Real estate bubble is brewing in several cities of the country, warn specialists

Fernando Camacho Servin

Newspaper La Jornada
Sunday, July 24, 2022, p. 9

In various cities of the country –such as Mérida, Guadalajara, Puebla and Querétaro– an urban speculation movement could be brewing that consists of buying lots for housing construction, but without the real intention of inhabiting it, but rather of reselling the land or the house to a higher price, which would give rise to a phenomenon of housing bubble.

Academics and activists specializing in the subject warned that the Mexican State must monitor housing developers more closely to prevent these properties from continuing to be used as cumulative currency, since the consequences would be very negative in financial, social and environmental terms.

In interview with the dayCarla Escoffié, director of the Human Rights Center of the Monterrey Free Law School, pointed out that in the case of the Yucatecan capital everything indicates that a real estate bubble was generated by the issue of investment lots, because most people do not buy land to give it a use value, but to resell it later.

As part of the growing interest that has arisen in recent months to live in Mérida, Hundreds and hundreds of subdivisions have been developed where there is no certainty that they will be inhabited in the future, due to their location and characteristics. There is much talk that Yucatan is growing, and it is true, but this phenomenon is disproportionate and does not correspond to its real growth.

After developing an analysis based on the real estate developers’ own information and figures, Escoffié identified that many of these lots have payment methods or facilities attractive and offer to be 40 minutes from the beachalthough in Yucatan many cities are already at that distance from the sea.

The foregoing, he said, can attract foreign buyers, but it is hidden that the subdivisions they can be in the middle of nowhere and not having any type of urbanization, for which there is no certainty that they are a good investment.

Despite this, In Mexico, the financialization of housing is advancing, that is, it is used as an asset or currency that you buy and accumulate with the expectation that it will increase in price. It does not attend to a logic of supply and demand, and we see that there are clear processes of speculation in Mérida, Querétaro, Puebla, Tijuana, Guadalajara and the Cuauhtémoc mayor’s office in Mexico City, which distort the market.

Escoffié underlined that the authorities must closely monitor real estate companies and banks that grant loans, because only the existence of a bubble until it blows up, leaving hundreds or thousands of lots unsold or unpaid because their prices got too high.

For his part, Enrique Soto, urban planner and professor at the Faculty of Architecture of the National Autonomous University of Mexico, agreed that investment lots have become one of the factors that artificially raise the price of housing and leave many people with the only option to acquire houses on the outskirts of cities.

They make us believe that they are land to be paid at present value, with profit expectations in the coming years, but many of them have been lent to fraud, because sometimes these developments do not materialize.he indicated.

Despite the above, and although they are properties far from the cities and without basic services, its price reaches levels similar to that of central areas. The effect it has is that the land within the cities also rises and the natural growth trend of land values ​​is perverted.

The expert joined the call for the authorities, especially the secretariats of Agrarian, Territorial and Urban Development and the Environment, to supervise real estate developers, because Many of these projects do not have municipal permits, but they do have federal government permits..