A devaluation of the Peso in 1994 threw Mexico into economic turmoil, triggering
the worst recession for over half a century. Since then the nation made an impressive
recovery on many scenes ranging from economics to society. Also the housing
market has improved dramatically for various reasons such as significant policy
changes. Only the general, systematic housing shortage, the under-supply of
mortgages and the under-capitalization of developers still hindered further growth.
This was yet addressed by the Fox government introducing new approaches and
special agencies to keep social stability and enhance further economic growth.
Therefore the thesis points on the rather recent developments of the Mexican
housing market including the question how it became the way it is. Furthermore,
the political and economic motivations and influence of both, public and private
local and foreign actors to the market, without which neither it would not have
grown that much, nor will grow as projected, are highlighted. Moreover, potential
obstacles to further market growth and increased stability such as an ongoing lack
of capital are named, and promoted along with ideas beyond like environmentally
friendlier approaches that are in the long-term favor of the Mexican society.
Table of Contents
1 Summary introduction
1.1 Rationale
1.2 Research question and aim of the paper
1.3 Theories, state of the art, and academic method
2 Mexico, a developing country in a emerging region
2.1 Mexico’s economic development since the Tequila crisis
2.1.1 Increased regional integration and free trade
2.1.2 Liberalization and foreign direct investments
2.1.3 Crude oil sales & transfers from foreign Mexicans
2.2 Political and legal improvements were making the way
2.3 Mexico’s poverty, demographics, and society changes
2.4 Summary of significant developments since 1994
3 The Mexican housing market
3.1 Three-fold weak grounds, but significant growth potential
3.1.1 General, systemic housing shortage
3.1.2 Under-supply with mortgages since 1994
3.1.3 Severe under-capitalization of housing developers
3.2 Customer segmentation in the market
3.2.1 Affordable entry-level homes for low-incomes
3.2.2 Residential housing for a growing middle class
3.2.3 Luxury housing for the top earners
3.3 Change in the customer base
3.3.1 Changes and growth of Mexico’s population
3.3.2 A changing society demands individual housing
3.3.3 Mexico’s economic success leads to a higher demand
3.4 Poor performance of the housing sector
3.5 Summary on reasons, segments and changes in housing
4 Driving forces for the increase of the Mexican housing base
4.1 Governmental motivations
4.1.1 Main aim: extend and keep social stability
4.1.2 Catering for a growing middle class
4.1.3 Support for further economic development
4.2 Motivations of international financial actors
4.2.1 Mainly politically motivated actors
4.2.2 Mainly economically motivated actors
4.3 Governmental vehicles of motivation and work
4.3.1 Federal mortgage society
4.3.2 Federal pension funds
4.4 Summary on the Mexican housing structure
5 Foreign involvement and motivation in Mexican housing
5.1 Politically motivated international actors
5.1.1 World Bank and International Financial Corporation
5.1.2 Inter-American Development Bank
5.2 Economically motivated financial actors
5.2.1 Foreign commercial banks including local subsidiaries
5.2.2 Mutual funds and private equity
5.3 Interactions and summary on foreign involvement
6 Assessment of the situation and potential obstacles
7 Conclusion and ideas beyond
Research Objectives and Topics
This thesis examines the development of the Mexican low- and middle-income housing market following the 1994 economic crisis, analyzing the interplay between national policy changes, economic stabilization, and the influential role of foreign investors and international financial actors in shaping this sector.
- Evolution of the Mexican housing market since 1994.
- Economic and political drivers of the housing construction boom.
- The impact of globalization and foreign direct investment (FDI).
- Role of federal agencies (INFONAVIT, FOVISSSTE, SHF) in mortgage financing.
- Challenges related to infrastructure, sustainability, and market maturity.
Excerpt from the Book
3.1.1 General, systemic housing shortage
“Mexico has a shortfall of over five million homes today and the number of willing buyers per year continues to exceed that of the home production.” The deficit comprises of one million families that do not have a home, 1.3 million homes in need of full replacement, and 2.7 million families that live in homes with significant deficiencies. According to the same source, the sub-standard quality of many homes, the continuing population growth including the aging population the significant changes in society, and the strong under-supply with mortgages especially since 1994 are to be blamed for a grown shortage in Mexican housing.
