Real Estate & Construction

Room To Live

Real Estate

The state-owned SHF promotes the country’s primary and secondary mortgage markets by granting guarantees for the construction, acquisition and home improvement, ostensibly for the lower-income bracket. In 2013, housing prices […]

The state-owned SHF promotes the country’s primary and secondary mortgage markets by granting guarantees for the construction, acquisition and home improvement, ostensibly for the lower-income bracket. In 2013, housing prices even rose by an average of 4%. However, when taking into account inflation, prices increased by just 0.4%.

Indirectly, however, the 2008 financial crisis severely dented the country’s efforts to construct social housing. From 2002 onward, the Mexican authorities on the one hand offered construction companies subsidies to build affordable homes and, on the other, provided mortgages for low-income households, mainly through Infonavit (National Fund for Worker’s Housing Institute) and FOVISSSTE (Housing Fund for Public Sector Workers).

Both organizations deduct a monthly amount from workers’ salaries in exchange for a mortgage loan at below-market interest rates. Between 2000 and 2008, the number of housing loans issued tripled to 1.4 million, while the ratio of self-built homes decreased from 70% of new build homes in 2000 to 30% in 2006.

As such, whole new cities were erected mostly on low-cost rural land away from the main urban centers. The scheme seemed a success, until the 2008 financial crisis hit the US and, consequently, the Mexican economy, manufacturing and export decreased, while unemployment rose.

As a result, many people could no longer pay their mortgages. Tens of thousands of newly built homes were abandoned, and complete ghost towns arose. In addition, the new developments often had a poor infrastructure and proved too far removed from the centers where people worked. Hence, President Peña Nieto in early 2013 proposed a policy shift: social housing should be “vertical” high-rise and close to where people tended to work.

As a consequence of the housing crisis, Mexico’s three largest homebuilders, Geo, Homex and Urbi, saw their stock prices nosedive and “the big three” now face an immense liquidity problem. Several European and American banks have also been affected by the crisis.

Yet, not all the news is bad. The economic and popular housing segment (with a maximum value of $29,000), which made up 70% of the market in 2011, went down to 64%. Homes with a value of 50,000 and more went up the ladder from 30% to 36% of newly built homes. Meanwhile, many of Mexico’s poor have returned to building their own homes.


Mexico’s population has rapidly increased over the past few decades. The country had a population of 28 million people by 1950, which had increased to over 120 million by mid-2014. The population growth rate currently stands at some 1.2% annually, while some 46% of the population is under 25 years of age. In 2010, some 44 million Mexicans were considered middle class, compared to 37 million in 2000.

An estimated 21 million people live in Mexico City, which makes the capital one of the largest cities in the world. Guadalajara is the country’s second biggest city with a population of some 4 million, followed by Monterrey with 3 million, while the latter ranks first in Mexico in terms of highest income per capita. Mexico’s average income per capita is some $15,000 annually.

Economic growth is set to reach some 3% to 4% in 2014, compared to 1.1% in 2013, which will arguably translate into a greater demand for residential, office, and retail space. Some economists, however, have warned that the projected growth may turn out lower than anticipated.

Foreigners can buy property in Mexico. The constitution declares that, “within a zone of 100 kilometers from the border or 50 kilometers from the coast, a foreigner cannot acquire the direct ownership of the land.” Such areas are known as “restricted zones.”

If a property is not located in such a zone, a foreigner only requires the right permits to be able to buy. If a property is located within a restricted zone, a foreign buyer needs to sign a “fideicomiso,” a 50-year fiduciary bank trust agreement, which is renewable every 50 years, and can be rented out, sold, or inherited. The property, however, may not exceed 2,000 sqm in size.

Both real-estate brokers and property developers are in favor of a constitutional amendment that would remove the prohibitions on foreigners owning property, as many foreigners shy away from buying homes due to the bureaucracy involved. Nonetheless, an estimated 500,000 Americans already own a second or holiday home in Mexico.


According to CBRE’s Office Insight 2013, some 390,000 sqm of A and A+ office space were added Mexican City in 2013. A total of 1 million sqm was under construction by the end of 2013, some 75% of which concerned the areas of Polanco, Reforme, and Insurgentes.

The average office rent in Mexico City amounted to some $25 per sqm per month, while the vacancy rate stood at 11.45%. In Monterrey and Guadalajara, the average rent per square meter amounted to $20 and $18.8 per sqm per month, respectively. The latter city in particular has caught the eye of property developers in recent years, as some 1 million sqm of commercial space was under construction by the end of 2013.

According to the CBRE Retail Insight 2013, the Gross Leasable Area (GLA) in Mexico City increased from 2 million sqm in 2003 to some 4.5 million sqm by the end of 2013. Eight new malls were being constructed, of which six were set to open their doors in 2014.

Colliers International reports that there were 552 shopping centers in Mexico by the end of 2011, some 27% of which was found in Mexico City. The most expensive rents in the capital, some $75 to $100 per square meter per month, were found at Masaryk Avenue, while the average rent amounting to some $50 per sqm per month.

Beyond the capital, Guadalajara boasted an estimated 1.2 million sqm of GLA. Over the past few years, however, Mexico’s second city has witnessed limited construction of retail space. The average rent has amounted to some $45 per sqm per month. More or less the same scenario is true for Monterrey, although there some 360,154 sqm of mall space was under construction.

Finally, Mexico City by 2013 had some 4.5 million sqm of industrial space, around 45% of which is located in Cuautitlan. A further 400,000 sqm are under construction, while the average rental price amounts to a little over $5 per sqm per month.

While the sudden collapse of the country’s social housing scheme has shocked markets both in Mexico and abroad, the damage overall seems limited. With an eye on population and economic growth, other property market segments in 2013 displayed healthy growth. Likewise, the market for holiday homes has recovered from the fallout of the 2008 crisis, and is set to grow, especially should the government decide to lift foreign ownership restrictions.