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Housing demand in Mexico

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  • Fontenla, Matas
  • Gonzalez, Fidel

Abstract

This paper analyzes the components of housing demand in Mexico in the context of developing and developed nations. The case of Mexico is particularly interesting given that population and income dynamics, as well as current housing shortages, suggest that the demand for housing will significantly increase in the near future. We use micro-level data from market-based mortgages that originated during the period of 2002 to 2004 for 21 metropolitan areas in Mexico. We find the price elasticity of housing demand to be -0.3, lower than previous studies for developed countries and within the range for developing countries. Permanent income is a major component of housing demand, with an elasticity of 0.8. In contrast, temporary income has a very low elasticity of 0.04. The mortgage rate elasticity for 25-year mortgages is -0.39. We believe these results provide important information to policy makers and practitioners in Mexico and other developing nations.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Housing Economics.

Volume (Year): 18 (2009)
Issue (Month): 1 (March)
Pages: 1-12

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Handle: RePEc:eee:jhouse:v:18:y:2009:i:1:p:1-12

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Web page: http://www.elsevier.com/locate/inca/622881

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Keywords: Housing demand Mexico;

References

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  1. Malpezzi, Stephen & Mayo, Stephen K, 1987. "The Demand for Housing in Developing Countries: Empirical Estimates from Household Data," Economic Development and Cultural Change, University of Chicago Press, vol. 35(4), pages 687-721, July.
  2. Ferda Halicioglu, 2007. "The demand for new housing in Turkey: an application of ARDL model," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 9(1), pages 62-74.
  3. Edward C. Skelton, 2006. "Laying the foundation for a mortgage industry in Mexico," Economic Letter, Federal Reserve Bank of Dallas, vol. 1(oct.).
  4. Malpezzi, Stephen, 1999. "Economic analysis of housing markets in developing and transition economies," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 44, pages 1791-1864 Elsevier.
  5. Ermisch, J. F. & Findlay, J. & Gibb, K., 1996. "The Price Elasticity of Housing Demand in Britain: Issues of Sample Selection," Journal of Housing Economics, Elsevier, vol. 5(1), pages 64-86, March.
  6. Malpezzi, Stephen & Mayo, Stephen K., 1987. "User cost and housing tenure in developing countries," Journal of Development Economics, Elsevier, vol. 25(1), pages 197-220, February.
  7. Mayo, Stephen K., 1981. "Theory and estimation in the economics of housing demand," Journal of Urban Economics, Elsevier, vol. 10(1), pages 95-116, July.
  8. Goodman, Allen C., 1988. "An econometric model of housing price, permanent income, tenure choice, and housing demand," Journal of Urban Economics, Elsevier, vol. 23(3), pages 327-353, May.
  9. Lea, Michael J. & Bernstein, Steven A., 1996. "Housing Finance in an Inflationary Economy: The Experience of Mexico1," Journal of Housing Economics, Elsevier, vol. 5(1), pages 87-104, March.
  10. Goodman, Allen C. & Kawai, Masahiro, 1982. "Permanent income, hedonic prices, and demand for housing: New evidence," Journal of Urban Economics, Elsevier, vol. 12(2), pages 214-237, September.
  11. Joseph B. Lipscomb & John T. Harvey & Harold Hunt, 2003. "Exchange-Rate Risk Mitigation with Price-Level-Adjusting Mortgages: The Case of the Mexican UDI," Journal of Real Estate Research, American Real Estate Society, vol. 25(1), pages 23-42.
  12. González, Leonardo, 1997. "Estimación de la demanda de vivienda: Tenencia y gasto en servicios. El mercado metropolitano de México," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(256), pages 569-598, octubre-d.
  13. Zabel, Jeffrey E., 2004. "The demand for housing services," Journal of Housing Economics, Elsevier, vol. 13(1), pages 16-35, March.
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Cited by:
  1. María Angélica Arbeláez & Roberto Steiner & Alejandro Becerra & Daniel Wills, 2011. "Housing Tenure and Housing Demand in Colombia," IDB Publications 58678, Inter-American Development Bank.
  2. Marcela Cristini & Ramiro Moya & Guillermo Bermudez, 2011. "Argentina`s Housing Market in the 2000s," Research Department Publications 4733, Inter-American Development Bank, Research Department.

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