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Cost of housing in Mexico increases by 8.7 percent

In the first quarter of the year, the price of housing in Mexico shot up 8.7 percent with respect to the same period in 2017, the largest quarterly increase since 2011 according to Sociedad Hipotecaria Federal (SHF).

The observed increase was greater than inflation, whose annual rate reached 5.03 percent in March, according to INEGI.

Jalisco, Mexico City and Puebla registered the highest increase with increases of 11, 10 and 9.6 percent, respectively.

The expectation is that the price of housing will maintain an upward trend in the next 12 months, warned Rodrigo Heredia, deputy director of Stock Market Analysis of financial group BX. He explained that the tariffs imposed by the United States on steel and aluminum will put more pressure on the cost of housing.

According to the Mexican Chamber of the Construction Industry, steel and aluminum represent between 18 and 22 percent of building materials distributed in rods, structures, windows and doors.

One of the other factors that have influenced the increase in housing is the increase in mortgage rates, explained Enrique Margain, executive director of Crédito Hipotecario de HSBC.

He explained that in March 2016, the average interest rate was 9.23 percent, while in February of this year it rose to 10.30 percent.

Additionally, the cost of land which has increased 300 percent over the last four years, as well as cement and ready-mix concrete, with increases of 4.7 and 7.4 percent in the last 12 months, are also playing a large factor in the price hike.

According to Eugene Towle , managing partner of Softec, the cost is not homogeneous.

In homes of up to 300,000 peso, the price fell more than 1 percent in the last year. In properties of 300,000 to 700,000 peso, it increased between 1 and 2 percent. In the segment of 700,000 to 1.8 million, there was an increase between 3 and 4 percent, while the largest increase is seen in the sector homes with a cost above 1.8 million.

In the latter, the increase is due to “the production of the Valley of Mexico and the recovery of tourist markets in Cancun, San Miguel de Allende and Los Cabos in addition to the fact that more apartments are built than homes.”