Archive for: April, 2006

How to Buy Real Estate in Vallarta — Lifestyles Magazine

Apr 11 2006 Published by admin under Uncategorized

 

Casa Canta Rana - North Shore Puerto Vallarta vacation rental villa and oceanfront real estate property

Casa Canta Rana — North Shore Puerto Val­larta vaca­tion rental villa and ocean­front real estate property

The fol­low­ing infor­ma­tion offers a sim­ple and con­cise sum­mary about own­ing real estate in Mexico.

 

It is sup­plied cour­tesy of Cen­tury 21 Bay & Beach in Nuevo Val­larta, and has been slightly revised by our edi­to­r­ial staff to focus pri­mar­ily on pur­chas­ing real estate in the Val­larta area and to bring it up to date.

Alter­na­tives

It is a com­mon mis­con­cep­tion that for­eign­ers can­not own real estate in Mex­ico, but the real­ity is that they can. Out­side the Restricted Zone, defined below, a for­eigner or for­eign cor­po­ra­tion can acquire any type of real estate, hold­ing the prop­erty as a direct owner com­ply­ing with Mex­i­can law.

How­ever, there is the Restricted Zone. The Mex­i­can Con­sti­tu­tion reg­u­lates own­er­ship of the land and estab­lishes that “… in a zone of 100 kilo­me­ters along the bor­der or 50 kilo­me­ters along the coast, a for­eigner can­not acquire the direct own­er­ship of the land”. These areas are known as the “Restricted or Pro­hib­ited Zones”.

Nev­er­the­less, the lat­est Mex­i­can For­eign Invest­ment Law, enacted Decem­ber 28, 1993, pro­vides a solu­tion in the form of a Fide­icomiso. Within the Restricted Zone, a for­eigner or for­eign cor­po­ra­tion can obtain all the rights of own­er­ship with a bank trust, known as a Fideicomiso.

Any for­eigner or Mex­i­can National can estab­lish a Fide­icomiso (the equiv­a­lent of an Amer­i­can ben­e­fi­cial trust) through a Mex­i­can bank to pur­chase real estate any­where in Mex­ico, includ­ing the Restricted Zone. For prac­ti­cal rea­sons, even in unre­stricted zones, many for­eign­ers, and Mex­i­can Nation­als for that mat­ter, pre­fer to hold their prop­erty under a Fide­icomiso.
To do so, the buyer requests a Mex­i­can bank of his choice to act as a trustee on his behalf. The bank, as a mat­ter of nor­mal course, obtains the per­mit from the Min­istry of For­eign Affairs to acquire the cho­sen prop­erty in trust.

The Fide­icomiso can be estab­lished for a max­i­mum term of 50 years and can be auto­mat­i­cally renewed for another 50-year period. Dur­ing these peri­ods you have the right to trans­fer the title to any other party, includ­ing a mem­ber of your family.

The bank becomes the legal owner of the prop­erty for the exclu­sive use of the buyer/beneficiary, who has all the ben­e­fits of a direct owner, includ­ing the pos­si­bil­ity of leas­ing or trans­fer­ring his rights to the prop­erty to a third party or pre-appointed heir.

The trustee is respon­si­ble to the buyer/beneficiary to ensure pre­cise ful­fill­ment of the trust, accord­ing to Mex­i­can law, assum­ing full tech­ni­cal, legal and admin­is­tra­tive super­vi­sion in order to pro­tect the inter­ests of the buyer/beneficiary. Fide­icomisos are not held by the trustee as an asset of the bank.

Another alter­na­tive is to pur­chase non-residential prop­erty through a Mex­i­can cor­po­ra­tion, which under cer­tain con­di­tions can be 100% foreign-owned, with a pro­vi­sion in its by-laws that the for­eign­ers accept being sub­ject to Mex­i­can laws and agree not to invoke the laws of their own coun­try. Also, they agree that the real estate acquired be reg­is­tered with the For­eign Affairs Min­istry and be used for non-residential activ­i­ties. In other words, under these con­di­tions for­eign­ers can directly acquire prop­er­ties des­tined for tourist, com­mer­cial and indus­trial use.

