INVESTORS LOOKING FOR long-term growth in mortgage-backed securities have to hope for more than the occasional developed-market housing bubble. Rather, they would seek out a market with relatively little mortgage penetration, giving lots of room for growth. There would also be strong population growth, especially among people aged between 20 and 40; an economy with low long-term interest rates; and a government where legislators from all parts of the political spectrum are agreed on the need to build much more housing stock and sell it on the private market. Finally, of course, there would be well-developed domestic capital markets, including pension funds looking for long-term investments, and lender-friendly bankruptcy laws allowing for repossession in the event of default.
No country fits the bill better than Mexico. According to official projections, the number of households in Mexico will have increased by 59% between 2000 and 2020, to 36.3 million. The total mortgage portfolio in the country will increase by much more than that: just 11.1% of GDP today, it is conservatively projected to be 27.7% of GDP by 2020. And if private-sector mortgages continue to grow at their present pace, the sky is the limit: the number of mortgage loans originated by building societies (sofoles) and banks grew by more than 50% in 2005 alone.