Today, this development is fuelled by an ever growing middle-class with better financial abilities, the trend towards smaller family sizes, and the fact that many Mexicans soon enter the house forming age. Also, parents are now more able to save and later pass on something (i.e. a piece of real estate) to their heirs.
Moreover, this is strongly linked with (1) the generally still small availability of mortgages to private customers in order to finance new homes. (2) The fact that the Mexican population is growing at a faster pace than the housing market is producing and financing new homes. And finally, (3) the massive under-capitalization of housing development companies. However, this housing shortage does not necessarily mean that the affected people are actually out on the streets, but that they are living in sub-standard housing or just overcrowded places.
Summary of Chapters
1 Summary introduction: This chapter introduces the focus of the thesis, which investigates the growth of the Mexican low- and middle-income housing sector since 1994, driven by internal reforms and external investment.
2 Mexico, a developing country in a emerging region: The chapter explores Mexico’s economic and political transition, highlighting its integration into global markets through NAFTA and the shift towards market-oriented policies.
3 The Mexican housing market: It details the housing shortage, the segmentation of the market, and the critical role of demographics and changing consumer demands.
4 Driving forces for the increase of the Mexican housing base: This section evaluates governmental motivations and the role of financial actors in boosting the housing supply through infrastructure and financing.
5 Foreign involvement and motivation in Mexican housing: It analyzes how international financial and political actors exercise influence and provide capital to modernize and stabilize the housing finance system.
6 Assessment of the situation and potential obstacles: The author discusses current hurdles such as infrastructure maintenance, environmental sustainability, and the need for better land use planning.
7 Conclusion and ideas beyond: The final chapter synthesizes the findings, offering an outlook on future trends like 'green' housing and the long-term necessity of structural and fiscal reforms.
Keywords
Mexico, Housing Market, Mortgage Finance, Tequila Crisis, NAFTA, Economic Development, Foreign Direct Investment, INFONAVIT, FOVISSSTE, SHF, Urbanization, Social Stability, Globalization, Middle Class, Housing Deficit
Frequently Asked Questions
What is the central focus of this research?
This thesis explores the dramatic evolution of Mexico's low- and middle-income housing market from the 1994 Peso crisis to 2007, emphasizing how national policies and international actors facilitated this sector's growth.
What are the primary themes discussed in the work?
The core themes include the systemic housing deficit in Mexico, the revitalization of mortgage financing through federal agencies, the impact of international investment (FDI), and the socio-economic transition of the Mexican population.
What is the primary research question?
The paper asks how the Mexican housing market developed after 1994, what factors drove this transformation, what influence international actors exerted, and how the sector can be sustainably developed in the future.
Which methodology is applied?
The study is a theory-proposing case study that combines academic literature, empirical data, and first-hand insights gained from interviews with industry experts, business leaders, and policymakers.
What topics are covered in the main body?
The main body examines the economic development of Mexico, the structural challenges of the housing industry (shortage, under-capitalization), customer segmentation, and the strategies of governmental and private international stakeholders.
Which keywords characterize this paper?
Key terms include Mexico, housing market, mortgage finance, NAFTA, foreign direct investment, demographics, and social stability.
What role does INFONAVIT play in the Mexican housing market?
INFONAVIT acts as a major government-mandated pension fund that serves as a primary mortgage provider for private sector workers, significantly impacting the affordability and volume of housing loans.
How did the 1994 crisis affect the housing sector?
The 1994 Peso crisis caused a collapse in banking and a drying up of private mortgage financing, which forced the federal government to intervene and take a more active role in the housing supply and finance system.
- Quote paper
- Michael A. Braun (Author), 2007, The development of the Mexican low- and middle-income housing market since the economic crisis of 1994, Munich, GRIN Verlag, https://www.grin.com/document/116898