The Real Estate Indus­try Status

The real estate indus­try in Mex­ico is sim­i­lar in many ways to that of the United States, which is prob­a­bly the most advanced in the world. It is devel­op­ing quickly, tak­ing advan­tage of today’s tech­nol­ogy; how­ever, it seems to be par­al­lel­ing the sys­tem as it exists in the U.S.A.
The only national pro­fes­sional real estate orga­ni­za­tion in Mex­ico is the “Asso­ciación Mex­i­cana de Pro­fe­sion­ales Inmo­bil­iar­ios” (Mex­i­can Asso­ci­a­tion of Real Estate Pro­fes­sion­als) or “A.M.P.I.” with 24 chap­ters in 38 cities. This orga­ni­za­tion is some­what sim­i­lar to the National Asso­ci­a­tion of Real­tors (NAR) in the United States.

Licensin­gAt this time, there are no gov­ern­ment license laws reg­u­lat­ing real estate bro­ker­age and sales in Mex­ico. Any­body can, in effect, offer prop­er­ties for sale. There­fore, cau­tion should be taken to select an estab­lished and rep­utable real estate com­pany. A poten­tial buyer may want to check with the local Cham­ber of Com­merce asso­ci­a­tions or a promi­nent law firm.
Financ­ingHis­tor­i­cally, due to lack of cap­i­tal mar­kets and high Mex­i­can inter­est rates, most trans­ac­tions were made in cash. In 1993 and 1994, the Mex­i­can econ­omy picked up to such an extent that annual infla­tion went down to one digit and inter­est rates were more or less accessible.

Banks intro­duced attrac­tive mort­gage pro­grams and, con­se­quently, sales pro­lif­er­ated through­out Mex­ico. Due to the deval­u­a­tion in Decem­ber 1994, the sit­u­a­tion has reverted and the few banks that offer mort­gages do so at such high vari­able inter­est rates that very few buy­ers are in a posi­tion to take advan­tage of them.

How­ever, this is chang­ing. Recently Sco­tia­bank Inver­lat intro­duced long-term mort­gages at rates between 15–17%. These mort­gages, how­ever, are only avail­able to for­eign­ers with FM-2 immi­gra­tion status.

Mul­ti­ple List­ing Service

A cou­ple of elec­tronic mul­ti­ple list­ing ser­vices (MLS) are now oper­at­ing in Mexico.Producciones Viva, the com­pany that pub­lishes the Real Estate Guide, has been offer­ing MLS ser­vice to Val­larta since 1989, avail­able in a print cat­a­log and online at mlsvallarta.com.)

Escrow, Title Insur­ance and Home Insurance

It is the Pub­lic Notary who, in effect, acts as a “Hold­ing Agent” for the involved par­ties, so there are few escrow com­pa­nies in Mexico.

At the present time there is no gen­eral use of title insur­ance in Mex­ico, although some Amer­i­can com­pa­nies are pro­vid­ing cov­er­age in some resort areas of the coun­try. On the other hand, insur­ance com­pa­nies do pro­vide full home cov­er­age through­out Mexico.

The most com­monly used title insur­ance com­pany in Val­larta is Stew­art Title.

Purchase-Sale

Process­Most real estate trans­ac­tions are “opened” after a writ­ten pur­chase offer is accepted by the seller and when a purchase-sale agree­ment (promis­sory con­tract) is signed by both par­ties. In most cases, a deposit is required by the bro­ker to trans­mit the offer to the seller. (If the trans­ac­tion is being con­ducted directly with the seller, it is highly rec­om­mended that a real estate bro­ker or lawyer be con­sulted before sign­ing any papers or hand­ing over any money.)
In some areas it is com­mon prac­tice to deliver to the seller, as an advance pay­ment, the equiv­a­lent of 10–30% (includ­ing the ini­tial deposit) of the total price upon sign­ing the purchase-sale agree­ment, which should con­tain a penalty clause applic­a­ble in case there is a breach of con­tract by any of the parties.

