| | |  Puerto Vallarta Real Estate 
Slump Hits Mexican Resort Homes, Too
 Jeff Collins - Orange County Register
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May 16, 2010
| | For more information about Luma, call toll-free at 1-866-554-LUMA (866-554-5862) from the U.S. and Canada or 322-226-7290 from within Mexico; go to www.LumaLiving.com. | |
Burbank-based Front Porch Development Co. branched out in recent years with construction with a high-rise Mexican condo project for older adults north of Puerto Vallarta.
According to the company’s website, it operates 11 adult living communities in Southern California, including a continuing care retirement community in Anaheim called Walnut Village. It also has one development each in Northern California, Louisiana and Florida.
In recent years, however, it launched Luma, a project in Nuevo Vallarta with plans to build more than 400 units in seven, 10-story towers. We asked Bill Jennings, Front Porch president, how the economy has affected the market for retirement and vacation homes in Mexico.
Us: What’s happened to sales and demand for second homes and retirement homes in Puerto Vallarta in the past two years?
Bill: The economic downturn in the U.S. has had an effect on Vallarta. The fallout from the economy and mortgage crisis of the U.S. spread to Mexico in 2008. Slower sales continued throughout the fall of 2009 as many Americans struggled with uncertainty about the severity of the downturn.
Us: What’s happened to prices and how do price changes compare with O.C. home prices, which fell 43% during the slump?
Bill: Well, it’s a buyer’s market. People are shopping around and not rushing into a decision. The spread between list price and sales price has moved from a traditional rate of six-seven percent to more than 10 percent. Prices for higher end product, such as Luma, have stayed more stable.
Us: Is that turning around in Puerto Vallarta, and do you see signs of recovery?
Bill: Interest never really left – but a lot of people who had been sitting on the sidelines waiting to see where the economy goes from here are now moving forward.
So we are seeing things turning around recently, with strong interest from Canadian and Mexican buyers. The Canadian market is confident with the increased strength in their currency, and the Mexican market is renewing their interest in resort destinations. The U.S. market remains strong too as evidenced by the rebound in interest in Luma in the last few months.
Vallarta has faired a bit better than some markets given its popularity. The Night at the Iguana, the sultry 1964 film starring Richard Burton and Ava Gardner, put Puerto Vallarta on the map and solidified its reputation as a tropical hotspot. Buyers are drawn by the area’s rich culture, its easy accessibility from the U.S. and the affordability of beachfront homes … which are approximately 50% less than comparable homes in the U.S. And the weather’s great too.
Us: How important is Orange County to the Mexican second-home market?
Bill: Orange County, as well as all of Southern California, is a very important market for Vallarta given how accessible it is. With plenty of non-stop direct flights to Vallarta from LAX, you can be in a tropical paradise in less than three hours flying time.
Us: With the advent of the “fideicomiso,” U.S. citizens now can “own” property in Mexico. What is that and when did that start becoming popular?
Bill: Purchasing real estate in Mexico has changed dramatically over the past decade – especially for foreign, or non-Mexican, nationals.
Before 1994, buying coastal land in Mexico carried many restrictions. Since then, the federal government of Mexico liberalized ownership provisions in what has been called the “prohibited zone,” granting prospective buyers from outside Mexico’s borders greater legal freedom and ownership rights of the once restricted land, through a bank trust known as a fideicomiso.
The fideicomiso allows a Mexican bank to act as a trustee that can act on behalf of the foreign beneficiary in any and all transactions involving the property. However, the beneficiary retains the use and control of the property, makes the investment decisions and has the right to use, mortgage, encumber, improve, lease without limitation, sell without restrictions and pass the property to named heirs. Basically, the beneficiary has the same absolute rights to use, benefit and enjoy the property as if it were in fee simple ownership.
The fideicomiso has made buying a first or second home on the beaches of Mexico more appealing and easier than ever before.
Us: Did the fideicomiso affect prices?
Bill: While the advent of the fideicomiso didn’t affect prices, it made a beachfront property sale akin to fee simple. Buying on Mexico’s beach fronts may become even easier. The new buzz is the idea of eliminating the fideicomiso and allowing foreigners to buy real estate through direct deed. The thinking is direct ownership will encourage more foreigners to buy property in Mexico, as some are discouraged or confused by the current process. To do this, however, Mexico’s government must change its constitution. The proposal is currently being reviewed in senate committees.
For more information about Luma, call toll-free at 1-866-554-LUMA (866-554-5862) from the U.S. and Canada or 322-226-7290 from within Mexico; go to www.LumaLiving.com or visit the sales studio and model home.
Luma was developed through a partnership between two established companies known for high-end product: U.S.-based Front Porch Development Company and Mexico-based Grupo Krone. Luma meets the highest construction standards, comparable to top-rated buildings in the U.S. A live webcam on Luma's site offers a front-row seat to the first images of the completed Tower One and progress on Tower Two.
Front Porch is dedicated to enhancing the lives and lifestyles of active adults by offering resort-style communities with a broad range of amenities and services that 'celebrate the art of the individual.'
Grupo Krone is a housing and land development company with 21 years of experience and a diverse portfolio of award-winning developments throughout Mexico and the U.S.
As partners, Front Porch and Grupo Krone believe in the importance of developing communities that are economically sound, environmentally responsible and supportive of a community spirit. |
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