The financial system provides credit for the 40% of the population that does not already own, but many still fail to find financing. Some analysts already see a potential housing bubble.
(this is translated from an article in the local uruguayan paper ‘el pais’ – this is part one of two)
The 18th of September in the Blue Room of the Municipality of Montevideo, there were 300 dreamers who were able to make a claim with the National Housing Authority to get a resale house. Everyone else had to walk away empty handed.
Months ago, in winter, half a hundred people lined up at the premises of the Banco Hipotecario del Uruguay (BHU). The line was to receive credit to buy 72 houses under the Phoenix Plan that BHU would deliver the first thing on Monday. Those that could not stay the whole time, paid someone to watch their place in line. Although the bank decided to cut the execution and delivery numbers before Monday arrived, the line was symbolic of the built up demand for credit for real estate in Uruguay.
I had long hoped to reopen the Uruguayan mortgage markets. For many years, through good times and bad, BHU had been offering credit to those who could not otherwise afford home ownership. However the economic crisis of 2002 changed that. In 2004 the bank stopped making loans and only recently began offering loans to private borrowers — slowly.
The explosion in new credit creation came in 2008, accompanying not only the restructuring of BHU, but what was a good economic year.
Following the expansion of construction in December were more than 2,000 transactions in Montevideo, a record according to the report of the Housing Mirador National Housing Agency (ANV).
Last year was the busiest since the INE began publishing these statistics in 1997. Moreover, according to records, the same report, credit followed this trend increasing in the number of applications and the loan amounts.
Regardless, the amount of credit creation for real estate purchases are still far from historical levels. “The levels of 2007 and 2008 were exceptional. But the whole financial system including BHU, Brou (Banco de la Republica Oriental de Uruguay), and private banks are providing loans at a level of only a third of what BHU alone used to do,” said real estate analyst, Julio Villamide.
The expansion in credit slowed and even receded a bit in 2009 on the expectation that the international crisis would have a negative affect on Uruguay. While prices rose, transactions, and loan applications fell.
There were 372 mortgage loans granted in December and an average of 180 in the following months. The various financial institutions lent 181 million dollars per month last year, and only 146 million per month during the first half of 2009.
The Book of classifieds from El Pais, the local paper, witnessed a downward trend as well. Marcelo Calcagno, section chief of the book said that the level of real estate ads went down in November, and only recently are starting to return to normal levels, “In October the book was 76 pages of real estate. Now we are reaching 68″, he illustrated.
But according to estimates by Villamide, 2009 Uruguay real estate will end with the same exceptional values of 2008. In that regard, several real estate agencies said a well-priced apartment will sell in a few months. Given forecasts of the International Monetary Fund (IMF), the expansion will continue. And with it the risk.
“The IMF is announcing four more years of growth for the country with a strong rise in GDP as expressed in US dollars. This will also help sustain growth in levels of real estate activities, growth rates and more mortgage loans. If this expansion cycle continues, it is likely that over the next four or five years we could be generating a yellow alert for a mini housing bubble, “said Villamide. (in uruguayguy’s opinion, it’s closer to red and closer to now — you can’t have forever expanding prices without expanding incomes. the math doesn’t work).
However, the country seems to discourage that trend with increased speculative bets on economic sectors such as agriculture or forestry. The analyst noted, by way of example, that so far this year, the property sector received 700 million less in investment compared to other years.
“That’s very healthy because the real economy has to grow more, which eventually will be reflected in greater demand in the housing market, but more genuine demand. Because, as Villamide added, the bubbles have to run “like the plague”.
But to think of a housing bubble is still missing the point, some analysts hurry to clarify. “The demand for credit is important and growing but there is still time for you to expand further,” said Sandra Rodriguez, an economist at the Institute of Economics, University of the Republic.
She also said that the supply is concentrated in one sector of the population whose income is high and is concentrated along the coast. Then there is the offer of the Ministry of Housing, for middle-income sectors and low-middle and the purchase of resale Uruguay houses.
“You have to see how it evolves. We are far from subprime. On the contrary, many people find it difficult to get a credit because of imposing requirements which demand higher savings or income levels.
