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Experts ignore facts while downplaying Mexico’s housing bubble

But are they telling the whole picture?

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Carlos Rosado van der Gracht
Born in Mérida, Carlos Rosado van der Gracht is a Mexican/Canadian blogger, photographer and adventure expedition leader. He holds degrees in multimedia, philosophy and translation from universities in Mexico, Canada and Norway. Sign up for the Yucatán Roundup, a free newsletter, which delivers the week's top headlines every Monday.
New construction projects continue to be erected across the Yucatán, but Yucatecos are not their target market. Photo: Carlos Rosado van der Gracht / Yucatán Magazine

Recent reports published in several leading local and national publications argue that Mexico’s housing market is no bubble.

But the arguments put forward by several of the specialists cited appear to be full of half-truths and carefully selected data points.

“Developers in Mexico are moving towards higher-end construction, but levels of debt in the country remain steady,” said Enrique Maragain, coordinator of Mexico’s credit and banking committee.

Analysts highlight the fact that homes in Mexico are much more affordable than in markets like the United States, Canada, or the European Union and that loans are fairly easy to come by.

But wages in Mexico are several times lower than in the developed world, making the panorama for first-time home buyers extremely difficult.

Furthermore, while it’s true that several banks and even state-run organizations are offering easy access to lines of credit, these loans are extremely expensive. 

In Mexico, the average interest generated on home loans starts at roughly 12.5% while in the United States the number is around 5 or 6%.

In the past, most first-time buyers in Mexico resorted to loans from the state-run housing agency INFONAVIT.

But ever-growing fees, climbing interest rates, and mind-numbing bureaucracy have turned off the public who now, in large part, are now opting for loans from private institutions.

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“Buying your first house through the INFONAVIT used to be great. But now the entire system is so bloated and corrupt, it just makes no sense to finance through them anymore,” says Sergio Sánchez, a recent first-time home buyer in Mérida. 

In cities like Mérida, the prohibitive cost of purchasing homes for most locals is masked by the influx of out-of-state and international buyers. 

The demand has been particularly high for apartments in new mid and high-range condo towers. 

And these apartments are by no means cheap, by any standard. For example, apartments in the 30-story Country Towers range from roughly 6 million pesos or nearly 300,0000 USD for a single bedroom unit to over 11 million pesos for two bedrooms — that’s over half a million USD.

Similarly, during the last decade, the value of colonial homes in Mérida’s historic center has risen by as much as 300%, say market analysts. 

Contrary to popular belief, this rise in prices is not fueled primarily by foreigners from the United States, Canada, or Europe, but rather by out-of-state domestic buyers.

Out-of-state demand and market speculation are not the only factors at play, as the cost of building materials like concrete and steel continues to increase every year.

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