Colombia | Real Estate Outlook 2022

BBVA Research present the report on the Colombian real estate sector for the year 2022. This edition covers the dynamics and structure of the sector, its prices and costs, financing and interest rates, the non-residential market and the long-term determinants of housing demand.

Key points

• Key points:
• In Colombia, construction accounts for 13.5% of GDP and 7.3% of employment (1.7 million jobs). New housing sales are worth more than 60 trillion pesos per year (4.1% of GDP). Social housing is the 71% of new housing sales. The ten largest construction companies in the country have 37% of the market. The mortgage portfolio is 8.3% of GDP. An average loan for new housing is $68 million, while it is $95 million for a used home.
• The housing sector is slowing down since May 2022. However, it remains at high levels of activity compared to its own history and has its main risks under control as it faces the new stage of the economic cycle. Even so, an increase in inventories, purchase cancellations and project interruptions is possible in 2023, which will imply significant challenges for companies in the sector.
• The residential sector is concentrated in social housing, which is where most structural demand exists and is supported by public subsidies. This conformation of the real estate supply will help to face the slowdown, since the VIS segment is less elastic to shocks that reduce household income when public subsidies are in place. However, work must continue on the financial closure of the most vulnerable households because the increase in interest rates and inflation reduced their ability to pay and save.
• The low growth in real estate prices since 2021 stands out. On the one hand, it represented a challenge for builders' margins. On the other hand, it will reduce the risk of an overvaluation of housing prices and control the deterioration of households' housing affordability.

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