Bloomberg News

Urbi Leads Builders Lower on Housing Policy: Mexico City Mover

February 11, 2013

Urbi Desarrollos Urbanos SAB fell the most in four months, leading homebuilders lower on speculation that President Enrique Pena Nieto will maintain a housing policy that has hurt cashflow.

Urbi, the country’s third-largest homebuilder by sales tumbled 5.8 percent to 6.54 pesos at 2:36 p.m. in Mexico City. It was the worst performance on the Habita index of six homebuilders, which plunged 3.8 percent to its lowest level in two months. Corp. Geo SAB, the second-largest homebuilder, dropped 4.6 percent to 13.42 pesos.

A statement on the presidential website today signaled that Pena Nieto, who took office Dec. 1, plans to continue former President Felipe Calderon’s policy to encourage more apartment construction, referred to as vertical housing. The government will seek to “consolidate our cities, growing in a vertical manner and in harmony with the environment,” according to the statement.

During Calderon’s tenure, Mexico increased subsidies for apartment-building construction that require greater initial investment from builders. This reduced cash flow for Urbi and Geo in recent quarters and has helped drive down shares 68 percent and 39 percent, respectively, over the past 12 months.

The government also said in its statement that the housing industry will require “structural adjustments” and a “24- month transition period will be established so all of the actors can carry out the necessary changes.”

Carlos Hermosillo, head of equity research for Grupo Financiero Banorte SAB in Mexico City, said investors are “disappointed” by a lack of details in the government’s statement, and the policy doesn’t seem to differ from Calderon’s.

“They mention a transition period that’s going to take 24 months,” Hermosillo said in a phone interview. “I’d say ’what transition?’ I thought we were already in the middle of one or even at the end of one. So when the government says there’s going to be another extended transition, that’s cause for concern.”

To contact the reporter on this story: Jonathan Roeder in Mexico City at jroeder@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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