Mexico’s real estate up over 17% YTD
Among the emerging markets (EEM) (VWO), Mexican real estate has been doing exceptionally well so far this year. Mexican real estate equity that is part of the Guggenheim Emerging Market Real Estate ETF (EMRE) portfolio is up 17.6% YTD. PLA Administradora Industria, with a 39.3% return YTD (as of May 5) has been the top performing Mexican real estate company in this regard.
Mexico is also the top contributor to the iShares Emerging Markets Infrastructure ETF’s (EMIF) 10.9% return YTD (as of May 5). Mexico’s (EWW) infrastructure equity has returned 32.3% YTD. The three ADRs of the company Grupo Aeroportuario gave the required boost to the portfolio’s performance. Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (OMAB), Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (PAC), and Grupo Aeroportuario del Sureste, S. A. B. de C. V. (ASR) had returned 30.3%, 27.6%, and 38.2%, respectively YTD.
Valuations are attractive, growth promising
From a valuation perspective, Mexican real estate equity is relatively inexpensive at 8.65 times price-to-earnings. Mexican real estate equity also comes with an attractive dividend yield of 6.36%.
We maintain a positive outlook on the real estate market in Mexico (EWW), given the following:
- The over subsidy in the Mexican real estate market that was prevalent before the 2013 crash, is now down to normal levels. The Mexican economy, in general, is recovering, despite the Trump administration’s protectionist pledges and lower oil (USO) prices. This is a good sign for real estate which gains with the overall health of an economy.
- We see a supply-demand mismatch in the real estate sector in Mexico. There are signs of pent-up demand which should provide ample opportunity to real estate developers.
- Mexico’s middle class continues to grow, and this rapidly rising segment coupled with urbanization should provide a sustained boost to this Latin American (ILF) economy’s real estate sector.