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Mexico housing demand to slump in 2009, gov't warns

Source: Reuters - Fri 19th Jun 2009

Fewer Mexicans are buyinghomes this year as a deep recession and rising unemploymentmake buyers wary, Finance Minister Agustin Carstens said onThursday.

"Demand for housing this year will be 7.1 percent less thanin 2008" Carstens told executives at a mortgage industryevent.

Hit by falling exports to the United States, Mexico'seconomy is expected to shrink 5.8 percent this year. That hasboosted unemployment and made many Mexicans reluctant to committo big investments.

Still, leading home construction companies Geo and Homex have said they expect to increase sales asmuch as 10 percent this year by focusing on low-income segmentsthat benefit from government subsidies.

They say tough economic times are an opportunity for bigplayers to excel and gain market share from Mexico's thousandsof tiny and often inexperienced developers.

Tougher conditions in the home construction industry couldlead to consolidation among builders, some experts say.

"Small and less-capitalized home developers, as well assome financial institutions, could disappear or be acquired"Fitch ratings agency said in a recent report.

Geo chief executive Luis Orvananos told Reuters in May hiscompany increased its sales channels to make up for consumers' increased reluctance to buy homes. 

Mexico's largest mortgage lender is Infonavit, a governmentbacked agency funded by employer contributions on behalf ofemployees.

Mexico's banks are also relatively healthy, having focusedon traditional lending rather than the subprime niches involvedin the U.S. financial crisis.

While demand for housing is declining, financing availableto the industry should increase 2.5 percent this year, Carstenssaid.

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