Nor­mally, when sign­ing the escrit­ura or offi­cial deed, which needs to be cer­ti­fied by a Pub­lic Notary, the bal­ance is paid and the prop­erty is deliv­ered. This should not take more than 45 days. It is rec­om­mended that an escrow account be used for all real estate trans­ac­tions.
The Pub­lic NotaryA Pub­lic Notary is a government-appointed lawyer who processes and cer­ti­fies all real estate trans­ac­tions, includ­ing the draw­ing and review of all real estate clos­ing doc­u­ments, thus ensur­ing their proper transfer.

Fur­ther­more, all pow­ers of attor­ney, the for­ma­tion of cor­po­ra­tions, wills, offi­cial wit­ness­ing, etc. are han­dled and duly reg­is­tered through the office of the Pub­lic Notary, who also is respon­si­ble to the gov­ern­ment for the col­lec­tion of all taxes involved.

In con­nec­tion with real estate trans­ac­tions, the Pub­lic Notary, upon request, receives the fol­low­ing offi­cial doc­u­ments, which, by law, are required for any trans­fer:• A non-lien cer­tifi­cate from the pub­lic prop­erty reg­istry, based on a com­plete title search;• A state­ment from the trea­sury or munic­i­pal­ity regard­ing prop­erty assess­ments, water bills and other per­ti­nent taxes that might be due;• An appraisal of the prop­erty for tax purposes.

Clos­ing Costs

It is com­mon prac­tice that the buyer pays the trans­fer of acqui­si­tion tax and all other clos­ing costs, includ­ing the Notary’s fees and expenses, while the seller pays his cap­i­tal gains tax and the broker’s commission.

Since Jan­u­ary 1, 1996, the fed­eral law regard­ing the real estate trans­fer tax, which was 2% for all the Repub­lic of Mex­ico, was mod­i­fied to allow each of the Mex­i­can states to deter­mine its own tax. The range now may be from 1–4% of the tax appraisal value, which is gen­er­ally less than the sales value.

The rest of the clos­ing costs, which exclude the trans­fer cost men­tioned above, vary from 3–5% or more of the appraised tax value, depend­ing on the par­tic­u­lar state. These per­cent­ages are applied to the high­est value of the fol­low­ing:• The amount for which the prop­erty is sold,

• The value of the offi­cial tax appraisal,
• The value des­ig­nated by the prop­erty assess­ment authorities.

Cost of the Fide­icomisoBased on the present tar­iff, the bank charges the per­son desir­ing the Fide­icomiso an ini­tial fee (approx. $500.00 USD) for draw­ing up the agree­ment and estab­lish­ing the trust, plus a per­cent­age based on the value of the prop­erty. In addi­tion, the bank charges an annual fee (depend­ing on the value of the prop­erty) to cover its ser­vices as a trustee.

Real Estate Broker’s Com­mis­sion­Most real estate com­pa­nies in Mex­ico charge a 6–8% com­mis­sion based on the actual sale price of the prop­erty. How­ever, in resort areas bro­ker rates are usu­ally higher because of increased bro­ker expenses.

Cap­i­tal Gains TaxIn Mex­ico, the con­cept of cap­i­tal gains tax does not apply in the same way it is deter­mined in the United States. Here, the gain from the sale of prop­erty is treated as nor­mal income at a tax rate of up to 35%. To deter­mine the gain, the fol­low­ing costs and expenses are deducted from the amount for which the prop­erty is offi­cially sold:

• The orig­i­nal land cost and the depre­ci­ated con­struc­tion cost, based on the num­ber of years the prop­erty was held and adjusted for infla­tion accord­ing to the offi­cial con­sumer price indexes;
• Addi­tions, mod­i­fi­ca­tions and improve­ments, but not main­te­nance, made on the prop­erty (con­struc­tion), adjusted as above;
• Com­mis­sions paid to real estate bro­kers by the seller;
• The clos­ing costs, includ­ing all expenses, taxes and fees paid by the seller.

The Notary will retain the cal­cu­lated gain after deduc­tions, for­ward­ing it to the Mex­i­can tax author­i­ties. The seller will then deduct this amount against his annual tax return, which becomes an adjustable tax credit in the U.S.A.

On the other hand, there is no cap­i­tal gains tax in Mex­ico if there is con­clu­sive proof the seller has used the prop­erty as his pri­mary residence.

