The analysis of the situation facing the development of buildings, particularly housing, is not new and has been approached from different perspectives. However, since July, the reduction of accelerated mortgage credit rates by the financial system has put a new hope for reactivation in the spotlight. It is worthwhile, then, to make a brief evaluation of the housing mortgage portfolio prior to the beginning of the “rate war” and the possible impacts that could be consolidated in the sector in the coming months. With high interest rates, a scenario of lower purchasing power of households and the lower availability of subsidies, housing sales were strongly contracted throughout 2023, and in 2024 the situation has not been very different with a drop that in the year to July stands at 6.2%. A priori, the expected impact on the portfolio should be reflected in a reduction associated with the lower number of disbursements. In order to verify this, it is useful to resort to the publication of the Housing Mortgage Portfolio (CHV) by DANE. This considers housing loans and housing leasing and the analysis is developed on the total principal balance, understood as the amount to be paid for the initially loaned capital..
At the end of the second quarter of 2024, the principal balance of the mortgage portfolio stood at $131.2 billion, 78.6% of which was made up of housing loans and 21.4% of which was leasing. The results for the quarter represent an increase of 1.7% compared to what was reported in the first three months of 2024 and 9.1% compared to the same period of 2023. A breakdown by purchase shows that the balance related to the purchase of new housing expanded by 7.6% annually, surpassed by the 11.4% growth of resources destined to used housing. Now, focusing on housing loans, which are the ones with the highest participation, it is found that for the period of analysis the balance of capital expanded by 1.8% compared to the accumulated in the first quarter of 2024, standing at $103.1 billion. Separating by type of housing, there was an expansion of 4.3% in the balance destined to financing VIS housing, while that destined to Non VIS housing grew by only 0.1% (see Graph 1). This is related to the number of housing loans in the portfolio. For the second quarter, the housing portfolio consisted of just over 1.4 million loans, which represented a growth of 0.9% compared to the previous period. There, the VIS segment was the one that registered positive variations (1.6%), while the Non VIS segment registered a 0.2% drop in the number of loans.
These results are in line with the situation faced by the sector, inasmuch as the Non-VIS segment is the most affected by high rates, which undoubtedly discourage financing for home purchases.
This situation for the VIS segment is partially offset by the rate coverage provided by the Mi Casa Ya program. This is corroborated in the analysis made by Camacol in the September 41 Economic Report, which states that periods with significant increases in interest rates lead to accelerated drops in housing sales (an increase of one percentage point in the rate leads to drops in the growth rate of sales of 9.3 pp VIS and 3.9 pp in Non VIS). However, as shown in the same report, the reaction does not turn out to be equally accelerated when entering periods of rate reductions (a one percentage point decrease in the rate leads to increases in the sales growth rate of 6.1 pp VIS and 1.4 pp in Non VIS). Hence, accelerating the rate reduction process, as has been promoted since the beginning of the “rate war”, turns out to be positive for the dynamics of the construction sector. So much so, that under the path of monetary policy rate cuts, the outlook for the end of 2024 kept the variation of housing sales in negative territory, while with the “war” the sector could achieve growth by the end of the year.
Sources:
- Comentario Económico ANIF, September 2024
- Camacol
- DANE
