[Economics] The abandonment of the purchase of housing: a scourge for the economy of the construction sector in Bogotá and the region

[Draeno]

 

The last report presented by the Colombian Chamber of Construction (Camacol), based on its Urban Coordinate system, revealed unpleasant news for the sector in the country, due to the drop in home sales, since they are being completed even fewer offices than in the covid-19 quarantine.

“During the time of the pandemic, when we were locked up and thinking that we were going to die, we sold 6,300 social interest homes (VIS) per month. Today we are selling 5,800″, explained the president of Camacol Guillermo Herrera, making a parallel on the problem.

Well, one of the factors that was put on the table in terms of the factors that have affected the sale of housing is the withdrawal of citizens from continuing with the purchase, which directly affects the construction sector and creates an echo in job creation.

"It is important to point out that the new housing market in Bogotá represents 1 out of every 5 new homes in the country, and each new home that is built generates 4 direct and indirect jobs, and mobilizes 54% of the country's productive apparatus through through the demand for inputs and services. In this sense, the effect of the contraction on housing sales in the city can significantly affect occupancy and aggregate economic dynamics,” said Edwin Chiriví, who is Camacol's manager for Bogotá and Cundinamarca.

Among the situations that have led to the withdrawal, which exceeded 2,100 as of February, have been the difficulties presented in the Mi Casa Ya program. This has a very high penetration in the social housing market, since about eight out of ten low-income homes sold in Colombia are subsidized by this program.

In October 2022, the budget resources of Mi Casa Ya ran out and from that moment the disbursements of said subsidies were suspended, which has generated a block in the dynamics of the sector. "Today we have some 52,000 homes that have not been delivered to their beneficiaries due to lack of disbursements," says Herrera.

According to Chiriví, the contraction in housing sales for the first quarter of this 2023, "is mainly explained by three factors that affect the investment decision of households: less economic activity in general, the increase in interest rates, interest and the reduction of the social housing market. Regarding the latter, the restart of the subsidy allocation process and the expected increase in resources to finance the Mi Casa Ya program are a good time, we hope they will help reverse this trend.”

The Camacol manager even stressed that the allocation of new subsidiary plans for the Colombian po[CENSORED]tion can help lift the sector out of the crisis. “One of the main solutions to the current housing situation in the city is that the process of assigning new subsidies and the additional resources to finance the Mi Casa Ya program reactivate the willingness to purchase homes and stimulate the creation of jobs and real estate investment in general," said

Some other causes are the growing inflation, which increased the cost of materials such as iron, steel and cement, and which today in Colombia has not yet reached the ceiling (it is at 13.34%). The increase in the reference rates of the Banco de la República, which in 18 months took it from 1.75% to 13%, increasing the cost of financing. And after two years of expansion in the economy, it was time for the slowdown, which would lead Colombia to growth close to 1%.

The numbers
According to the most recent quarterly analysis, during January, February and March, 21,728 units were sold in Social Interest Housing (VIS) —which means more than 70% of new housing—, which represents a drop of 58% compared to the same period from the previous year.

In the data for the 12 months until March, 60,000 units have stopped being marketed in the last year, a drop of 25%. And if the exercise is monthly, in March, the variation had a contraction of more than 60%. In total new housing (including VIS and non-VIS), the outlook is no better and in the same period, the contraction is 25.4%, with a market that would be below 200,000 units per year.

For some, the situation could be the reflection of a base effect in the face of historical growth in recent years, while others argue that it is a normal cyclical movement in the sector.

However, in the last 15 years, the country has gone through three major crises —subprime, the fall in oil prices in the middle of the last decade, and the pandemic—, and in none of them have fewer homes been sold than now, being one of the most pronounced falls of the last three decades. If the situation continues, the annual sales projection for VIS would be below 100,000 units at the end of 2023, which would represent a 43% drop.

 

https://www.semana.com/nacion/articulo/el-desistimiento-a-la-compra-de-vivienda-un-flagelo-para-la-economia-del-sector-constructor-en-bogota-y-la-region/202325/