Housing Bubble in Uruguay
Dreaming of Bricks
The financial system provides credit for the 40% of the population that does not already own, but many still fail to find financing. Some analysts already see a potential housing bubble.
(this is translated from an article in the local uruguayan paper ‘el pais’ – this is part one of two)
The 18th of September in the Blue Room of the Municipality of Montevideo, there were 300 dreamers who were able to make a claim with the National Housing Authority to get a resale house. Everyone else had to walk away empty handed.
Months ago, in winter, half a hundred people lined up at the premises of the Banco Hipotecario del Uruguay (BHU). The line was to receive credit to buy 72 houses under the Phoenix Plan that BHU would deliver the first thing on Monday. Those that could not stay the whole time, paid someone to watch their place in line. Although the bank decided to cut the execution and delivery numbers before Monday arrived, the line was symbolic of the built up demand for credit for real estate in Uruguay.
I had long hoped to reopen the Uruguayan mortgage markets. For many years, through good times and bad, BHU had been offering credit to those who could not otherwise afford home ownership. However the economic crisis of 2002 changed that. In 2004 the bank stopped making loans and only recently began offering loans to private borrowers — slowly.
The explosion in new credit creation came in 2008, accompanying not only the restructuring of BHU, but what was a good economic year.
Following the expansion of construction in December were more than 2,000 transactions in Montevideo, a record according to the report of the Housing Mirador National Housing Agency (ANV).
Last year was the busiest since the INE began publishing these statistics in 1997. Moreover, according to records, the same report, credit followed this trend increasing in the number of applications and the loan amounts.
Regardless, the amount of credit creation for real estate purchases are still far from historical levels. “The levels of 2007 and 2008 were exceptional. But the whole financial system including BHU, Brou (Banco de la Republica Oriental de Uruguay), and private banks are providing loans at a level of only a third of what BHU alone used to do,” said real estate analyst, Julio Villamide.
The expansion in credit slowed and even receded a bit in 2009 on the expectation that the international crisis would have a negative affect on Uruguay. While prices rose, transactions, and loan applications fell.
There were 372 mortgage loans granted in December and an average of 180 in the following months. The various financial institutions lent 181 million dollars per month last year, and only 146 million per month during the first half of 2009.
The Book of classifieds from El Pais, the local paper, witnessed a downward trend as well. Marcelo Calcagno, section chief of the book said that the level of real estate ads went down in November, and only recently are starting to return to normal levels, “In October the book was 76 pages of real estate. Now we are reaching 68″, he illustrated.
But according to estimates by Villamide, 2009 Uruguay real estate will end with the same exceptional values of 2008. In that regard, several real estate agencies said a well-priced apartment will sell in a few months. Given forecasts of the International Monetary Fund (IMF), the expansion will continue. And with it the risk.
“The IMF is announcing four more years of growth for the country with a strong rise in GDP as expressed in US dollars. This will also help sustain growth in levels of real estate activities, growth rates and more mortgage loans. If this expansion cycle continues, it is likely that over the next four or five years we could be generating a yellow alert for a mini housing bubble, “said Villamide. (in uruguayguy’s opinion, it’s closer to red and closer to now — you can’t have forever expanding prices without expanding incomes. the math doesn’t work).
However, the country seems to discourage that trend with increased speculative bets on economic sectors such as agriculture or forestry. The analyst noted, by way of example, that so far this year, the property sector received 700 million less in investment compared to other years.
“That’s very healthy because the real economy has to grow more, which eventually will be reflected in greater demand in the housing market, but more genuine demand. Because, as Villamide added, the bubbles have to run “like the plague”.
But to think of a housing bubble is still missing the point, some analysts hurry to clarify. “The demand for credit is important and growing but there is still time for you to expand further,” said Sandra Rodriguez, an economist at the Institute of Economics, University of the Republic.
She also said that the supply is concentrated in one sector of the population whose income is high and is concentrated along the coast. Then there is the offer of the Ministry of Housing, for middle-income sectors and low-middle and the purchase of resale Uruguay houses.
“You have to see how it evolves. We are far from subprime. On the contrary, many people find it difficult to get a credit because of imposing requirements which demand higher savings or income levels.
to be continued….