PERU: STATE OF THE HOUSING INDUSTRY IHA Secretariat

2 COUNTRY: Peru NAME OF ORGANIZATION: Peruvian Construction Chamber - CAPECO 1- ORGANIZATION OVERVIEW: CAPECO is the largest organization representing Peruvian companies related to the construction sector. It has more than 700 members, 60% are located in Lima and the others in five regions: Arequipa, Chiclayo, Piura, Cusco e Iquitos. CAPECO´s mission is to contribute to economic development of the country and social welfare of the Peruvian citizens, promoting construction industry through: (a) Political, legal and normative initiatives; (b) Technical and Professional Training; (c) Economic and Market Information; (d) Strategic partnerships with public and private stakeholders; (e) Technical and Commercial Events. CAPECO promotes EXCON, the most important construction´s fair and develops market researches from real estate sector in Lima and main cities. Its Construction´s Superior Institute-CAPECO provides technical careers and short courses related to construction activity. CAPECO negotiates industry´s salary with the union. PERU: STATE OF THE HOUSING INDUSTRY

3 2- HOUSING AND ECONOMIC STATISTICS: Starts (1) (2015):PercentagesNumbers: - Single Family 12% Multifamily 88% Gross Domestic Product (GDP) US$ 186,7 billion GDP Growth (2015) + 2,9% GDP Per Capita US$ House Price Index 2015 (2) + 1,0% Consumer Price Index + 4,4% Unemployment (Nov 2015) 6,3% Home Mortgage Interest Rate (Nov 2015) 9,1% Home Ownership Rate (2014) 75,8% Population Growth/Net (2015) + 1,1% PERU: STATE OF THE HOUSING INDUSTRY (1)New houses sold and formally built in 35 largest urban areas (2)Lima only, peruvian currency

4 3- HOW HAVE ECONOMIC AND/OR POLITICAL CONDITIONS CHANGED SINCE THE BEGINNING OF 2015? In 2014, Peru had the lowest GDP growth (2.4%) since 2009 (1.0%). In 2015, this rate reached 2.9%. Average growth in period was 6.5% per year. Private Investment was the trigger for the Peruvian economy between 2004 and 2013, reaching 23% of GDP. However, in the last two years there was a fall of 8.4%. From 1990, Peruvian national administrations have developed economic policies based on open market, promotion of private investments, protection of property and free commerce. In the last 15 years, Peru has signed FTA with 17 countries and geo-economic blocs. Peru will have demographic bonus for the next 20 years. But, weakness of the political institutions have failed to implement second- generation reforms needed to ensure country's long- term competitiveness. Modernization of the National Congress, independence and integrity of courts and police, reduction of informality, protection for start-up and operation of strategic projects (mining, energy, roads, ports, etc.) are urgent issues for the next years. On the other hand, risk that populist or radical parties win presidential election is quite low, at least in mid-term. But social violence, public insecurity and crime are still a problem. PERU: STATE OF THE HOUSING INDUSTRY

5 4- HOW HAVE THESE AND RELATED INSTANCES OF INTERNATIONAL FINANCIAL MARKET TURBULENCE, INCLUDING THE SLUMP IN COMMODITY PRICES, PARTICULARLY OIL, IMPACTED YOUR HOUSING MARKET? Mining is the most important export industry of Peru: US$ 20 billion, 50% of total exports in It fell 18% over previous year. Mining investments have great influence in construction sector development. Oil prices had no relevant impact in Peru´s economic results or exports. International financial turbulence resulted in a slight increase of interest rates, affecting mortgages and finance of real estate projects. However, CAPECO considers that housing and real-estate market are impacted by five structural problems (the Five “S”) in the country: Soil. Lack of urban land for formal projects, social housing especially Sanitation. Growing difficulty in obtaining water and sewage facilities for these projects. Subsidies and financing. Insufficient state funds to promote social housing market (target middle and low income families. 80% of housing demand in urban areas) Simplification. Construction permits procedures too long, expensive and unpredictable Security. Violence and informality in building works. PERU: STATE OF THE HOUSING INDUSTRY

6 5- IF THE ECONOMIC AND POLITICAL DYNAMICS DESCRIBED ABOVE HAVE IMPACTED YOUR MARKET, DO YOU EXPECT THESE CONDITIONS TO NORMALIZE BY YEAR END? Yes __x (it depends*)__ No________ (*) Presidential election in April and “El Niño” can affect housing market in short term. 6- IF YOUR MARKET HAS BEEN IMMUNE TO THESE DYNAMICS TO DATE, DO YOU EXPECT TO SEE AN IMPACT ON YOUR HOUSING MARKET BEFORE THE YEAR IS OVER? Yes __x (a little**)__ No________ (**) CAPECO estimates that new home sales can grow 6-8% this year ( units). Peru´s Central Bank calculates that Construction GDP will grow 3% in PERU: STATE OF THE HOUSING INDUSTRY

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