Latin America's Real Estate Boom
Latin America's Real Estate Boom
Despite concerns over the impact of U.S. housing market troubles on the global economy, solid growth has been forecasted for Latin America's real estate sector as it draws foreign investors. At a recent AS/COA discussion forum, experts focused on how global market volatility could affect Latin American economies.
Even as the U.S. housing market’s downturn has sparked fears of worldwide financial repercussions, Latin America’s real estate market appears unharmed by the U.S. subprime mortgage crisis. In Latin Business Chronicle, experts predict growth in the region’s real estate sector, with property markets heating up, particularly in Brazil and Mexico.
In comparison to the U.S. real estate market, where property yields range from 5 to 8 percent, Latin American property yields have hit between 9 and 15 percent. Investors Business Daily reports that U.S. real estate investment trusts and private equity funds have fueled the surge, with European investors beginning to show interest as well.
A report by Canada’s National Post focuses on Brazil’s building and real estate boom, attributing it in part to an expanding middle class and a corresponding demand for housing. Ongoing political stability and economic growth have boosted living standards in Latin America. An Economist article examines Brazil as an example of Latin America’s new financial stability in the face of U.S. economy woes.
However, the softening U.S. housing market has affected remittance flows, particularly to Mexico, because of that downturn in the U.S. construction sector. With as many as a quarter of legal—and probably a similar percentage of undocumented—Mexican migrants in the United States working in construction, the slowdown has contributed to a deceleration in how much money those workers send home. While remittance rates grew by over 23 percent in the first six months of 2006, the growth rate slowed to 0.6 percent in the same period for 2007.
In September, AS/COA brought together financial experts to discuss how global market volatility could have an impact on Latin American economies. Speaking with cautious optimism, they agreed the region is better-positioned to withstand external downturns than in the past. In a recent issue of Viewpoints Americas, Chief Economist for Fedex Services Gene Huang writes that Latin America is playing a major role in the success of the global economy while the United States “takes a break.”
