Colombian Real Estate Market Is Cooling, Housing Minister SaysMatthew Bristow and Oscar Medina
Colombia’s residential real estate market is cooling after a decade of rising prices stretched families’ ability to buy a new home, the nation’s housing chief said.
The number of new high-end housing developments has fallen, while builders are taking longer to sell homes in projects coming onto the market, according to Housing Minister Luis Felipe Henao. These may be early signs that a period of rapid price increases is coming to an end, he said.
“The market is calming in terms of prices,” Henao said yesterday in an interview in Bogota. “People are no longer taking the decision to buy so quickly, because it seems expensive. They are shopping around more before buying, and there’s not so much demand, so prices are reaching an equilibrium.”
Home prices rose to a record high last year in inflation-adjusted terms, according to the central bank, prompting Yale University’s Robert Shiller to say Colombia’s housing market reminded him of the inflating U.S. bubble a decade earlier. The Andean nation’s conservative lending rules and low levels of mortgage debt will prevent a house price crash, according to Henao.
“Prices are going to stabilize, but we don’t expect a fall of 20 percent, because our system is so financially conservative,” Henao said. Even as the number of new luxury developments fell, so-called “social housing” for low-income families continued to expand, he said.
Mortgages are equal to about 6 percent of gross domestic product in Colombia, according to Titularizadora Colombiana SA, the nation’s biggest issuer of mortgage-backed securities. That compares with 8 percent in Brazil and 55 percent in the U.S.
Colombian home prices have risen an inflation-adjusted 78 percent since 2003, according to data gathered by the central bank. Luxury homes in Bogota now cost 88 percent of the prices in Rio de Janeiro, up from 49 percent in 2008, according to a study published last month by the Bogota-based National Association of Financial Institutions.
Henao’s argument that Colombia should cut the minimum down payment on mortgages to 10 percent from 30 percent last year drew fire from central bank Governor Jose Dario Uribe, who attacked the proposal as “totally inappropriate” and “a source of future risks.” Henao says the measure would draw more low-income families into the financial system and stimulate house building.
Construction was the best-performing sector of the Colombian economy in the fourth quarter, expanding 8.2 percent from a year earlier, while the economy as a whole grew 4.9 percent.