SOURCE: Vir­tual Val­larta — Pro­duc­ciones Viva
http://www.virtualvallarta.com/puertovallarta/realestate/re-articles/real-estate-trends-update-2.shtml

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Useful Information for the Real Estate Owner

Apr 11 2006 Published by admin under Uncategorized

• Prop­erty Tax:At the begin­ning of every year, you need to pay prop­erty taxes (Impuesto Pre­dial). If they are paid in January,you receive a 15% dis­count. If your prop­erty is in the state of Jalisco, as is the case with Puerto Val­larta, your pay­ment needs to be made to:
H. Ayun­tamiento de Puerto Val­lar­taIn­de­pen­den­cia 123 (City Hall)(322) 223‑2500
In Nayarit:Municipio de Bahia de Ban­deras, NayaritH. Ayun­tamiento Con­sti­tu­cional, Tesore­ria Munic­i­palPuebla & Quere­taro Valle de Ban­deras (City Hall)(329) 291‑0818
• Fed­eral Zone Rights:If you have an ocean­front prop­erty, you need to pay an annual Fed­eral beach zone fee(Derechos Zona Fed­eral), unless it is a condo, in which case the fee is part of your HOA pay­ment. Pay­ment is made to:
H. Ayun­tamiento de Puerto Val­lar­taIn­de­pen­den­cia 123 (City Hall)(322) 223‑2500
In Nayarit:Tesoreria Munic­i­pal de Buce­rias, NayaritHeroes de Nacazari & MorelosBucerias(329) 298‑1319
• Rental Property:If you rent your prop­erty, you need to get a tax ID (Cedula de Iden­ti­fi­ca­cion Fis­cal) from:
Sec­re­taria de Hacienda y Cred­ito Pub­li­coFco. Med­ina Ascen­cio Km. 2.5(Plaza Caracol)(322) 225‑0437
In Nayarit:Hacienda Fed­er­alOcéano Paci­fico 17Bucerias(329) 298‑1806
• Res­i­dency Permit:You can apply for a Mex­i­can res­i­dency per­mit (Per­miso para Residir) at:
Insti­tuto Nacional de Migra­cionHeroica Escuela Naval Mil­i­tar 2755 (Next to the Mar­itime Terminal)(322) 224‑7653
• Mex­i­can Social Security:If you have house staff (maid, cook, chauf­feur), you should reg­is­terthem with Mex­i­can Social Secu­rity at:Fco. Med­ina Ascen­cio 2006(322) 224‑3838 Ext 202, 212
In Nayarit:Josefa Ortiz de Domínguez S/NMezcales(329) 296‑5140
• Telephone:Your phone bill is due monthly and can be paid atvar­i­ous banks and gro­cery stores or at:
Telmex­Los Tules 178(Gigante in Plaza Caracol)(322) 225‑1021
In Nayarit:TelmexHeroes de Nacazari 10Bucerias(329) 295‑1686
• Electricity:For both states, your elec­tric bill is due everytwo months and can be paid at:
Comi­sion Fed­eral de Electricidad.Colombia 118(322) 225‑5555
• Home Owner’s Insurance:If you need insur­ance for your prop­erty, which may be included in your HOA fees,there are many insur­ance com­pa­nies avail­able, but most North Amer­i­cans work with:
Oper­adora de Fon­dos Lloyd SAPlaza Marina L-A-48(322) 221‑3101
Plaza Santa Maria L-D-13(322) 224‑2490

SOURCE: Vir­tual Val­larta — Pro­duc­ciones Viva
http://www.virtualvallarta.com/puertovallarta/realestate/re-articles/useful-information-for-th.shtml

Copy­right © 2002–2005 Pro­duc­ciones VIVA, S.A. de C.V. All rights reserved. It is pro­hib­ited to repro­duce, in total or part, any por­tion of this Web site with­out the expressed per­mis­sion of Pro­duc­ciones VIVA.

