House prices rose by 4.73% y-o-y in Q1 2019

Mexico’s housing market continues to strengthen with the nationwide house price index rising by 4.73% during the year to Q1 2019, an improvement from last year’s growth of 2.98%. In fact, it was the biggest increase since Q2 2016. On a quarterly basis, house prices increased 1.27% during the latest quarter.

For a decade the housing market has hardly moved. In 2009, house prices rose 0.77% (inflation-adjusted), in 2010 it fell 0.59%, in 2011 + 2.37%, in 2012 -1.15%, in 2013 + 0.39%, in 2014 + 0.84%, in 2015 + 4.36%, in 2016 + 4.07%, and in 2017 +0.73%, all inflation-adjusted. In 2018, house prices increased robustly by 4.32%.

Luxury market buoyed by both foreign and domestic demand. Mexico’s real estate market has been buoyed by strong demand in resort communities, according to the International Consortium of Real Estate Associations (ICREA). American and Canadian buyers are returning to Mexico, after a several-year slump, thanks to low oil prices and the strong US dollar, pushing home values up. 

Mexico’s rising middle class continues to boost the housing market. The country’s middle class was estimated to account for almost half of the total households, at 14.6 million. They are expected to continue growing, with about 3.8 million more households projected to move into the middle class by 2030.

Rents, rental yields: moderate yields at 4.9% to 5.4%

Mexico City apartment costs are reasonable at around $3,000 per sq. m.  

Mexico: typical city centre apartment buying price, monthly rent (120 sq. m)
  Buying price Rate per month Yield
Mexico City $350,000 $1,500 5.2%

Recent news. The central bank Banco de Mexico (Banxico) held its key rate unchanged at a 10-year high of 8.25% in May 2019, following 15 rate hikes since December 2015, after inflation exceeded the target range.

The Mexican economy grew by just 1.3% in Q1 2019 from a year earlier, a slowdown from an expansion of 1.7% in the previous quarter. In fact in a quarterly basis, GDP contracted by 0.2% during the latest quarter. Newly-elected President Andres Manuel Lopez Obrador, widely known as AMLO, has alarmed investors since taking office on December 1, 2018 by vowing to transform the country’s “neoliberal” economic model and terminating a new US$13-billion airport for Mexico City that was already one-third complete. 

The economy is expected to expand by 1.5% this year – the lowest growth since 2013.