A news report from Reuters recently highlighted a potential reform in Mexico’s real estate industry which would allow mexico mortgage lenders to tap into the global capital markets. Speaking last Thursday,Finance Minister Ernesto Cordero showed his support for the proposed changes,which are expected to increase the amount of foreign interest in Mexico’s booming real estate opportunities.
Domestic buyers are granted mortgages of hundreds of millions of dollars every year supplied through Mexico’s largest home lenders. In the past,fears about red tape discouraged some would-be buyers from looking into mortgages in Mexico, but Cordero has now backed the reforms,saying that the changes will clear the way for even more foreign capital.
Speaking at a real estate promotional event held in New York,Cordero discussed how providing more liquidity to agencies for foreign investors would allow them to,“reach the market with their mortgage bonds.” One such mortgage lender is Infonavit,which is one of the largest mortgage lenders in Mexico today. Last year alone,they managed to sell around $1 billion in mortgage bonds. Infonavit has also spoken out about the growing interest among foreign real estate investors surrounding local mortgage bonds.
Cordero announced that opening the doors to more foreign investors will result in more liquidity being brought into Mexico’s housing market. It will also provide investors intent on investing in Mexico the opportunity to overtake the returns on government bonds. As it stands the bonds profit around 7.8% for ten year maturities.
Currently Mexican lawmakers are mulling over proposals for the new reform package. It is possible that the first dollar bond could arrive in less than six months if the reforms come into effect,according to Jose de Jesus Gomez Dorantes,who is the chief financial officer for the mortgage lending giant Infonavit.
One issue that needs to be considered before the reforms are passed is the exchange rate. The current Mexican law states that they cannot take on the risks involved with the exchange rate,so a solution must be found before the reforms can come into play.