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Marina Living

Apr 11 2006 Published by admin under Uncategorized

Lights twin­kle on soar­ing masts against the twi­light sky, as boats rock gen­tly in their moor­ings and buoys chime sooth­ingly in Vallarta’s sweet breeze. It’s a beau­ti­ful scene, and one that can be eas­ily enjoyed in the Bahia de Ban­deras with­out ever board­ing a boat. Dock­side life can be enchant­ing from the ter­race of a marina home.
Marina liv­ing appeals to a vari­ety of peo­ple for many rea­sons, and this pres­ti­gious lifestyle is read­ily avail­able in the numer­ous har­bor devel­op­ments of Marina Val­larta in Puerto Val­larta, Par­adise Vil­lage in Nuevo Val­larta, and soon just off the high­way to Punta Mita in La Cruz de Hua­nacax­tle, where a marina is under con­struc­tion.
Homes along the canals of Nuevo Val­larta pro­vide beau­ti­ful coastal scenery with easy access to wider waters. Whale watch­ing, fish­ing and cruis­ing are just moments away if you have your own boat docked out­side your door or char­ter a craft for sail­ing, water ski­ing or just watch­ing the sun­set.
When not out enjoy­ing the water, marina dwellers can enjoy the many ameni­ties of their attrac­tive and well-planned com­mu­ni­ties, which usu­ally com­bine tourist, res­i­den­tial and com­mer­cial devel­op­ment. Golf, ten­nis and a health club and spa will likely be nearby, as well as restau­rants and shops and the beau­ti­ful palm tree-fringed beaches of the bay.
The mari­nas of Val­larta pro­vide tran­quil water­front liv­ing in a wide vari­ety of homes and con­do­mini­ums, from stu­dio apart­ments to million-dollar man­sions over­look­ing world-class boat­ing facil­i­ties packed with stun­ning plea­sure boats, sail­boats and yachts. Res­i­dences may over­look the bay or a lagoon, and many have views of the spec­tac­u­lar Sierra Madre Moun­tains.
A marina is gen­er­ally the heart­beat of a resort area – a vibrant and vital cen­ter. Cer­tainly “pic­ture per­fect” marina liv­ing in Val­larta will trans­form the lifestyles of both water enthu­si­asts and leisure lovers alike.

SOURCE: Vir­tual Val­larta — Pro­duc­ciones Viva
http://www.virtualvallarta.com/puertovallarta/realestate/re-articles/marina-living.shtml

Copy­right © 2002–2005 Pro­duc­ciones VIVA, S.A. de C.V. All rights reserved. It is pro­hib­ited to repro­duce, in total or part, any por­tion of this Web site with­out the expressed per­mis­sion of Pro­duc­ciones VIVA.

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The Attraction of Fairway Homes

Apr 11 2006 Published by admin under Uncategorized

A favorite pas­time for many seniors, snow­birds and year-round res­i­dents, this dream is becom­ing a real­ity for many.

Even for those who have yet to swing a club, buy­ing a home on a golf course can feel like win­ning the real estate lotto! Gor­geous views, peace and quiet and well main­tained large green expanses are just some of the ben­e­fits avail­able to all, besides con­ve­nient golf­ing. A golf course behind your house can seem like an exten­sion of your prop­erty – with­out any of the upkeep obligations!

The courses them­selves are usu­ally owned by the devel­oper, with golf mem­ber­ships avail­able to res­i­dents, but not required. In Val­larta, golf com­mu­ni­ties may also offer such bonuses as attrac­tive club­houses, stores sell­ing every gold acces­sory, nearby five-star resorts, full-service spas and gyms, restau­rants and ten­nis. Sev­eral pro­vide spe­cial beach clubs for own­ers along the broad, white shore­line. Another advan­tage to this type of liv­ing is that this park-like set­ting is often part of a gated neigh­bor­hood with excel­lent security.

In addi­tion to mem­ber­ship oppor­tu­ni­ties in excel­lent golf facil­i­ties, Val­larta itself pro­vides many ameni­ties that enhance the golfer’s lifestyle: fab­u­lous din­ing, beau­ti­ful beaches, and inter­est­ing shop­ping and cul­tural activ­i­ties, not to men­tion won­der­ful weather.

