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Banking

Mexico leads the way in Latin property finance

With heavy demand for housing piling on the pressure for additional mortgage funding, Mexico has pioneered RMBS issuance in Latin America. An active real estate market has also prompted as yet unfulfilled moves towards the creation of Reits. Leticia Lozano reports.

Maria Tapia, Standard & Poor’s “The local mortgage-backed bond market makes up 42% of Mexico’s capital markets. That is comparable to Europe and the US” Maria Tapia, Standard & Poor’s

FOR WEALTHY AMERICANS and Europeans, real estate in Mexico conjures up thoughts of stunning Caribbean beach houses and mountain-top retirement haciendas. For millions of working-class and middle-class Mexicans, though, four walls, a roof and a few tasteful furnishings are more than sufficient. However, for years obtaining even a simple home has been hugely difficult because of a lack of financing. Houses were built room by room, funded by hard-won savings and with luxuries such as plaster and tiled floors postponed almost indefinitely.

Things have changed for the better – now a fast-growing residential mortgage-backed securities (RMBS) market is generating an unprecedented flow of capital for an ever faster-growing housing market, giving Mexicans another way to construct their homes and opening a lucrative route into Latin America for international investors. Ever since Mexico’s first $54 million RMBS issuance in 2003, the market has flourished to become one of the biggest successes of the 2000-06 term of president Vicente Fox, who made the push for construction and financing of more affordable houses one of his flagship domestic policies.

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