As business opportunities grow in Mexico, so does the demand for prime real estate. Investing in Mexico ‘s real estate market over the last few years has shown increasingly strong returns. Thanks to its combination of iconic cities, unusual tourist attractions, and the economic expansion of its professional middle class, the real estate industry is experiencing substantial growth in competitiveness. Becoming part of this vein of success within Mexico is easier than many might think.
Real Estate – Investing in Mexico
The sector is considered as a pillar of the Mexican economy, accounting for no less than 15% of the country’s economic activity and generating more than 15 million direct and indirect jobs. Mexican real estate experienced a growth of 2.1% from the end of 2018 to the beginning of 2019. According to the January newsletter of the Mexican Association of Real Estate Professionals (AMPI), the sector is expected to grow by 6% in 2019.
This growth is partly due to the exceptional appreciations enjoyed by hotels in Mexico. Consequently, the Mexican market is set to be part of one of the ten fastest-growing real estate markets of 2019/20. On the same AMPI report, it is noted that real estate investment accounted for 12.1% of foreign direct investment received in 2018. The real-estate porperties in highest demand are hotels concentrated in cities such as Monterrey, Guadalajara, Querétaro, and Tijuana.
A sector boosted by tourism
The two industries, real estate and tourism, are large contributors to the Mexican economy. The tourism industry is one of the greatest growth drivers for the country and has a significant impact on the real estate sector. The area experiencing the greatest growth as a consequence of this cross-pollination of sectors is mainly around the Mexico City district.
Just like Mexico City, the cities of Tulum and Merida, thanks to their tourism, are becoming the preferred destinations for real estate investors. Both cities are currently experiencing a boom in urban growth and investment in eco-tourism. This boom is allowing the greater development of many real estate projects such as museums, shopping malls, and even concert halls. The two cities are mixing calm, modernity, sustainability and security, in a wildly innovative way. Tulum and Merida are certainly two for the Mexico real estate watch list.
Playa del Carmen is another Mexican destination where tourism is influencing real estate, but in a different manner. The beach resort, home to music festivals, carnivals, and a party culture is widely attracting the North American youth, gathering nearly 12 million visitors in 2018. This highly seasonal but regular tourism makes real estate management simpler where the quiet off-peak times make hotels, and other residencies cheap, money-saving periods.
How to Buy Property in Mexico
To get started in the real estate sector in Mexico, it is vital to know how to legally buy a property. The purchase of a property in Mexico is governed by certain specific rules.
The process begins with the seller accepting an “offer to purchase”. The “offer to purchase” is a type of contract that presents all the terms of the purchase – a deposit of funds, a price, and a deadline. Once the seller accepts this contract, both parties may sign a new settlement called a buy/sell contract. This generally includes a deposit from the buyer of 5-10% of the value of the property. This contract also contains conditions if one of the two parties decides to withdraw from the agreement during the proceedings.
From this point on, it is recommended to consult a lawyer before making any other financial transaction. His role will be to manage any potential difficulties and to act as an advisor on taxes and the drafting of legal documents.
Why invest in Mexico?
Mexico is considered the second-largest economy in Latin America, enjoying a strategic position as a bridge between the major powers of North America and the countries of Latin America. The economy has a business-friendly culture and consequently receives one of the highest amounts of foreign direct investment (FDI) in Latin America. The World Bank reported in 2018 that FDI in Mexico has reached US$ 36.9 billion. Supporting this flow of investment, according to the International Monetary Fund (IMF), the country’s GDP is expected to continue on its healthy growth path of 2018 and grow by 2.1% in 2019 and 2.2% in 2020.
Why invest in the Mexican real estate market?
Though there are real estate markets all around Latin America that are experiencing similar growth rates, investing in Mexico’s is an astute move. The country can offer a solid return on investment (ROI) and a diverse range of locations that few countries can provide. Outlined are some of the advantages of investing in Mexico’s real estate.
An economic destination for foreign investors
One of the main reasons to consider investing in Mexico is its inexpensive nature. With a generally advantageous currency conversation, this will make your primary investment cheaper and allow you to buy more significant properties whilst also maintaining a margin of safety. Furthermore, if building in Mexico, labor costs are far cheaper than those in more developed regions.
Convenient real-estate laws
Unlike in many countries, Mexican law allows foreigners to acquire real estate without a residence or a work visa. This allows foreigners to invest from their home country and generate income from rent or the elevated resale of their Mexican real estate.
The Mexican real estate sector is supported by increased liquidity due to the emergence of a new national real estate investment vehicle known as FIBRA and CKD. Its support is mainly aimed at the hotel sector and facilitates investment in the sector.
High internal mobility
Mexico has a high level of local movement, which is facilitated by the presence of many airports and the low cost of bus transport. There are many connecting flights to national and international cities at major international airports. This makes Mexico an easily accessible location from abroad with the potential for maneuverability. This freedom of mobility within Mexico has enabled many foreigners to locate their second homes in prime holiday destinations. The city of Cancún, for example, has an occupancy rate lower than 80%.
Property Values Won’t Depreciate
Generally speaking, Mexican property value is showing no signs of depreciation, whilst places like the Maya Riviera, holiday homes are appreciating exponentially. In fact, the Mexican real estate market is currently offering more investment security than its stock market. As property gains value over time, allowing an exciting return on the initial investment, it also has the potential to earn through rent.
Coordinate with a local expert – Biz Latin Hub
The real estate sector is one of the safest sectors to invest in Mexico. The industry is strongly supported by the tourism and business sectors and growth rates are seeing no sign of slowing. Mexico can also provide you with a high frequency and a return on investment between 2% to 10% on the country with some destinations reaching 17%.
To facilitate your venture and to comply with the specificities of Mexican law, consult with a local expert. A local expert can promote your entry into the market by explaining the particularities of the Mexican market as well as offer legal services. With offices all over Latin America, Biz Latin Hub assist foreign investors with their ventures. With our local expertise, we can assist on your business needs.
Contact us today at [email protected] to get expert insights into the Mexican real estate market.
Learn more about our team and expert authors.