development of the country's nascent secondary market for mortgage credits in order to free up financing for further lending, analysts say.
Less than 5 percent of mortgage loans are securitized in Mexico, a fraction compared with the United States. |
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Puerto Vallarta Real Estate | October 2006 
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