Our Markets
We operate in geographically diverse markets throughout Mexico, from Tijuana in the north to Tapachula in the south, which represent 21 states and 34 cities as of December 31, 2009.
Mexican Housing Market
We have obtained the following information from public sources, including publications and materials from the Mexican Ministry of Social Development, or SEDESOL (Secretaria de Desarrollo Social), the Mexican Population Council, or CONAPO (Consejo Nacional de Poblacion), INEGI, INFONAVIT, SHF, the Mexican Home Building and Development Industry Chamber of Commerce, or CANADEVI (Camara Nacional de la Industria de Desarrollo y Promocion de la Vivienda), and CONAFOVI. We have not independently verified any of the information provided in this section.
The housing market in Mexico is influenced by several social, economic, industrial, and political factors, including demographics, housing supply, market segmentation, government policy, and available financing.
National demographic trends drive demand for housing in Mexico. These trends include:
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sustained growth of a relatively young population;
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a high rate of new household formation;
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a high urban area growth rate; and
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a decrease in number of occupants per home.
According to INEGI, Mexico had a population of approximately 107.9 million in 2009 and estimates that this will grow to 108.8 million in 2011. CONAPO estimates that there will be approximately 28.1 million households in Mexico in 2010 and that there will be approximately 28.7 million households by year-end 2011, approximately 32.9 million by year-end 2018 and approximately 34 million by year-end 2020.
Mexico experienced a period of particularly high population growth during the 1970s and 1980s. The children born during this boom are contributing to the current increased demand for housing. The target consumer group for our homes is typically between 25 and 50 years old. In 2009, the 20-50 year-old age group represented approximately 45.6 million people or 42% of Mexico’s population. CONAPO estimates that by 2020, this age group will represent 44.3 million or 38.0% of Mexico’s population. The size stability of this group is expected to contribute to increased housing demand in Mexico.
In 2006, CONAVI housing statistics indicated there was a shortage of 4.4 million homes in Mexico. This figure included the need for:
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2.1 million new homes to accommodate multiple households currently living in a single home and households living in homes that must be replaced; and
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2.3 million substandard homes in need of extensive repair and possible replacement
CONAVI estimates that the growth of the Mexican population will generate a sustained demand for new homes of at least 633,742 units per year into the near future. To address the immediate shortage of million homes as well as the anticipated new demand, the Mexican government has committed to financing and/or building at least 1.3 million units a year in 2009.
Instituto de Vivienda del Distrito Federal (INVI)
INVI is a public, decentralized institution for the public administration in the Federal District (Distrito Federal), legally autonomous with its own working capital; its functions are the design, proposal, promotion, coordination, execution and evaluation of policies and housing programs focused mainly on families with limited economic resources, all of which is regulated within the General Development for the Federal District Program (Programa General de Desarrollo del Distrito Federal) derived from the Housing Law for the Federal District (Ley de Vivienda del Distrito Federal).
The mission of INVI is to satisfy the need for housing of families with limited economic resources located in the Federal District through the granting of mortgages for affordable entry-level homes, with the goal of creating 200,000 new housing units in the years 2007-2012. The Company entered into contracts of Ps. 298,620 during 2008 with this institution.
In general, Mexico’s developer-built (as opposed to self-built) housing market is divided into four segments according to cost: affordable entry-level, middle-income, residential and tourism. The developer-built housing market includes homes built by contractors and developers, which are generally financed by mortgage providers. These homes are built with official permits, have municipal services, and are located on land that is registered and titled by the homebuyer. Developers must obtain clear title to the land, proper zoning permits, any necessary financing commitments from lenders, and install infrastructure.
Mexico‘s developer-built housing market is categorized in the table below:
| Sector | Cost | Size | Characteristcs |
| Affordable entry-level | Between Ps. 88,000 and Ps. 220,000 (US$ 8,000 - US$ 20,000) | 35m² - 50m² (376 ft² - 538 ft²) |
Kitchen, living-dining area; 1-3 bedrooms; 1 bath; parking spaces; titled; all utilities available. |
| Economic - income | Between Ps. 220,000 and Ps. 420,000 (US$ 20,000 - US$ 38,000) | 50m² - 75m² (538 ft² - 807 ft²) |
Kitchen, living-dining area; 2-3 bedrooms; 2-3 bath; 1-2 parking spaces; titled; all utilities available. |
| Middle - income | Between Ps. 420,000 and Ps. 1,100,000 (US$ 38,000 - US$ 100,000) | 75m² - 130m² (807 ft² - 1,399 ft²) |
Kitchen, family room, living-dining room; 3-4 bedrooms; 3-5 baths; 2-4 parking spaces, service quarters; titled; all utilities available. |
| Residential level | Between Ps. 1,100,000 and Ps. 2,400,000 (US$ 100,000 - US$ 220,000) | 130m² - 200m² (1,399 ft² - 2,153 ft²) | Kitchen, family room, living-dining room; 3-4 bedrooms; 3-5 baths; 2-4 parking spaces, service quarters; titled; all utilities available. |
| Residential Plus | More then Ps. 2,400,000 (US$ 220,000) | 130m² - 350m² (1,399 ft² - 3,767 ft²) | Kitchen, family room, living-dining room; 3-4 bedrooms; 3-5 baths; 2-4 parking spaces, service quarters; titled; all utilities available. |
| Tourism | More then Ps. 1,100,000 (US$ 100,000) | 50m² - 500m² (538 ft² - 5,381 ft²) |
New homes in vacation destinations. Kitchen, family room, livingdining room; 1-4 bedrooms, 1-5 baths; 1-6 parking spaces, titled, all utilities. Houses and apartment condos. |
The Mexican affordable entry-level housing market experiences significant seasonality during the year, principally due to the operational and lending cycles of INFONAVIT and FOVISSSTE. The programs, budgets, and changes in the authorized policies of these mortgage lenders are approved during the first quarter of the year. Payment by these lenders for home deliveries is slow at the beginning of the year and increases gradually through the second and third quarters with a rapid acceleration in the fourth quarter. We build and deliver affordable entry-level homes based on the seasonality of this cycle because we do not begin construction of these homes until a mortgage provider commits mortgage financing to a qualified homebuyer in a particular development. Accordingly, we also tend to recognize significantly higher levels of revenue in the third and fourth quarters and our debt levels tend to be highest in the first and second quarters. We budget the majority of our purchases for the second half of the year to coincide with peak cash flows. We anticipate that our quarterly results of operations and our level of indebtedness will continue to experience variability from quarter to quarter in the future. Mortgage commitments from commercial banks, sofoles and sofomes for middle-income housing are generally not subject to significant seasonality. We do not expect significant changes in the overall seasonality of our results.
Last Update on August 24, 2010
