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 Puerto Vallarta Real Estate | February 2008 
Mexico Resort Real Estate Update
 Linda Neil - The Settlement Company
| | For further information, contact John K. Glaab, CIPS Editor, at John.glaab(at)settlement-co.com or visit Settlement-Co.com. | | |
As we enter a new year, we wish you and your colleagues a great 2008. While the market softened in 2007, there is guarded optimism for 2008. One economist recently said, "In the US there are two economies: one is the economy of Wall Street and the other is the economy of hard facts." The hard facts economy is displaying little signs of forward movement as this is being written.
On January 8, 2008, Goldman Sachs declared the US to be in a recession. This will certainly impact on the Mexican real estate market, presenting a challenge to all of us. But in late 2007, Chief Economist for the National Association of Realtors Lawrence Yuen said, "There are still strong markets in the US," naming Kansas City as an example. "As well, San Francisco, New York, London and Paris are buoyant."
Tourism Figures are Encouraging:
According to Concanaco, the Mexican Chamber of Commerce for Tourism and Services, Tourism grew by 7.30% in 2007, outpacing the country’s total economic growth of 6.30%. This generates a significant number of jobs for Mexican nationals. Growth predictions for 2008 are as follows, general commerce 2.90%, service industry 6.80% and tourism 8.2%.
In a report issued by International Living, Mexico is now the preferred destination for a second/retirement home. Panama fell to number four in popularity, the position previously held by Mexico.
Mark Your Calendar:
April 8-12th: SIMA* - International Real Estate Exhibition Madrid, Spain. This is the largest real estate exposition in the World. SIMA sponsored the Second Home Pavilion at the 2007, NAR Annual Conference in Las Vegas.
May 12–17th NAR Mid Year Business Meetings and Trade Exposition, Washington, D.C.
June 19-20th: MINT Second Homes and Resort Real Estate Conference, Cancun.
September 16-18th: Real Estate Investment World-Latin America, Coral Gables, Florida.
September 26–28th: Bolsa Mexicana Inmobiliario Turistica -FONATUR’s annual gathering of international investors and hotel and resort developers. Mexico, D.F.
November 5–10th: National Association of Realtors Annual Conference and Trade Show, Orlando Florida.
November 20–23rd: Mexican Association of Real Estate Professionals (AMPI) National Conference and General Assembly, Mayan Riviera, Quintana Roo.
Mexico in 2008:
Pundits are saying we can look forward to a 2008 which promises to be very similar to 2007, and which will present opportunities and challenges to what we have experienced in 2007 only more so.
Best of times/worst of times: The international context is mixed. The enthusiasm over Mexico’s inclusion in the expanded definition of emerging BRIC nations (called BRICSAM, composed of Brazil, Russia, India South Africa and Mexico) has been tempered by the country’s slow growth. (There are some bright spots, see MICHOACAN, below.)
Nevertheless, despite the fact that Mexico is not China, what economists call its "country risk" rating has remained at historically low and advantageous levels in recent years, allowing for more and more people to enjoy access to credit. Commodity price inflation is both boon and bane for Mexico, given that the country is a net food importer and that oil production is falling due to the exhaustion of the Cantarell megafield.
Fortunately, there are no sub prime loans in Mexico because lending standards were never relaxed to the point of giving NINJA ("no income, no job no assets") loans.
Specifically, Mexico’s housing boom has occurred as a result of conditions that have arisen because of Mexico’s financial stability, not because of a speculation bubble...
A cursory glance at the different markets shows continuing growth in Cancun/Riviera Maya, Puerto Vallarta/Nayarit, Los Cabos, San Miguel de Allende/Bajio, and Guadalajara/Chapala. The situation is stable in most major cities in the North and center of the country, including Mexico City. The market is soft in places like Puerto Penasco (Rocky Point) and Ensenada/Rosarito. This is related to automotive tourism near the bubble markets of California and Arizona.
Michoacan and Mexico City
Booming: Michoacan is located in the south west part of Mexico. It is bordered by Colima and Jalisco to the West, Guanajuato and Queretaro to the North, Mexico to the East, Guerrero to the Southeast and the Pacific Ocean to the South. It has been known historically as an agricultural state. Its major product is avocados. That market has expanded greatly in recent years particularly with exports to the US Sales and prices have increased significantly during the last five years.
But a major source of growth is the Pacific Port of Lazero Cardenas. The port is blessed with a deep channel, excellent road and railway connections. Geographically it is closer to the Eastern Seaboard than is either Long Beach or Los Angeles. In November a $ 244 million dollar expansion of the port was initiated. According to John Merideth, President of Hutchison Port Holdings, administrators of the container port, the installation will have the most advanced technology in the world. Also at the port, work has commenced on the most modern customs installation in Latin America.
On a recent trip to Morelia, the state capital, I observed twenty convoys of trucks carrying cars. One was Toyotas and the other a General Motors products. Honda, Mazda, Isuza also enter the continent via Lazero Cardenas. These were likely destined for the Mexican market. On the way back, I observed a very long train (Kansas City Southern, the states of Kansas and Michoacan have an economic development alliance.) Hutchison Port Holdings (HPH) is a company owned by Hong Kong billionaire Li Ka shing. It operates ports around the globe. In México, the port of Manzanillo is an HPH terminal.
