Gloria Camargo
The Bank of the Republic (Banrep) published its Monetary Policy Report for April 2023, in which the prospects for the housing market in Colombia were presented.
According to the report, the housing sector experienced an increase in total investment between 2020 and 2022, due to growth projections for the economy after the pandemic. However, in recent months, the housing market has suffered a significant contraction due to the reduction in sales and the slowdown in the generation of future supply.
The report noted that in 2021 home sales reached a record high of 238,000 units, which represented an increase of 37% compared to the figures recorded in 2019. This result was due both to the segment of social interest housing (VIS ) as to non-VIS. However, by March 2023, the VIS had slowed by as much as 64%.
The report highlights that the economy between 2020 and 2022 was marked by comfortable financial conditions and the availability of household savings that helped finance spending due to repressed demand.
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Subsidies for home purchase were also one of the most relevant factors for the good performance of sales, since within the framework of the 2020 Compromiso por Colombia reactivation plan, the Mi Casa Ya program for home purchase was expanded from low-income households. This resulted in a significant increase in the number of subsidies allocated, from around 30,000 in 2019 to more than 65,000 in this period.
Starting in the second half of 2022, the dynamics changed and sales began to register annual contractions that have become more pronounced in recent months, explained both by the dynamics of the VIS and non-VIS segments. Housing prices have increased sharply due to the increase in production costs, which has led to renting living being a more profitable option for Colombians today.
In addition, the report highlights the increase in the financial burden and household debt, the reduction in confidence levels and the increase in the levels of country risk and the exchange rate. All these factors, together with upward adjustments in the monetary policy interest rate, have led to a moderation forward in the rate of generation of future supply in the sector in a context of reduced sales and little transmission margin. from costs to housing prices.
According to the report, housing launches have presented significant annual contractions compared to historically high levels, in an environment of construction costs that remain high, reflected in annual increases in residential Icoced, close to 14% in recent months.