Res­i­den­tial golf com­mu­ni­ties in the Bahía de Ban­deras area already include the many indi­vid­ual homes and con­do­minium projects located on the Marina Val­larta Golf Club and in the plan­ning and con­struc­tion stages with easy access to it. Fur­ther north in Nayarit, much hous­ing devel­op­ment is occur­ring in Nuevo Val­larta around the Mayan Palace and Par­adise Vil­lage golf courses and near the town of Buce­rias around the Flamin­gos Golf Club, as well as along the north­ern­most tip of the Bay, in Punta Mita.

SOURCE:
http://www.virtualvallarta.com/puertovallarta/realestate/re-articles/the-attraction-of-fairway.shtml

Copy­right © 2002–2005 Pro­duc­ciones VIVA, S.A. de C.V. All rights reserved. It is pro­hib­ited to repro­duce, in total or part, any por­tion of this Web site with­out the expressed per­mis­sion of Pro­duc­ciones VIVA.

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Mortgage Financing

Apr 11 2006 Published by admin under Uncategorized

Mort­gage financ­ing is now avail­able in Mex­ico, although it is just being intro­duced and still work­ing through grow­ing pains. Purchase-only financ­ing is avail­able (no remod­e­la­tion loans) for sin­gle fam­ily res­i­dences and con­dos with a 20-year mort­gage (25 & 30 year amor­ti­za­tion loans are on the way) with a four-year fixed loan rate. Rates vary but at least they are well below 10%, finally.

The loans are cur­rently avail­able only for US cit­i­zens (sorry, Cana­di­ans!). The major hold­back with regards to how quickly the loans can be put together is on the seller’s side with regards to the can­cel­la­tion of the trust. Unfor­tu­nately not all the banks are han­dling the process as quickly as they could be. Bor­row­ers can be approved within 48 hours in most cases.

There are a num­ber of dif­fer­ent bro­kers enter­ing the mar­ket­place and it should be noted that some are bet­ter than oth­ers. Be sure to check around by ques­tion­ing a few com­pa­nies and ask­ing your realtor’s opin­ion on them. Hav­ing a bro­ker that knows how the sys­tem works locally can make the dif­fer­ence as to whether the loan will actu­ally hap­pen or not.

Have you seen that per­fect prop­erty on the bay, but you’re not quite pre­pared to cash in your US or Cana­dian invest­ments to make it yours? Are you set to make the move to Puerto Val­larta, but just a bit shy of ready cash for a condo? Now you can stock up on sun­tan lotion, because mort­gage financ­ing has come to Mex­ico. “The secret of great liv­ing and invest­ment oppor­tu­ni­ties in Mex­i­can resort areas is out!” points out Eduardo Perez of Con­fi­casa Inter­na­tional, and he believes that “the avail­abil­ity of loans will only fuel that growth, with Val­larta lead­ing the way.”

Tra­di­tion­ally, real estate pur­chases in Mex­ico have been lim­ited to full cash pay­ment at the time of clos­ing, but recent changes in Mex­i­can reg­u­la­tions regard­ing fore­clo­sure on foreign-financed prop­erty have made lenders more com­fort­able, and cross-border loans are now avail­able through sev­eral bro­ker­age firms with rep­re­sen­ta­tives in Val­larta. Lenders range from inter­na­tion­ally known finan­cial insti­tu­tions to pri­vate entre­pre­neurs and funds. Ter­ence Reilly of Mexlend explains that because real estate here has been mov­ing upwards so steadily lenders want to par­tic­i­pate in this sta­ble, but vibrant, market.

A key word in real estate lend­ing in Mex­ico is “vari­ety.” While some bro­kers han­dle only com­pleted res­i­dences, oth­ers are explor­ing refi­nanc­ing, con­struc­tion loans, pre-construction bridge financ­ing and advances for unim­proved lots. Loans are avail­able in both US dol­lars and pesos, pri­mar­ily to US and Cana­dian res­i­dents. And terms can range from five years up to 30, with 20-year loans being the most com­mon. Although inter­est arrange­ments vary from fixed to float­ing rates based on an index such as “prime,” rates are gen­er­ally higher than in the USA. Other vari­ables are title insur­ance require­ments and loan fees.

