Two Decades Post Crisis, Colombia Looks to Boost Home LoansBy
Housing Minister says 70% loan-to-value limit too restrictive
Home prices have surged, leading some to issue bubble warnings
Colombia’s Housing Ministry is calling on lenders to ease conservative mortgage lending requirements to allow more people to buy a home, and revive a market that still hasn’t recovered from a crisis two decades ago.
Housing Minister Elsa Noguera said that with mortgage lending levels that are modest by regional standards, and low default rates, Colombia can now afford to relax rules that were introduced after a financial crisis at the end of the 1990s. Noguera said she has held talks with the nation’s banking association to urge them to boost the maximum loan-to-value rate for home loans to 80 percent, from 70 percent.
‘‘After the mortgage crisis of the 1990s, very conservative regulation was developed that has not been modified,’’ Noguera said in an interview at the Bloomberg offices in Bogota. ‘‘There’s room to relax credit.’’
Finance Minister Mauricio Cardenas has said that home-building and highway construction can provide new sources of growth after the fall in energy prices in 2014 caused oil and mining sectors to slow. With millions of Colombians still living in sub-standard housing, the housing sector could potentially be a strong driver of growth for decades to come.
Home prices have risen more than 80 percent over the last decade, according to the central bank’s inflation-adjusted used housing price index, leading the The National Association of Financial Institutions, or ANIF, to warn of the risk of a bubble, while the central bank has observed that real estate prices are at historically high levels.
Mortgages are equal to about 7 percent of gross domestic product in Colombia, still less than the 9 percent it reached before the 1999 crisis, when many home owners were ruined by a combination of rising real interest rates and falling real estate prices.
Colombia’s mortgage market is still small by world standards. In Chile, mortgages account for about 24 percent of GDP, while in Switzerland the figure is more than 100 percent.
Noguera dismissed talk of a housing bubble, saying that home price rises were driven higher by a lack of land in cities including Bogota. Over the next few years, she forecasts housing prices moving up at a pace of 1.5 percent to 2.5 percent.