Real estate sales in Colombia have declined dramatically in 2023, with house sales in particular showing a steep drop that is worsening as the year progresses. Until August of 2023, the decline amounted to 52%, further increasing by 5 points to reach 57% in the sale of Affordable Housing (Viviendas de Interes Social or VIS), which is subsidized by the government.
Comparing the sales figures for August 2023 with the same month of the previous year, it becomes evident that this year only 8,699 units were sold, in contrast to the 18,192 units sold in August 2022. Sales of VIS homes experienced the most significant decline, with 5,613 units sold in August 2023, compared to 13,037 in the same month the previous year.
In terms of year-to-date accumulated data, for the first 8 months of the year, the decline reached 49.8% compared to the previous year. Consequently, sales plummeted from 173,575 during the same period in 2022 to 87,156 in the January-August period of 2023.
Causes of the real estate decline in Colombia
This significant decrease not only impacts the construction sector but also numerous related industries, putting an estimated 150,000 jobs at risk. Experts in the real estate sector attribute the decline to the high inflation that Colombia has been experiencing for almost two years, driving up construction costs. Additionally, adjustments to subsidy programs, and most importantly, the high interest rates that have been in effect for mortgage loans throughout 2023, have played a role.
In a year where the interest rate set by the Bank of the Republic has remained above 12%, peaking at 13.25% from May until November, many families have encountered difficulties in accessing credit, directly affecting the pace of house sales, both new and used.
Affordable homes subsidized by the government, designed for those with more limited resources, have experienced an even more pronounced decline in sales, as low-income individuals have even fewer opportunities to obtain a mortgage.
Jose Luis Mojica, an economist at Corficolombiana, also points to “the exhaustion of the 200,000 subsidies from the Mi Casa Ya program, which led to record sales in the sector in 2021 and part of 2022.”
Fewer housing developments
The significant decrease in sales has also resulted in a sharp drop in new housing developments. According to official data, as of August, new housing promotions saw a 51% decline compared to August the previous year.
Furthermore, the figures indicate that the decline is even more pronounced in VIS housing, which implies that the supply of this type of more affordable housing in the coming months will be lower than what is currently available in the market.