Puerto Vallarta, Mexico – Mexico has emerged as one of the world’s leaders in the increase of housing prices compared to pre-pandemic levels, according to a recent report by the International Monetary Fund (IMF). In 2023 alone, Mexico secured the second position in the global ranking for the highest increase in housing prices, trailing only the United Arab Emirates.
The IMF’s report sheds light on the challenges facing potential homebuyers in Mexico and around the world, as housing affordability continues to diminish amidst a higher interest rate environment. Prospective buyers are confronted with soaring property prices and elevated borrowing costs, while property owners are hesitant to put their homes on the market.
Data provided by the IMF reveals that Mexico has witnessed an increase in housing costs by 8.44 percent compared to pre-pandemic levels. While this rise is significant, it is surpassed by Israel, where housing costs skyrocketed by a staggering 23.69 percent. Other countries with substantial increases include Portugal (22.29 percent), the United States (19.15 percent), Japan (15.29 percent), Netherlands (14.4 percent), United Arab Emirates (14.15 percent), and Australia (9.24 percent).
In terms of annual increases in housing prices in 2023, Mexico occupies the second position globally, with a rise of 4.72 percent. The United Arab Emirates leads this category with a notable increase of 10.39 percent. Other countries that experienced housing price hikes last year include Israel, Portugal, Thailand, Japan, and Malaysia.
The IMF also noted that the surge in housing prices has a direct impact on the cost of renting properties. Many individuals are opting to rent rather than purchase homes due to the sluggish adjustment of average home prices. This scenario, coupled with higher interest rates and a limited housing supply, creates a challenging environment for central banks in their efforts to combat inflation.
Furthermore, the IMF highlighted the potential consequences of increased household debt in overvalued real estate markets, particularly where the average mortgage loan duration is relatively short. In the United States, for example, the Federal Reserve’s interest rate hikes have led to significant disruptions in the mortgage loan market, resulting in an average rate of 7.8 percent for a 30-year fixed mortgage, the highest in two decades. These elevated costs are exacerbating the affordability crisis, with down payments becoming increasingly prohibitive as pandemic-induced savings dwindle.
The current average 30-year mortgage rates in the United States stand at 6.6 percent, approximately 3 percentage points higher than the pandemic lows. This has resulted in an 18 percent decrease in mortgage originations compared to 2022 levels, while refinancing applications have increased by 8.5 percent as mortgage rates continue to decline.
In conclusion, the IMF underlines that the Federal Reserve’s actions in adjusting interest rates this year may further impact mortgage lending and housing demand. A sudden increase in rates could potentially offset improvements in housing supply, leading to a surge in housing prices, which remains a critical issue in Mexico and globally.
This report highlights the pressing challenges of housing affordability and the broader implications for the real estate market, underscoring the need for effective policy measures to address these issues both in Mexico and on a global scale.
Puerto Vallarta, Mexico - Mexico has emerged as one of the world's leaders in the increase of housing prices compared to pre-pandemic levels, according to a recent report by the International Monetary Fund (IMF). In 2023 alone, Mexico secured the second position in the global ranking for the highest increase in housing prices, trailing only the United Arab Emirates.
