MEXICAN HOUSING OUTLOOK. February 09

MEXICAN HOUSING OUTLOOK February 09 GLOBAL OUTLOOK • Subprime Crisis in US triggered dramatic events in the capital markets, and now in the broader...
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MEXICAN HOUSING OUTLOOK

February 09

GLOBAL OUTLOOK • Subprime Crisis in US triggered dramatic events in the capital markets, and now in the broader economy. • High capital markets dependency, housing price bubble, weak origination practices and aggressive risk taking are some of the key factors to follow closely. • Mortgage Back Securities have been severely affected, implying a financial drought in the housing sector. • The mortgage sector if of worldwide concern: US, UK, Spain…

BUT, WHY IS MEXICO DIFFERENT?...

1. CONSISTENT GROWTH DURING THE LAST 10 YEARS • After a severe crisis in the 1990’s, the housing sector has been growing at an annual rate of 17%.

Source : CONAVI

2. DEMOGRAPHIC FORCES SUPPORTING DEMAND • Housing deficit is estimated to range, at least, between 5 and 6 million units. Housing Credits Housing Needs 2001‐2008 

and Subsidies 2001‐2008

12,000,000 10,000,000 8,000,000 6,000,000

Lack of Housing 2008 Lack of Housing 2000

4,000,000 Improvement 2,000,000 New House 0

Source : CONAVI

3.2 million

2.3 million

2. DEMOGRAPHIC FORCES SUPPORTING DEMAND • Mexico’s still young population translates into strong household formation rates for years to come. Population Pyramid (2009) 65 + 60–64 55–59

Age (years)

50–54 45–49 40–44 35–39

57

30–34

million

25–29 20–24 15–19 10–14 5–9 0–4 6,000

3,000

0

3,000

Thousand inhabitants Men

Source : CONAPO

Women

6,000

3. HOUSING PRICES STABLE (NO BUBBLES) • Housing deficit is concentrated in low income population; a first house buyer. Present Value Pesos

20,000.0 18,000.0 16,000.0 14,000.0 12,000.0 10,000.0 8,000.0 6,000.0 4,000.0 2,000.0

$2,500,000

Sep-08

Mar-08

Sep-07

Mar-07

Sep-06

Mar-06

Sep-05

Mar-05

Sep-04

Mar-04

Sep-03

Mar-03

Sep-02

Mar-02

Sep-01

Mar-01

Sep-00

Mar-00

Sep-99

Mar-99

Sep-98

-

4. STRONG INSTITUTIONAL FRAMEWORK • With a robust credit supply structure, not highly dependant from capital markets: LOW income

ƒFederal spending as subsidy ƒPrivate funding for credit ƒPrivate funding for credit ƒFederal (multilaterals) funding for credit

HIGH income

ƒDeposits and market funding for credit

4. STRONG INSTITUTIONAL FRAMEWORK • And a diversified housing supply structure all over the country: Homex 10%

Grupo GEO URBI

9%

Consorcio ARA 7% 58%

5% 3% 2% 3% 2% 1%

Grupo SADASI Altta Ruba Sare Grupo Metta Rest Industry

Source: Softec 2007

5. BEST PRACTICES IN ORIGINATION AND SERVICING

• The legacy of the financial crisis from the mid 1990’s, explains strict origination standards, implying no subprime origination. FICO* scoring

Credit Income Bureau Validation

√ √ √ *Or equivalent.

√ √

√ √ √ √

House Appraisal

√ √ √ √

LTV at  Payment to originatio income ratio n 25% 

85%

25% 

65%

30%

87%

30%

90%

6. MEXICAN MORTGAGE DESIGN

• Mexican mortgage is prepared to deal with high volatility environments: – Fixed interest rate in real terms. – Long term, up to 30 years. – Monthly payment indexed to minimum wage growth. – Unemployment insurance. – Collection through payroll discount. – Innovative model for “social” debt collection, through product design.

2008 PERFORMANCE • Housing and credit goals were achieved by far, setting a new historical record: INVESTMENT  CREDIT AND SUBSIDIES

(MILLION PESOS)

494,073

$107,676

128,380

$11,835

90,140

$34,669

213,853

$4,242

222,036

$2,151

Financial Entities

207,172

$112,358

Other Entities

49,901

$7,670

1’405,537

$280,601

716,915

$269,133

Financing Homes Source : CONAVI

WHAT DO WE EXPECT IN 2009?...

HOUSING SECTOR AS AN INTERNAL DEMAND GENERATOR • National Agreement to Protect Employment and Ensurie Economic Stability: President Calderón 1. 2. 3. 4.

5.

Supporting workers’ employment. Supporting families’ economies. Supporting competitiveness and Small and Medium Businesses. Investment and infrastructure to promote competitiveness and employment. Encouraging actions to promote more transparent and efficient public spending.

