Housing market surges in Mexico

Mexico is undergoing a housing revolution similar to that which began in America some 50 years ago, according to John Lyons of the Wall Street Journal.

After being wiped out by the mid-1990s' financial crisis, the Mexican mortgage market has improved over the past decade thanks to a relatively stable economy:

Mexican construction companies have accounted for all of the initial public offerings on the Mexican stock exchange in the past 12 months.

The average share price of Mexican builders has risen 33 percent this year, outpacing the broader Mexican market.

The Mexican government has also increased home lending. As a result, homes have become increasingly affordable for young Mexican couples of modest means, whether they be teachers, government workers or salesmen:

Mortgage rates are relatively low, at about 12 percent for a 20-year loan.

In one suburb, Piramides, a new house costs an average of $14,000; fancier homes run about $39,000.

While this newfound home ownership may bolster the thin ranks of Mexico's middle class, it is uncertain how far this revolution will spread. With about half of Mexico's 105 million people in poverty and half the work force labouring off the books, access to home loans may be difficult, says Lyons.

Source: John Lyons, Revolution in Mexico: Affordable Housing, Wall Street Journal, December 15, 2004.

For text http://online.wsj.com/article/0,,SB110306435798800163-search,00.html

For more on International: Institutions and Growth http://www.ncpa.org/iss/int/

FMF Policy Bulletin/ 04 January 2005