Housing sector decline: households put off 20 billion investments due to low sales in 2023 – Sectors – Economy

2023 was not a good year for new housing. According to the urban coordination of the Colombian Chamber of Construction (Camacol), only 130,851 units were sold.

This means that during the last year Construction companies sold 106,554 less houses The decline in one year compared to what was recorded in 2022 is 44.9 percent.

This shows a decline in sales 20 billion pesos less in housing investment by households.

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But if we put a magnifying glass on social interest housing (VIS), which cost a maximum of 174 million pesos in 2023, the situation is more complex. Sales declined by 49.7 percent, as only 86,468 units were sold, Practically half of a year ago’s sales (171,828 units).

Meanwhile, sales of no vis in 2023, which are homes that can cost up to 650 million pesos, reached 44,383 units, 32.3 percent less than in 2022 (21,194 fewer homes).

The decline in sales impacted the start of construction of new projects. By December 2023, Camacol reports that construction of 138,418 homes had begun compared to 193,387 counted at the end of 2022, a decline of 28.4 percent.

The lower rates of initiation generally occurred in No VIS, falling by 22.5 percent, while VIS closed the year with a 30.6 percent decrease compared to 2022.

“The potential impact on employment of lower levels of work is estimated Gross domestic product (GDP), It is therefore necessary to implement a strategy that will allow to promote the construction of new homes,” said Guillermo Herrera, Executive Chairman of Camacol.

2023 was also a record year for housing offtake, which skyrocketed in the VIS segment from the end of 2022. The union reports that 37,753 families decided to abandon their purchasing process, Which shows an increase of 62.9 percent compared to 2022. Of these, 78.1 percent of resignations were in VIS, with this segment accounting for 91.5 percent of the resignation volume.

According to analysis conducted by Cárdenas Urbana, 31 percent of withdrawals were due to changes made to Mi Casa or the program by the Housing Ministry And 25 percent, for the cost of the loans that households will have to bear to complete the payment for the house.

(Also read: Real housing prices in Colombia have been falling for 15 months)

Combined, both factors explained approximately 16,500 of the 29,468 units left in the VIS segment.

Sector sources assure this Construction companies have been flexible and have allowed families to waive procurement procedures without penalizing them, Which is basically not refunding the money for the initial payment that they contributed on the date of withdrawal.

However, there are many complaints from people who claim that, after losing their job or being unable to obtain a mortgage loan, they gave up on purchasing. Construction companies have not returned the funds contributed for the initial payment And they have put into effect the penalty clause, which in some cases is 15 or 20 percent of the total value of the house.

In view of the crisis that the housing sector is going through since the beginning of 2022, the Chairman of Camacol reiterated that The priority in 2024 is to reverse the negative trend in commercial and construction indicators.

“We expect mortgage interest rates to begin to moderate during this year inflation trend, “This will improve the financial condition of families who want to buy homes and will be a decisive factor in reducing withdrawals,” he said.

Similarly he also said There is a need to promote housing policy in the Vis section Which starts the year with a subsidy loss of close to Rs 25,000. Guillermo Herrera said, “By 2024, between 72,000 and 75,000 subsidies will be needed from Mi Casa or the program, which is more than the 50,000 set by the national government.”

In return, he only indicated that Mi Casa Ya has guaranteed resources for 33,000 coverage at the rate required to operate. “It will be essential to make efforts to guarantee resources that effectively allow more Colombians to reach their homes with the support of the government,” he said.

Just this Monday, the subsidy allocation of the Mi Casa or program for 2024 was reactivated, so financial institutions can now resume the process of uploading documents to request the allocation.

The first assignment resolution will be released next Friday, February 2. According to the Housing Ministry, The allocation of the subsidy will begin with 1,700 places enabled weekly.

(Also read: Of the 11 measures announced for the housing sector, the government has not complied with 9)

Prices fall, but people don’t buy

According to the Banco de la República index, House prices are falling in real terms, That is, they grow less than inflation.

Over two years, from the third quarter of 2021 to the third quarter of last year, Used home prices have gone down, In real terms, 6.73 percent.

In new housing, this index shows that the maximum was reached in December 2021, and then prices fell till May last year. Despite some bounce back since May, these prices are still 3.4 per cent lower than the peak seen in December 2021.

A report by the International Monetary Fund indicates that Real housing prices should continue to decline until they reach pre-pandemic levels, Which will allow more people to get access to these properties again.

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