| | |  Puerto Vallarta Real Estate | August 2008 
Real Estate in Manzanillo is Gaining Popularity
 Cali Zimmerman - NuWire
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| | Manzanillo City is an important port town and the seat of the Manzanillo municipality. | | |
The port city of Manzanillo, Mexico may offer some excellent real estate investment opportunities for foreign investors looking for an alternative to Mexican tourist cities such as Cabo, Cancun and Puerto Vallarta. Real estate values in Manzanillo have been on the rise in recent years and will likely continue to increase as the city gains popularity with cruise lines, expatriates and holidaymakers.
Located on the western coast of the state of Colima, Manzanillo City was home to 110,728 residents as of the 2005 Population and Housing Census. Manzanillo City is the municipal seat of the Manzanillo municipality. Copper and marble deposits can be found in the region, and a large portion of the municipality’s economy is founded on agriculture. Crops such as corn, sorghum and green chilies are grown, as well as cyclical crops such as watermelons, tomatoes and pumpkins and perennial crops such mangoes and tamarind, according to the Encyclopedia of Mexican Municipalities (Enciclopedia de los Municipios de México).
The Port of Manzanillo first opened in 1825. It was named for the manzanillo trees that were abundant in the area at the time. Manzanillo trees are highly toxic, with sap so potent that even sleeping beneath one can result in bodily swelling. Wood from these trees was commonly used when building ships, and by 1767 there was only one manzanillo tree remaining in the city. In 1825, the story goes that the governor of the state of Colima had the last manzanillo tree cut down after several people died from eating its fruit, according to GoManzanillo.com.
The city of Manzanillo, though, is anything but toxic. In fact, it has begun to attract the attention of world travelers and more tourists are trekking to its port than in years past. Part of this change may be because cruise lines—including Holland America and Carnival—have begun including Manzanillo among their ports of call. Manzanillo may soon be an origin port for some cruises because the logistics of starting in Los Angeles are becoming too difficult to accommodate.
“They spend all that gas going back and forth [to Los Angeles],” Candy King, a real estate agent for Coldwell Banker and a resident of Manzanillo originally from Seattle, said. “We’re about to become an origin port for cruise ships from Mexico in December. They’re going to take off from Manzanillo.”
Manzanillo is the largest port on the Pacific coast of Mexico, admitting ships up to 30,000 tons. And the port is increasing in global popularity, which can only mean good things for the city’s economy and modernization prospects.
“During the longshoreman’s strike in Long Beach in 2002, products from Asian countries were diverted to Manzanillo. Surprisingly, though the distance the ships must travel is slightly longer, the lack of delays in the port of Manzanillo [has] made many shipping lines consider switching. A delay of only one day can cost a shipping line as much as $45,000,” according to GoManzanillo.com.
Though Manzanillo has certainly drawn more attention to itself during the past several years than in years prior, the city would never be dubbed a “tourist trap.” It’s mostly considered a family vacation spot by Mexicans; interestingly, approximately 60 percent of holiday homes in the city are owned by Guadalajarans, according to King.
“They will never put the emphasis on tourism [in Manzanillo],” she said. “There are hardly any timeshares, very few vendors and when you walk down the street nobody tries to sell you anything.” It is this tranquil atmosphere that creates much of Manzanillo’s appeal to vacationers trying to get off the beaten path and expats looking for a place to call home.
Another factor in the city's favor is the low crime rate. “Not only does the state of Colima have the lowest crime rate in the country, but Manzanillo has the lowest in the state. Hearing those statistics gets many foreigners, who live in big cities where there is a crime every 20 to 30 seconds, [to] look very closely at safe, laid-back Manzanillo,” according to GoManzanillo.com.
Probably partially owing to its increasing popularity with expats and travelers, real estate in Manzanillo has been increasing at a rate of approximately 20 percent per year over the last five years, according to King. “Demand is up, supply is down.For example, a one-bedroom condo on the Peninsula de Santiago [recently] sold for $48,500. Eleven months earlier it was purchased for $30,000 USD,” according to GoManzanillo.com. King believes that property values will continue to rise in coming years, though she said the rate is likely to slow somewhat as time goes by.
New projects being built in the city may open up new opportunities for investors looking to get involved. “We have several new condo projects going in on the beach to be finished from now to three years from now. We also have some new housing projects going in for under $300,000 USD. These are not on the beach, but close and with their own pools and private gardens,” King said.
As with buying property elsewhere in Mexico, foreigners must purchase property in conjunction with a Mexican bank that acts as their partner. Foreigners must set up a real estate trust—a fideicomiso—to act on their behalf if they wish to purchase property in the restricted zone. The restricted zone includes land within 100 meters of international borders and land within 50 meters of Mexican coastline, according to Mexico Law. These fideicomisos can ultimately make property purchases safer for investors.
“If your property is eligible for a bank trust, or fideicomiso, you are okay. It is very risky to buy in an area where a fideicomiso is not available,” King said.
King said she recommends focusing on newer properties rather than on buying older ones. Many older properties do not have common conveniences such as elevators for multi-story condominiums. The average sale in Manzanillo takes approximately 45 days from start to finish, and is usually straightforward and simple unless there are extenuating circumstances, King said. Fees and expenses from setting up the fideicomiso, conducting a title search, notary services and taxes will likely cost 4 to 6 percent of the property’s sale price. It’s also worth bearing in mind that capital gains taxes are 28 percent in Mexico, according to King.
Many real estate companies that operate in the U.S. also have offices in Mexico, so investors interested in purchasing property in Manzanillo may wish to start there. A local real estate attorney is also important to ensure that all laws regarding real estate processes and restrictions are properly followed. |
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