Qual­i­fi­ca­tions for bor­row­ers take into account that many peo­ple buy­ing in Mex­ico will no longer be employed when liv­ing here, so lenders will look at avail­able assets and credit his­tory, as well as income. The process, which usu­ally takes about 60 days from appli­ca­tion to clos­ing, is sim­i­lar to pro­ce­dures in the USA, and ini­tial appli­ca­tions may be avail­able online.

“The mar­ket is hot these days even with­out financ­ing, and these advances in financ­ing will heat it up even more,” points out Doug Jones of Mort­gages in Mex­ico, while Charles Alexan­der of Alexan­der, Bar­rett notes that these devel­op­ing pro­grams will help the com­mu­nity by allow­ing a diverse group of peo­ple to par­tic­i­pate in life on this beau­ti­ful bay.

SOURCE:
http://www.virtualvallarta.com/puertovallarta/realestate/re-articles/mortgage-financing.shtml

Copy­right © 2002–2005 Pro­duc­ciones VIVA, S.A. de C.V. All rights reserved. It is pro­hib­ited to repro­duce, in total or part, any por­tion of this Web site with­out the expressed per­mis­sion of Pro­duc­ciones VIVA.

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Real Estate Trends Update 2005 — 2006

Apr 11 2006 Published by admin under Uncategorized

The growth of the Val­larta real estate mar­ket con­tin­ues to be very strong, with sales tripling for the local real estate association’s MLS (Mul­ti­ple List­ing Ser­vice) and dou­bling for devel­op­ers com­pared to the 2003–2004 sea­son. This type of growth is unprece­dented for Puerto Val­larta and their doesn’t seem to be an end in sight. If any­thing, as many real­tors and devel­op­ers state, there are strong rea­sons to believe it’s here for awhile. “This is just the begin­ning of some­thing really big. We haven’t even got going yet,” says Wayne Franklin of Trop­i­casa Realty and the pres­i­dent of the Val­larta real estate board. In 2004 there were an esti­mated $300 mil­lion USD in new con­struc­tion sales and nearly $100 mil­lion USD in sales for the MLS ser­vice. That total of $400 mil­lion is des­tined to be sur­passed in 2005, with $250 mil­lion in sales already reg­is­tered by devel­op­ers and real­tors as of the begin­ning of June. Roughly two-thirds of this new devel­op­ment is con­do­mini­ums. Larger projects of 150 or more units are being built around the bay, with smaller bou­tique projects sched­uled for the South Shore as space and avail­abil­ity allow.
Strong demand has cre­ated a weak sup­ply of both homes and con­do­mini­ums in the $300,000 — $400,000 USD price range. Most con­do­minium devel­op­ments’ start­ing point for view prop­er­ties is now at or above $400,000. The increase has been dri­ven by a demand for larger units and bet­ter qual­ity con­struc­tion and fin­ish­ing. Units with more than 3,000 sq. ft. are now com­mon, whereas 10 years ago it was a 1,500 sq. ft. cookie-cutter, two-bedroom stan­dard unit. Buy­ers now expect full ensuites, Sub-Zero appli­ances, mar­ble floor­ing, a third bed­room and per­haps a TV/study, as well.
Although the strong Mex­i­can econ­omy has cre­ated a mar­ket for national buy­ers once again, the buy­ing that is tak­ing place is pre­dom­i­nantly by Amer­i­cans, espe­cially on the North Shore, Nuevo Val­larta and along the hill­sides of the South Shore. The new con­do­minium tow­ers in Marina Val­larta and now in the Hotel Zone, how­ever, are the pre­ferred real estate choice for the national mar­ket.
Across the board, most real­tors say the buy­ers they are work­ing with today are more sophis­ti­cated, less intim­i­dated by the trust/purchase sys­tem and ready to make a buy­ing deci­sion quickly. Today’s buy­ers come into the office with a good under­stand­ing of the mar­ket, so less time has to be spent explain­ing how pur­chas­ing real estate in Mex­ico takes place. They have a lot of con­fi­dence in the Puerto Val­larta real estate mar­ket and are ready to make a buy­ing deci­sion.
Why is the mar­ket so strong?There are many rea­sons the mar­ket is so strong. It can be attrib­uted to hur­ri­canes in Florida and tsunamis in Indone­sia. The 9/11 dis­as­ter is partly respon­si­ble for mak­ing peo­ple think about their future, about hav­ing a vaca­tion home some­where warm, where they could drive back home if need be. The burst of the Inter­net bub­ble and crash of the stock mar­kets have peo­ple look­ing for alter­na­tive invest­ments. The size of the US debt, social secu­rity issues and an out-of-control trade bal­ance have peo­ple con­cerned about their finan­cial future.
In Mex­ico the econ­omy is sur­pris­ingly robust. The bud­get deficit has been reduced each of the past four years, and a bal­anced bud­get is expected in 2006. Eco­nomic growth is well on track, expected to exceed 3.88%, and infla­tion should drop below 4%. So far this year, the peso has proven itself to be stronger than the US dol­lar.
Why Puerto Val­larta? The vari­ety of real estate avail­able by price, type, area and loca­tion make Val­larta very desir­able when com­pared to other des­ti­na­tions, such as Los Cabos and Can­cun. But the pri­mary rea­son is the peo­ple. Carl Tim­o­thy of Tim­o­thy Fuller & Asso­ciates explained this very well, “When you are in large cities, such as Los Ange­les or New York, you feel that peo­ple just want some­thing from you, the peo­ple are tak­ers. In Puerto Val­larta it’s the oppo­site; the peo­ple are giv­ing, and you can feel that through­out the com­mu­nity.” There­fore, it is pri­mar­ily the peo­ple of Puerto Val­larta that make it such a won­der­ful des­ti­na­tion for tourists and second-home buyers.