In early January, Carlos Slim, who last year passed Bill Gates as Forbes magazine’s wealthiest, met with Michoacan Governor and a group of engineers. The meeting was held to discuss modernizing the coastal highway from Lazero Cardenas to Manazanillo, in the neighbouring state of Colima.
In other economic news from Michoacan a joint Chinese/Mexican joint venture is underway. Construction has been started on a new automobile factory. Low cost vehicles will be produced for sale in the Elektra chain of department stores. It is estimated that 5,000 jobs will be created and the annual output will be 200,000 units a year.
Finally Michoacan is the only Mexican state without massive tourism development. It has miles of coast line interspersing Big Sur type terrain with pristine beaches. It is ripe for investment by the tourism industry.
Mexico D.F.:
Mexico’s Capital has sprouted construction cranes, everywhere. Late in 2007, I had the pleasure of joining the Advisory Board of the Mexican Association of Real Estate Professionals (AMPI) in a tour of the "Torre Mayor."
This 52 story, "Smart Building" lists as tenants, a cross section of Forbes 500. On the 51st floor is situated an elegant club for the Mexican business community. The Harvard Club of Boston is among the members.
The day before I toured the Torre Mayor, the Canadian Ambassador took part in a ground breaking ceremony next door. Reforma 489 is another project of the Canadian Reichman brothers. It is a nine story building with access to the "Torre" in the 2nsd and 9th floors. Don’t bother to ask about rental prices. The building has been completely leased even before start of construction.
Another skyscraper is in the works. "La Torre Reforma will be the tallest in Latin America. The Federal District is now seventh for the number of skyscrapers in the world, following New York, Toronto, Chicago, Tokyo, Vancouver and Los Angeles."
2007 – A Year of Successful Conferences and Educational Events:
In May, I attended the mid year meetings of the National Association of Realtors. Having attended the larger annual conferences, this was a first. The meetings focus more on governance and are attended by a much smaller group.
Among the highlights for me were, The MLS Association Meeting, The Local Community Association Meeting, and The International Operations. The Board meeting of the International Consortium of Real Estate Associations and of coursed the CIPS breakfast. Usually this event attracts nearly 1,000 Designees. This breakfast saw about 400 of us and offered a better chance to visit with old friends and network. During my visit to the US Capital, I also toured NAR’s "Green Building." The building at 500 New Jersey Avenue, N.W. is just a short walk from Capitol Hill. It is populated mainly by the association’s lobbyists and attorneys. The President has a high-tech office and Conference room.
The MINT Conference in Cancun brought together Realtors® from Mexico, the United States and Caribbean countries. Linda Neil from the Settlement Company taught the "Doing Business in Mexico" course.
In September, developers, bankers and members of the real estate community from Latin America, the US Canada and Europe gathered in Coral Gables. This event was called "Real Estate Investment World-Latin America." A panel consisting of real estate journalist Tom Kelly, Linda Neil from the Settlement Company and developer Tom Bishop discussed the process for purchasing property in Mexico.
Opportunities in La Paz and Area:
For several years, Realtors in the La Paz market complained of lack of product to sell and the fact the area lacked a golf course to attract tourists. This has changed. Seven condominium projects are under construction and will soon be ready for occupancy. A gated community. Maravia just outside the city has sold out its Phase l and sales are brisk at Phase II. Less than two hours from La Paz, another gated community Colina del Sol is offering ocean view building sites in an ecological friendly "Green" development.
Meanwhile, three gold courses are under construction. So there are opportunities. At Costa Baja Resort and Marina new "Hillside Homes" are now being offered. The resort includes 250 slips for yachts from 30 to 300 feet and an Amphitheatre. Costa Baja Beach Club, shops and restaurants. It has become a place for public events and a gathering place for La Paz residents. The Grand Baja, historic Baja hotel is being converted into luxury condominiums. The first two towers fronting the bay are well underway and another two towers are planned for the near future. There is something available for every buyer in La Paz!
Late Breaking AMPI News: Adrian Arriaga, former Ambassador for the National Association of Realtors to the Mexican Association of Real Estate Professionals (AMPI) has been named Real Estate Commissioner for Texas. Linda Neil of The Settlement Company and Broker for Linda Neil Properties has been appointed Vice President of International Memberships for AMPI. Linda is starting her second year as a member of AMPI’s National Advisory Council.
An Important New Service is Offered for Foreigners Renting Homes and Condominiums. Payment of state, federal and guest taxes on rental income has often been a tremendous puzzle and a complicated procedure for foreigners who rent their Mexican properties to others, either Mexican or foreign.
The Settlement Company has now developed a program in which it is able to receive funds, calculate taxes, prepare declarations and file them on behalf of foreigners or nationals, no matter where in Mexico the properties are located. This is considered a breakthrough and is in keeping with The Virtual Closing program established several years ago in which titles can be transfered and insured without the need for buyers and sellers to be present at the closing. Details on this service at linda.neil(at)settlement-co.com.
For further information, contact John K. Glaab, CIPS Editor, at John.glaab(at)settlement-co.com or visit Settlement-Co.com. |
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