9 May 2008 One Comment

1. President Felipe Calderon has set a national goal of a million new mortgages a year by 2010

Government regulation should boost the housing market by aiding people to get homes of their own.

2. Overall debt remains low for Mexico’s lenders

Lending institutions are more willing to lend to home buyers and have increased lending significantly. However they are not relying on debt and thus are unlikely to be threatened by bankruptcy like a certain major lender in America.

3. Major mortgage insurers now back Mexican loans

Mortgage insurers include U.S.-based AIG United Guaranty and Genworth Financial are investing in Mexico’s mortgage market. Along with reduced risk, lenders can bundle and sell debt as mortgage-backed securities and raise capital to sell more loans. From 2003 to 2008, almost $6 billion of these securities have been sold.

4. Mexico’s mortgage market is more stable

Few people in Mexico flip their homes and the sub-prime market is non-existent. Lenders have enough demand for loans, that they can be selective and only grant loans to people with good credit.

5. Private lenders called Sofoles are pioneering home loans to lower working class

Sofoles which is stands for a Spanish acronym for “limited financial institution” open small offices and cater to individuals who are unlikely to get a bank loan. They are able to grant loans to the working class because they reduce their risk by requiring relatives to co-sign and sending debt collectors to their doorstep.

6. Increased competition in banks have driven down mortgage rates

In November 2007, average 15-year mortgage rates were 12.5%, a great decrease from the 65% rates of 1995.

7. Currently 6 percent of Mexico’s 25.7 million homes are financed with mortgages

Most Mexico residents inherit, pay with cash, or build their homes. With favorable conditions, this figure can only go up.

8. Increased migration from US

Demand will be boosted by the baby boomer segment and other Americans fleeing the worsening economic conditions in the US.

9. Many areas are still underdeveloped

Areas like Loreto and Merida are some of the locations that have all the qualities to become the next blockbuster destination of Mexico in the not too distant future. What they lack are a developed infrastructure that will encourage growth.

10. Tourist travel predicted to double

Some experts, such as the authors of “The Tourism Time Bomb” article in the Harvard Business Review are predicting a global tourism to double to 1.6 billion which will result in increased demand for travel lodging. New destinations will likely be created and will be opportunities for tremendous growth.

Source: International Herald Tribune