There has been much talk about the Mexico real estate market and what it will bring in 2008. When talking about this real estate market, it seems that the US property market is closely associated. On the surface, this may look like a fairly gloomy outlook for Mexico ‘s real estate market, but research deeper than this basic generalization and you will quickly find a clear and promising outlook for the Mexican real estate market in 2008.
In the past 5 years the property market throughout Mexico has continued to appreciate steadily, with a mixture of homes and condo’s, both new and resale properties. Traditionally the Mexican property market was strongly driven by those American’s who were looking for a second or vacation home in the warm temperate climate of Mexico due to its value for money and low cost of living. In more recent decades Mexico has experienced an increasingly high number of retirees heading south of the US boarder for the same reasons.
With the American market being such a dominant force on the Mexican real estate market, why then is it not necessary for America’s current downturn and recessionary effects to impact Mexico’s market to any great concern?
The Mexico property markets popular with foreign investors such as Cancun, Puerto Vallarta , Acapulco , and the Baja California Peninsular, continue to see strengthening growth in the large number of new development condos being built constantly, and with a large supply of such properties, they are continuing to meet with high demands. Many American buyers traditionally bought based on re-mortgaging their US homes to purchase a second home in Mexico . But the Mexican market, strongly pushed by the new property development investor market in these major areas, has greatly benefited from mortgage financing with major American and Mexican banks based in Mexico . Since the introduction of mortgage financing over the past approximately 5 years for foreign investors buying real estate in Mexico , the increase of foreign investment helped to strengthen the annual capital growth of the market each year. During this period the lending process and criteria for foreign investors has been well refined, only speeding up the process and frequency of foreign purchases of Mexican property.
The International Monetary Fund released a report in December 2007 identifying some clear differences between the American and Mexican markets, therefore offering signs of stability which can surpass the current US property problems. The number of private mortgages in Mexico was preceded by a lengthy period of stagnation. The residential mortgage backed securities, popular in the US property market, are not common within Mexico so have a much less effect than if they were significantly higher in number. Finally, the International Monetary Fund also identified that securities such as Collateralized Debt Obligations, are almost non-existent among the Mexican financial sector.
The first home buyer market in America is what seems to be hit hard, but there are certainly some strong areas where capital growth of property in America is still on the increase. It is the buying market who are looking for the second vacation home that is not really experiencing too much of the current recessionary effects in America.
One very interesting consideration when speaking about the Mexican real estate market is the increase in Canadian buyers throughout many areas of Mexico . Canada has experienced a very strong dollar in recent times and their strong overall economy and increased property markets, especially in the main areas of Toronto and Vancouver, have led to a large number of Canadian home owners able to spend money on a second or vacation home in warmer climates, and Mexico, with its great value for money, is attracting many buyers.
Mexico ‘s economic status remains strong, with commercial banks offering lower mortgage rates than in previous years and remaining stable and profitable, and the government has focussed strongly on reducing the public debt ratio and Mexico ‘s external debt, and keeping inflation low.
So in summary the Mexican real estate market seems set to be a promising and steady market for investors throughout 2008. Outward influences from the US have not shown any real negative impact so far on Mexico ‘s property market and, as stated are not likely to have too much negative effect in the future. The other foreign investors from such markets as Canada , and even more popularly the UK and Europe are likely to pick up where any reduction in American investment may dwindle. Mexico has successfully established itself as a solid investment market, due to its popularity as a retirement destination and its ever increasing tourists visiting each year. Combine this with the governments focus on maintaining Mexico ‘s impressive economic growth and stability and it seems that Mexico should certainly remain a definite consideration when thinking of purchasing your own piece of Mexican real estate.
Author: Jason Keiller