Why Own Real Estate in Mexico?
Investment Real Estate Location Profile
Mexico is bordered by the United States to the north and Belize and Guatemala to the southeast. Mexico is about one-fifth the size of the United States. Baja California in the west is an 800-mile peninsula and forms the Gulf of California. In the east are the Gulf of Mexico and the Bay of Campeche, which is formed by Mexico's other peninsula, the Yucatán. The center of Mexico is a great, high plateau, open to the north, with mountain chains on the east and west and with ocean-front lowlands lying outside.The consistent tropical climate, pristine beaches, and historical culture have established many communities within Mexico, such as Puerto Vallarta, Cancun, Baja, and Las Cabos as highly desired vacation destinations. However, until the late 1990’s real estate in Mexico was only able to be owned by Mexican citizens. It was unconstitutional for non-Mexican residents to acquire ownership interest in real estate. Since that time, federal laws have been instituted to allow foreign investment and real estate ownership. In today’s article we will examine Mexico’s past, present and future and why one should consider it a place to invest their financial resources in real estate.
GEOGRAPHY
Mexico’s thirty-one (31) states and one (1) federal district covers almost 780,000 square miles making it the world’s 8th largest nation. The country curves from northwest to southeast, and continues northeast to the Yucatan Peninsula. To the South and West, Mexico is bordered by the Pacific Ocean. The Sea of Cortez lies between the mainland and Baja California. The east coast of Mexico is bordered by the Gulf of Mexico from the USA border to the northeastern tip of the Yucatan Peninsula.
ECONOMY
The economy of Mexico is supported by about 108M Mexican residents. The national currency is the Peso. End of Year 2007 economic estimates show key metrics demonstrating strength and stability such as real GDP growth rate of 3% on a base of $1.353 Trillion (about 1/4th of the US), as well as low inflation of 3.8% and very low unemployment of 3.7%Tourism, agriculture, ranching, timber, mining, oil, natural gas, fishing, and manufacturing are Mexico’s primary revenue earners. Mexico has a free market economy and free trade agreements with most of their main trading partners.The recent administration has expanded and invested in seaports, railroads, telecommunications, electricity generation, natural gas distribution, and airports to support the present and expected future growth.
FUTURE OUTLOOK
The Mexican economy has come a long way from the economic instability of the past. Past economic collapses caused severe problems and economic instability, the last of which occurred in the mid-1990’s. During this period of political and economic unrest, and for long term stability, Mexico was forced to drastically de-value their currency. The short term effects of this move were overnight increases in credit interest, as high as 80% and inflation that climbed as high as 50%. This instant cost of living increase spelled disaster for many businesses and residents. This issue was quickly brought under control and best practices were put into law to extend the economy to make broader contributions globally, to consistently grow the middle class, and to increase tourism and real estate development.Mexico has a very rosy outlook. For the first time, in the face of a severe real estate correction in the United States, Mexico boasts a thriving housing sector whose record growth leads Latin America. Long thrashed by swings in the U.S. economy, this is a significant sign of increased economic independence and stability.
Interestingly, the booming Mexico real estate market is now providing an outlet for many that are looking to escape the U.S. downturn.Money and credit liquidity are now more attainable than ever in Mexico due to new laws put in place to encourage domestic and foreign real estate development and mortgage growth. The increases in domestic savings and wage growth have created the opportunity for many Mexican residences to own their first home. Supporting the new-found growth, President Felipe Calderon has set a national goal of one million mortgages by the year 2010. Behind the boom are six years of economic growth and stability -- and a national shortage of six million residences. While interest rates are falling, just six percent of Mexico's 25.7 million homes are financed with mortgages -- compared with about 67 percent in the U.S.
The pent-up mortgage demand in a nation of 108 million people means lenders can be choosy, enforcing strict standards that have held delinquency rates below 4 percent in third quarter-2007, compared to 5.6 percent in the U.S. The Mexican lending environment is very stable because lenders don’t need to expand portfolios with high risk loans to weak credit applicants to grow business. There is no Mexican subprime issue because that category of lending just doesn’t exist. Mark Zaltzman, chief financial officer at Su Casita, one of Mexico's largest mortgage lenders commented, “'Mexico doesn't have a credit issue. We can still choose our borrowers because demand is so great.”''Mexico is in the early stages of expansion,'' recently commented Juan P. De Mollein, managing director for Latin American structured finance at Standard & Poor's. ``There are still plenty of points for evolution because there's still plenty of demand.''Now that the appropriate federal laws are in place to make it possible for foreigners to own real estate in Mexico, according to recent estimates, over six million American and Canadian buyers will migrate to Mexico to purchase real estate over the next decade. Most of these real estate purchases are projected to be in the most luxury, already famous vacation destinations. At a very conservative average price of about $300,000 per residence, Mexico is likely to see at least 1.8 Trillion dollars in real estate investment over the next decade. Prospective buyers name beauty, location, convenience, and affordability as some of the main reasons they are looking to invest their resources in Mexican real estate. This is the beginning innings of a longer term growth and prosperity trend for Mexico. The world is taking note and migrating in droves. Real estate prices in most desired Mexican locales have been on the rise over the past few years, a trend which looks like it will continue given domestic and international demand and growth projections over the next decade.
Is Mexico the Right Place for Your Second/Investment Home?
Maybe…Depending on Your Goals and Objectives
What Part of Mexico is Right for You?
Contact Us to Help Sort it All Out!
