House prices rose by 4.96% y-o-y in Q3 2019
Mexico’s housing market continues to strengthen, despite ailing economy. The nationwide house price index rose by 4.96% during the year to Q3 2019, the biggest increase since Q2 2016. On a quarterly basis, house prices increased 1.21% 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|
Recent news. In November 2019, the central bank Banco de Mexico (Banxico) cut its key rate by 25 basis points to 7.5%, the third consecutive rate cut this year, amidst slowing inflation and sluggish economic growth.
The Mexican economy shrank by 0.4% in Q3 2019 from a year earlier, following a y-o-y decline of 0.8% in Q2 2019 and annual growth of 1.2% in Q1 2019 and 1.7% in Q4 2018, weighed down by a slump in industrial output and weakening services sector. In a quarterly basis, the economy grew by a miniscule 0.1% in Q3 2019, after posting zero growth in the previous 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. His abrupt decision to cancel the project sparked a sell-off in Mexican financial assets.
The economy is expected to expand by a meagre 0.4% this year, the lowest growth since 2009 when the economy contracted by 5.3%.