Queretaro’s Housing Market Brings Hope to DevelopersThu, 11/01/2018 - 11:01
The infrastructure industry is vulnerable to geopolitical uncertainty and global market fluctuations. Highly dependent on materials prices, in recent years some cities have experienced a contraction of construction activity as inflation pressured new developments. Daniel Tovar, Director General of LATAM at Grupo Acerta, says that as a result, developers are looking to cities that have withstood these challenges. Among the leaders is Queretaro. “The inflationary impact on the housing sector has drastically boosted prices all across the country. Yet, in comparison to other Mexican markets, Queretaro has contained its prices,” he says.
In the last few years, Queretaro has become home to hundreds of new families. After the September 2017 earthquake, INFONAVIT in Queretaro saw a 33 percent increase in weekly mortgage requests in the state, jumping from 300 loans a week in 2016 to 400 weekly in 2017. Forming part of the Bajio region that represents more than 15 percent of the entire Mexican housing market, Queretaro is now among the Top 5 real estate destinations in Mexico according to the Mexican Association of Real Estate Professionals (AMPI). Many housing developers see Queretaro as the land of opportunity, with an increase in demand forecast for 2018.
Its demographics, industrial attractiveness and proximity to Mexico and Leon make Queretaro a job magnet, boosting the demand for new homes. Developers, including Grupo Acerta, are taking advantage of these factors and looking for new ways to innovate and adapt to the changing needs of new generations. “This year we have been analyzing the opportunity to venture into the rental housing sector and we believe that the results that we have received are positive,” Tovar says. “We are validating a new project for this subsector for the next few years.”
The factor that no developer can escape is volatility. Much like 2017, 2018 began under a cloud of uncertainty, causing a contraction in the country’s economy. In 3Q17, GDP shrank by 0.3 percent compared with the previous quarter, the first contraction in almost two years. This has made it difficult for companies like Grupo Acerta to attract investment. NAFTA renegotiations, rising inflation rates and the November 2018 mid-term elections also led to investor caution. “We have not been able to carry out other projects in our pipeline due to a lack of funding,” he says. “We continue to search for investors that believe in our capabilities. This has been our greatest challenge despite our experience as developers.”
Still, despite the challenges, Tovar says money for investment is there. “Investors are being more cautious, but are still looking for opportunities to invest. We have received positive responses from the banking sector in general and were able to close deals with Banregio and Santander,” says Tovar. Grupo Acerta surpassed its growth expectations in 2017 and aims for 15-20 percent in 2018, a conservative prediction according to Tovar. He adds that convincing investors and attracting capital will always be a challenge for developers.
The construction of housing also involves many public entities, which creates yet another hurdle. “We faced additional challenges working with public bodies on environmental issues because not only were they from different levels of government, but also different agencies,” says Tovar. In some situations, companies face several rounds of negotiations to achieve a win-win situation, making processes much more tedious. “Aligning our interests is difficult,” he continues. “There always comes a time where we believe the government is overstepping and vice versa.”
Grupo Acerta is developing its first planned community in Queretaro, called Altos, in the Juriquilla area of the city. As of January 2017, it had sold more than 50 percent of its lots to renowned developers Ruba, Caisa and Urbana. “The average price for a vertical development is approximately MX$25,000/m2 and for horizontal developments it is around MX$20,000/m2,” says Tovar. The company also has its own housing developments within Altos, called ZENDA and Celesta. ZENDA will have 109 individual lots. The project is in the procurement stage. Celesta contains 166 apartments and by February was in the commercialization and presale stages. “The development is receiving a good response from the market and as of January 2018 we have more than 20 apartments sold,” Tovar says.