Sunday, 23 August 2026
Mexico’s residential market continued to record rising property values during the second quarter of 2026, although the pace of growth moderated compared with the beginning of the year. Housing demand remains supported by demographic pressures and the continuing need for homes in the country’s major cities, but high borrowing costs and a shortage of appropriately priced properties are making affordability an increasingly important constraint.
Residential prices increased by approximately 7.3% nationally compared with the second quarter of 2025. During the first six months of the year, the increase reached 7.9%, remaining well above general inflation. The pace nevertheless slowed from the annual increase of 8.7% recorded during the first quarter, suggesting that the market is gradually moving away from the stronger price growth seen during the previous phase of the cycle.
Newly built properties continued to increase in value slightly faster than existing homes. During the first half of 2026, prices for new housing rose approximately 8.3%, while existing properties increased 7.5%. Detached houses recorded growth of around 8.4%, compared with 7.4% for apartments and condominium properties.
The strongest increases were recorded at the less expensive end of the market. Housing aimed at lower-income buyers increased in value by approximately 10% during the first half of the year, compared with around 6.7% for middle and higher-priced residential categories. This is particularly significant because it means the greatest pressure is occurring in the part of the market where households generally have the least capacity to absorb higher purchase prices.
The average assessed value of homes purchased with mortgage financing reached approximately MXN 1.96 million during the first six months of the year. The median was considerably lower at around MXN 1.30 million, demonstrating the wide variation in housing values across the country and the influence of more expensive transactions on national averages.
Approximately one quarter of financed residential transactions involved properties valued below MXN 843,000, while three quarters were below approximately MXN 2.23 million. The figures illustrate the scale of Mexico’s lower and middle-income housing market and why increases in this segment have significant implications for overall affordability.
Price movements also varied substantially between cities. Guadalajara recorded one of the strongest increases among the major metropolitan markets, with residential values rising approximately 11.1% during the first half of 2026. Tijuana followed at around 9.7%, while Puebla-Tlaxcala recorded approximately 8.5%, Monterrey 8.3% and León 7.9%.
Growth was more moderate in Querétaro at approximately 5.6% and Toluca at 5.1%. The Valley of Mexico, including Mexico City and its surrounding metropolitan area, recorded an increase of around 4.6%, significantly below the national rate.
The slower increase around Mexico City does not necessarily indicate weak housing demand. The capital is already one of the country’s most expensive residential markets, meaning affordability places a greater restriction on how quickly prices can continue increasing. Limited development opportunities in central areas, high land costs and strong demand for well-connected neighbourhoods continue to support property values.
Mexico City also illustrates a wider problem affecting the national residential market. Demand for housing remains considerable, but the homes being produced are not always located or priced where the greatest need exists. This is particularly important for middle and lower-income households that need access to employment centres but increasingly struggle to purchase properties within reasonable commuting distances.
Mortgage costs remain another major obstacle. Average residential borrowing rates stood at approximately 11.42% during the second quarter. Although monetary conditions have begun to ease, mortgage finance remains expensive compared with the purchasing power of many Mexican households.
High interest rates have a particularly strong impact when combined with several years of rising property values. Buyers must provide larger deposits while also financing more expensive homes at relatively high borrowing costs. This limits the number of households capable of converting underlying housing demand into completed purchases.
Mortgage lending has nevertheless remained active. Banking data towards the end of the second quarter indicated continued growth in housing loan portfolios at some of the country’s largest financial institutions. This suggests that financing conditions have slowed demand rather than bringing the market to a standstill.
The supply side is also beginning to improve following several years of weaker construction. Mexico’s available housing inventory increased substantially during 2025, reaching approximately 269,000 units, around 35% more than a year earlier. The increase indicates that developers have started rebuilding the supply of homes available for purchase.
Greater inventory alone, however, does not resolve Mexico’s housing challenge. A substantial proportion of demand is concentrated among households that require relatively affordable properties, while development economics frequently favour more expensive projects. Land prices, construction costs, infrastructure requirements and financing expenses make it difficult to deliver new homes at prices accessible to lower-income buyers.
This imbalance is particularly visible in large metropolitan areas. Developers can often achieve better returns by concentrating on smaller apartments or higher-value residential schemes, while the largest unmet requirement remains housing affordable to workers and families.
The existing-home market consequently plays an increasingly important role. In expensive cities such as Mexico City, previously occupied properties can provide alternatives where limited land and high construction costs restrict new development. Renovation and redevelopment of older residential stock may therefore become a larger part of the housing market as cities become denser.
Regional differences are also becoming more important. Guadalajara, Tijuana and Monterrey continue to experience stronger price growth than the Valley of Mexico, reflecting different combinations of employment creation, industrial investment, migration, housing availability and population growth.
Industrial expansion is particularly relevant in several regional markets. Manufacturing and logistics investment has increased employment and attracted workers to cities in northern and central Mexico, creating additional housing requirements close to major employment centres. Where residential construction has not kept pace, this can place further upward pressure on prices and rents.
For developers, the opportunity remains considerable, but the challenge is increasingly one of affordability rather than simply demand. Mexico has a large population, continuing household formation and significant housing requirements, yet the gap between household incomes and property prices limits the number of buyers able to access conventional mortgage finance.
The second half of 2026 is therefore likely to bring further residential price increases, although probably at a more moderate pace than during the strongest recent years. Lower interest rates could gradually improve purchasing conditions, but any benefit may be partly offset if property values continue rising faster than household incomes.
Mexico’s residential market is consequently entering a more complicated phase. Demand remains substantial, construction is recovering in selected locations and property values continue to increase, but the ability of households to purchase those homes is becoming the central issue.
The greatest challenge is no longer simply producing more housing. It is delivering homes at prices that match local incomes, in locations where people can realistically reach employment, transport and services. Until that gap narrows, Mexico is likely to continue experiencing the unusual combination of strong underlying housing demand and an increasing number of households unable to afford the properties the market produces.
Research & Analysis: CIJ.World
