The global impact on the supply chain by the pandemic, as well as the inflationary effect on the Mexican economy have created a ‘perfect storm’ for the construction industry, mainly in the housing sector, whose effects have caused an increase of up to 15% in materials such as steel and cement.

Rodrigo Suárez, co-founder and COO of the institutional rental housing developer Hasta Capital, pointed out that these types of homes have risen in price due to higher construction costs.

“If there is general inflation, there is usually also inflation in rent. You can capture inflation in rent, so if construction costs go up, rents also go up, which helps us mitigate costs. Compared with levels prior to the pandemic, the direct cost of work probably increased by 15%, so it is significant,” he said in an interview.

At the national level, the rise in construction costs was reflected in an increase in the final price of the house of 7.6% during the first nine months of 2021 against the same period of the previous year. However, homeowners reported an average increase of 10% in the first nine months of the year.

“Unfortunately, with this inflation, affordable housing can hardly be done because we hear that inflation this year will even exceed 7%. But speaking of construction materials, the increase is going to be around 18%, and it continues to grow,” warned Ahumada Russek, CEO of Consorcio Ara.

Ricardo Trejo Nava, general director of the consulting firm Forecastim, pointed out that, despite the fact that the industry had been recovering marginally, the logistical crisis of the pandemic, in addition to the lack of domestic components in the materials industry, complicates the scenario for home construction in the country next year.

He added that, similar to what happened in 2017 when energy prices increased, the inflationary impact reached up to 15%, while, this time, the rise is related to materials such as steel, with price growth of up to 40%.

“Inflation in construction is on the order of 16 and a fraction, almost 17%, mainly driven by increases in metals, mainly steel, and what we, unfortunately, expect for next year is that we have another rise in steel,” said Francisco Solares Alemán, national president of the CMIC.

He added that the shortage of steel due to lower production in China, and also the lack of semiconductors for construction machinery, threatens to extend the recovery further, a situation that could extend even beyond the second half of the coming year.

“Housing prices are going to increase toward the end of this year. It is already happening. In the first half of next year, for all the housing that was under construction, the final prices will have a significant rise compared to what was in inventory, which had been built before material costs rose,” concluded Eduardo Torres, general director of the ai360 consulting firm.

Source: El Financiero