Lagging economy, slow population growth affecting P.R. housing market
Puerto Rico’s demographics have significantly influenced the housing market in recent years and it is expected to continue playing a crucial role in its future, according to the findings of the “Puerto Rico Housing Market Outlook 2011-2015” study revealed Wednesday by the Puerto Rico Bankers Association.
The study identifies the economic and social factors that have influenced the demand for housing on the island and highlights alternatives to serve the housing needs of underserved segments of the local population.
Among other findings, the study noted that a slower population growth has significantly influenced the island’s housing market. The 2010 U.S. Census showed a 2.17 percent contraction in the island’s population, which will result in a mere 0.7 percent growth in households between 2010 and 2015, said Bankers Association President Aurelio Alemán.
The study also revealed that housing in the $80,000 to $100,000 price range needs to be better served, as it is the segment that is in high demand by working families and the elderly population.
“A significant portion of our population is over 60 years old. At the same time, we have young families with moderate income who do not find housing within a price range they can afford. This suggests two courses of action: the need to take short-term steps to offer affordable housing to young families, and ensure housing alternatives for our population over 60,” Alemán said.
“The banking industry is actively working to provide alternatives to solve the current housing situation experienced by low and moderate-income families,” said Alemán, who is CEO of FirstBank. “This survey provides us with an enhanced perspective of the real needs of this group and will provide support to our different efforts aimed at this particular goal.”
The study presented Wednesday is an update of the Bankers Association’s Housing Demand Study of 2007 and includes changes that have affected the local housing market in the last five years, such as the economic downturn, as well as demographic and financial challenges, which affect housing demand. The report cited data from the Construction and Sales Activity Report published by Estudios Técnicos Inc., and the quarterly statistics published by the Office of the Commissioner of Financial Institutions.
Findings key in defining banking sector’s role
The study’s findings are key to establishing a series of processes in the banking industry and plays a key role in defining the industry’s role as a facilitator of affordable housing in Puerto Rico, Alemán said.
On a positive note, the study revealed that the economic contraction has slowed down, indicating that the recession is ending and pointing toward the possibility of a modest improvement in the housing market in the near future.
Furthermore, the study confirmed Puerto Rico’s housing offer is significantly better compared to the scenario that prevailed in 2007. The existing housing inventory will satisfy market needs for the next 24 months. Nonetheless, the inventory of properties priced at less than $200,000 could run out in many communities during 2012.
While housing sales should remain at moderate levels in the next four years, Alemán said “proactive measures” may help promote a turnaround.
“Factors that may significantly contribute to boost housing sales include the construction of low-cost units, the revitalization of urban areas, and price reductions in new developments. In addition, tax incentives from the government to promote the sale of low-cost housing may not only help a large segment of our population, but also to boost sales and promote the growth of the housing industry,” said Alemán, adding the Bankers Association’s recommendation that government housing incentives scheduled to end in June should be extended through the end of the year.