In the 40 most important real estate markets of the country, 2015 brought a continuation of the consolidation trend seen in the Middle, Residential, and Residential Plus markets insofar as the number of project starts is concerned. The conditions of size, profitability, and feasibility of developing projects in those segments would seem to favor more and more project starts in the middle and upper segments of the market. However, in the overall result, the number of project starts in 2015 was 31% lower than the number of starts in 2014, thus breaking the upward trend that began in 2010 and seemed as if it would continue for longer to gradually recover the dynamics of new project starts.
Project starts for 2016 will depend mainly on planning, land purchases, management, and investments started, in the best case scenario, in 2015.
For the affordable entry level segments (S and E), the guidelines for mortgage financing, as well as the effects on the profitability of projects in these segments, given the longer time required compared to higher value segments, will continue to affect a smaller number of affordable entry projects started over 2016.
The volume of units started in 2015, however, has shown no clear signs of recovery. The volume of unit starts has been on an ongoing downtrend since 2007, without it reversing significantly.
In nearly every segment, the volume of unit starts in 2015 has decreased significantly compared to the number of units started in 2007. In the best case, the decrease was 35% (Middle segment); however, the extreme drop was seen in the S segment (77% less unit starts in 2015 vs. 2007). Overall, the volume of unit starts in 2015 was 78% lower than in 2007, going from 417.8 thousand unit starts in 2007 to an estimate of slightly over 92 thousand unit starts in 2015. This opens up great opportunities to weed out the market and make room for new projects.
The relative stability of the overall sales volume will allow imbalances between supply and demand to prevent distortions in prices or purchase terms.
The sales in the 40 main housing markets in the country have remained at slightly over 300 thousand units per year in the period from 2010 to 2014. In 2015, the scarcity of project and unit starts has hampered a full recovery of the supply to make the demand want to remove inventories. Thus, in 2015, the total sales volume is estimated to be 26% lower than in 2014. Ahead, if the planning processes for starting up new projects in 2016 do not bear fruit and
the project starts in 2016 do not replenish the offer of housing depleted by the market, sales volumes of finished new housing could fail to recover.
The train of new unit and project starts could have effects next year on the monthly sales volumes in each city. As, overall, the sales progress is over 55% of the units under construction, the markets are deemed to lack an excess supply, which would see a positive response from monthly sales volumes through the entry of new projects in agreement with the market.
If new projects are not started, the lower number of finished new housing units offered will generate significant decreases in sales volumes. Thus, at the current sales level and without new project starts to replace the sold
out ones, units for sale will suffer a significant depletion in 2016.
The impact on average national prices, based on the lower supply dynamics, and thus, a similar response from demand, has been limited.
Thus, average prices per unit have remained stable, recovering, in the best case scenario, the inflationary increase. Some strategies of reducing the inhabitable area, as well as standardizing the attributes and finishes, will make it possible to limit the increase in prices to maintain the stability of sales.
Upcoming price increases are expected to depend on changes in the structure by market segment; that is, the sales of higher segment products will start to gain market share, rather than seeing price increases for the same product in the same segment.