New housing sales in Colombia have fallen by 50% in one year. This figure completes 17 months of continuous falls in the sale of residential real estate in the country. Housing sales in the free market have fallen by 40.4% compared to November 2022, while in operations with social interest properties, which have public subsidies, the drop is even greater, reaching 54.6%.
According to data from the Colombian Chamber of Construction (CAMACOL), the year 2023 will be “a year to forget”. According to their data, the decline began in June 2022, although it has been this year when the falls have worsened. Between January and November 2023, sales of low-income housing (VIS) registered contractions of 50.9%. During the year, a total of 103,000 VIS and Non-VIS homes were not sold. The drop in sales represents a loss in investment in housing of close to Col$19 trillion (US$ 4.8 billion).
The impact is also reflected in the contraction of new-builds, which during 2023 fell 30.1% in the VIS segment and 22.6% in Non-VIS, representing the start of construction of 49,906 fewer units compared to 2022, which in addition, point to a lower demand for labor for 2024.
Reasons for the drop in sales
“In a normal year sales are 58 billion, this year we have only sold 38 billion,” said Guillermo Herrera, president of CAMACOL. The reasons for this significant drop in sales are diverse. According to the study, the main one is related to the changes introduced by the government in the ‘Mi Casa’ Program, which supports citizens’ access to subsidized housing. In this regard, the number of withdrawals for this reason is 31%. On this important point, the two main reasons for withdrawing from housing projects are the range of subsidies and delays in their allocation.
Access to credit has also favored the soaring number of withdrawals from the purchase of subsidized housing. With a very high interest rate of 13.25% since May, the possibilities for many families to access bank loans have been greatly hindered. As a result, 25% of homes have not been purchased. Finally, for reasons related to the specific construction project, the rate of cancellation is 16%.
Concern about impact on employment
Construction is an important sector for employment in Colombia. Consequently, this year’s negative data is worrying because of the obvious effects that it will have on the labor market in the coming months, causing less hiring, since there are currently more projects underway than there is demand in the market.
When these works are finished, and if the pace of sales does not recover, the slowdown in new promotions will be important, seriously affecting construction workers. This was acknowledged by Guillermo Herrera, after presenting this year’s devastating report.
“In the last months the initiations are above the sales, the gasoline of the sector is running out. Today we initiate more than what is sold, in the future this means that there will be deterioration in construction and employment,” said the president of CAMACOL.
Similarly, housing is only one part of the construction sector, which has been slowing down for months. The National Administrative Department of Statistics (DANE) reported that the national GDP fell 0.3% in the third quarter of this year, and when analyzing the result of the value added by large branches of activity, construction drove this fall with -8.0% in its annual variation, and this was driven by the reduction of civil works (-15.0%), among other aspects, such as specialized activities and the added value of buildings, with data also down.