ROBUST CREDIT AND SUBSIDY SUPPLY FOR HOUSING GOAL

MILLION PESOS

500,000

$ 106,966

189,980

$    19,500

100,000

$    43,424

190,000

$      5,137

101,865

$      2,028

Financial Entities

207,000

$ 112,000 *

Other Entities

60,000

$      7,500

Financing

1’348,845

$ 296,555

Estimated Homes

720,000

* Similar level of mortgage origination as in 2009 Source : CONAVI

FEDERAL SUPPORT FOR LIQUIDITY • Also, SHF has an additional $31,650 budget to provide liquidity for funding needs in the short term: – Securitization – Bridge loans – Liquidity lines – Credit guarantees

STRONG HOMEBUYER BASE POTENTIAL DEMAND 2009

Potential Demand

Credit Supply

Ratio

4,799,774

500,000

9.6 to 1

1,576,849

100,000

15.8 to 1

REDUCED HOUSING INVENTORIES New houses ready for sale

400,000 

372,080  331,407 

350,000  300,000 

293,406 

278,064 

277,468 

250,000  205,317  200,000 

167,614 

150,000  100,769  100,000  57,849 

77,951 

38,470 

50,000  12,691  16,279  ‐ 1996

Source : SOFTEC

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008e

A DYNAMIC HOUSING SECTOR 600,000

Begining of new houses 488,760

500,000

495,704

185,406

400,000

217,611

322,807 300,000

270,373

26,126 16,163

241,737 239,121

200,000 195,130

144,716

75,243

97,021

83,686

Dic. 04

Dic. 05

Dic. 06

136,097

160,917

100,000 118,889

123,255

Dic. 07

Dic. 08

0

Viv. Eco.

Source : RUV ‐ INFONAVIT

CTBI

COFI‐COFIA‐AI

CT

UPCOMING NATIONAL HOUSING PACT

• Financial Intermediaries: AHM, ABM, AMFE. • Developers: Canadevi, Cmic. • Construction and Mortgage suppliers; i.e., Cement, Steel, Public Notaries Association (ANNM), Public Property Registriy Institute, Appraisal Units, among others. • Authorities, National Housing Entities, development banks.

LONG TERM STRATEGIC PLANNING Services supply: •Water •Electricity •Communications

Land Banks for Housing

Licenses and building legal framework

Susteinable house building technology and design

Saving programs and subsidy strategy

Financial Funding

Ser la institución que respalda el esfuerzo de los trabajadores y sus familias por incrementar su patrimonio y calidad de vida; al financiar su acceso a una vivienda y a un entorno sustentable en el que puedan desarrollar su potencial como individuos y como ciudadanos, consolidando la nación más humana y competitiva que todos los mexicanos nos merecemos.

Humana

Ser el mejor lugar para trabajar con la mejor gente

Contar con la cultura de compromiso social y excelencia en el servicio

Garantizar que las personas del Infonavit ampliado cuente con las capacidades y actitudes en cultura y niveles de servicio

Procesos

Crear alianzas con la sociedad y el gobierno para impulsar la calidad de vida y el desarrollo humano y social de manera sustentable

Asegurar la comunicación permanente con trabajadores y usuarios

Contar con la infraestructura necesaria para dar soporte a la estrategia

Aplicar las mejores prácticas para tener Gobierno Institucional ejemplar

Financiera

Enriquecer el conocimiento de nuestros derechohabientes y acreditados sobre la importancia de vivir en comunidades que generen bienestar social y plusvalía.

Asegurar viabilidad financiera a largo plazo

Incrementar Recursos disponibles para la atención a los trabajadores

COMUNIDAD

Proveer financiamiento para satisfacer las necesidades de vivienda de los trabajadores , derechohabientes y acreditados.

Mejorar la calidad de vida de nuestros derechohabientes entorno sustentable en el que puedan desarrollar su potencial como individuos y como ciudadanos

Proporcionar productos y servicios de excelencia con foco en las necesidades de los usuarios y rostro humano Contar con procesos transparentes de excelencia y mejorarlos continuamente

Institucional y de Servicio

Beneficiar a los derechohabientes con rendimientos competitivos a sus ahorros

Ser generadores de bienestar social, en comunidades competitivas y armónicas

Balanced Scorecard for strategic planning in Mexican Housing Public Policy.

FINAL REMARKS • Mexican Housing Sector has a number of strengths that make it different from other experiences in the world: – Consistent growth during the last 10 years, after a severe crisis. – Demographic forces supporting demand: housing deficit and household formation in the coming years. – Housing prices stable with no risk for housing price bubbles. – Strong institutional framework with no high dependency from capital market funding. – Best practices in origination and servicing. – Mexican mortgage designed to deal with crisis conditions.

FINAL REMARKS • Current situation is positive: – New houses inventory for less than 6 months. – Strong new buyers base, considering Infonavit and Fovissste credit programs. – SHF serving short term liquidity needs. – Federal institutions supporting the final consumer and the financial intermediary. – Massive low income housing demand. – Strong federal goverment support, and consolidated coordination among all players. – Signing of the National Housing Pact. • Sector strategic planning also considered, for assuring long term optimal performance.