(This is an edited version of an article originally published in globalpropertyguide.com…//)
Local house price variations//
Home prices in Mexico have risen by 6% annually between 2005 and 2016, according to SHF´s home price index. The last big housing crisis occurred after the Tequila crisis of 1994, when a currency devaluation followed by interest rates spiking caused 40% of all bank loans to default. Since then, there has been continuous growth.
Mexico´s most expensive houses are in Mexico City, State of Mexico, Nuevo León, Jalisco and Querétaro, according to Lamudi.
In Polanco and Lomas, Mexico City´s most exclusive neighbourhoods, prices of luxury residential properties can range from US$ 6,000 to US$ 10,000 per square metre (sq. m.) in 2018, according to according to Carmella Peters Romero of Peters & Romero Bienes Raices.
In Santa Fe, one of Mexico City´s modern districts, properties can be bought at an average price of US$ 3,500 per sq. m., according to Mexico Sotheby’s International Realty agent Laura de la Torre de Skipsey.
In Cuernavaca, capital of the state of Morelos, an hour and a half drive from Benito Juarez International Airport in Mexico City, luxury homes are available at prices above US$ 1.5 million. Low end three-bedroom homes can be bought starting from US$ 200,000, while mid-range houses with three to four bedrooms are priced at US$ 500,000, according to Andrea Dolch Espinosa de los Monteros of Mexico Luxury Estates.
In Playa del Carmen, a coastal resort town along the Yucatán Peninsula´s Riviera Maya, a three-bedroom apartment is priced at US$ 460,000. In Playacar, a gated community of resort developments in Playa del Carmen, a four-bedroom luxury home lists for US$ 1,500,000.
In Tulum, another resort town located in Mexico´s Caribbean coast, a two-bedroom townhouse in the exclusive gated community of AldeaZamá, can be bought for below USD 500,000.
In Cancún, a city in southeastern Mexico known for its beaches, mega-resorts, and frenetic nightlife, the average price of houses was at around MXN 4.7 million (US$ 241,647) in Q2 2018, according to Lamudi. Apartments in the area had an average price of MXN 4.6 million (US$ 235,789) during the same period.
Rental yields are moderately good//
Gross rental yields in Mexico City – the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs – are moderate. In previous years, Global Property Guide found that rental yields in Mexico City were between 4.9% and 5.4%.
Strong demand from foreign buyers//
Mexico´s real estate market has been buoyed by strong demand in resort communities, according to the International Consortium of Real Estate Associations (ICREA). Over the recent years, American and Canadian buyers have been returning to Mexico, after a several-year slump, thanks to low oil prices and the strong US dollar, pushing home values up.
Mexico ranks first among 30 favourite US and Canadian destinations for second home searches, according to Point2 Homes. Some of the most sought after Mexican destinations on Google from January 2017 to January 2018 include Cancun, Playa del Carmen, Cabo San Lucas, Puerto Vallarta, and San Miguel de Allende.
American buyers are very important as owners of beachfront properties, which were badly affected by the slump of 2009-10 in areas like Baja California Sur, Nayarit, Baja California, Guerrero and Sinaloa. Tourist-friendly areas along the country´s Pacific Coast and in Cancun are popular among foreign home buyers, according to Ana Laura Monsivais of Home del Valle. Foreign buyers are also eyeing properties in Cuernavaca´s prime neighborhoods, such as Sumiya, Palmira, and Tabachines, according to Guadalajara Sotheby’s International Realty´s agent Laura de la Torre de Skipsey.
In Mexico City, most foreign buyers (mostly from Brazil, Spain, and US) tend to invest in new construction or commercial properties, and are in the city for work.
Effect of violence on the housing market//
Although drug-related violence has been present in Mexico for the past three decades, the government passively ignored the problem from the 1980s to early 2000s. This norm was broken when President Felipe Calderon took office in 2006 and implemented a militarized approach to dealing with the drug cartels.
Calderon may have been partially successful, but around 60,000 people were killed during his campaign against drug cartels. News about drug-related violence turned off potential American baby-boomer home-buyers.
A BBVA study has suggested that violence has only a limited effect on domestic housing sales, because the violence is very regionally concentrated. Almost half of the homicide cases every year occur in Baja California, Durango, Sinaloa, Chihuahua and Guerrero, according to the SSP (Secretaría de SeguridadPublica or Public Security Ministry).
However, violence has climbed to new highs recently. President Enrique Peña Nieto´s (2012+) rhetoric has focused on lowering murder rates, kidnappings, and extortions, as opposed to arresting or killing the country´s drug lords. He announced the creation of a large national centralized police force, but then retreated from that announcement.
During the first half of 2018, the number of homicides in Mexico reached a historic high of 15,973 killings, an increase of 16% from 13,751 during the same period last year, according to the interior department.
Baja California is the second most violent state in Mexico, with a homicide rate of 71 murders per 100,000 inhabitants for the first six months of 2018, just behind Colima with a rate of around 80 murders per 100,000.
Source: globalpropertyguide.com
