Corp. Geo SAB and Urbi Desarrollos Urbanos SAB, the worst performing Mexican homebuilders this year, fell the most on the country’s benchmark index this week amid speculation they will be the worst hit by government housing policy changes.
Geo fell 9.3 percent to 7.96 pesos at at the close of Mexico City trading, the lowest price since Aug. 2003, extending its weekly plunge to 21 percent. Urbi tumbled 6 percent to 3.14 pesos, a record low, leaving it down 22 percent this week.
Mexican homebuilders have plunged this year amid worse-than-expected earnings and credit-rating cuts. The government also is shifting the focus of its housing program from single-family homes to apartment buildings, which require higher initial cash investment.
The rout in Geo and Urbi is “mostly a panic reaction to sell at whatever cost you can find,” said Carlos Hermosillo, an analyst with Grupo Financiero Banorte SAB in a telephone interview from Mexico City. Investors should “get rid of them until you see a clear picture,” he said.
Urbi and Geo have sunk more than other homebuilders because more of their assets are land reserves, which investors have speculated could be worth less after changes in the government’s housing policy, according to Hermosillo.
“What you could expect is the land would be developed over a longer term, not as fast as they were hoping,” he said. “That does change the outlook for the return on these investments.”