Trends for 2005–2006#1 Younger Buyer Pro­fileThere is much talk about the aging Baby Boomers and how they will be spend­ing their time and money as they enter retire­ment. And their num­bers are remark­able: There are 70 mil­lion of them, and they con­trol more than $7 tril­lion USD in wealth in the USA – 70% of the total. They are the most finan­cially wealthy gen­er­a­tion of mature con­sumers the world has ever seen.
And what do they want? Well, a sec­ond home in a resort area seems to be high on the list. We have expe­ri­enced their influ­ence with the devel­op­ment of con­do­mini­ums con­sist­ing mostly of three-bedroom units. Ten years ago the mix was basi­cally just two-bedroom units. A good exam­ple is Marina Val­larta, where it is dif­fi­cult to find a three-bedroom unit. Very few were built, and the few that do exist are the result of pur­chasers join­ing together two units to cre­ate a three– or four-bedroom con­do­minium. Today, projects such as Punta Vista, Hacienda de Mita, Shangri-la and many oth­ers are nearly exclu­sively three-bedroom con­do­minium projects. The Baby Boomers are trav­el­ing, and when they do they like to take the fam­ily with them.
An inter­est­ing trend is evolv­ing regard­ing how Baby Boomers are liv­ing their lives, espe­cially the younger Boomers who are still in their 40s. With life expectancy sur­pass­ing 75 years, they are not wait­ing until their 60s to begin some form of retire­ment. In the past, aging pat­terns have been lin­ear, fol­low­ing a set trend of rais­ing a fam­ily in the 20s and 30s, build­ing invest­ments dur­ing the 40s and 50s, and retir­ing in the 60s. Today, we are see­ing Baby Boomers decid­ing to “semi-retire” early, but to con­tinue in the work force in some man­ner.
This trend, which was recently writ­ten about in the “Har­vard Busi­ness Review” by Ken Dycht­wald, who has a book about the sub­ject com­ing out soon, is exactly what is being reported by real­tors. Their buy­ers are younger, in their 40s, and are per­haps finan­cially capa­ble of retir­ing or close to it, but have no inten­tion of doing so quite yet. So they do a pre­lim­i­nary semi-retirement, spend­ing more time at a sec­ond home or per­haps even mov­ing the fam­ily to the sec­ond home for a year or two for a cul­tural expe­ri­ence. The kids pick up a sec­ond lan­guage, while dad com­mutes back and forth. And while they are in Val­larta, they con­tinue to be active with fur­ther real estate invest­ing. For oth­ers, it involves tak­ing a few years off to build a home and enter the job mar­ket later on, per­haps return­ing to their past employer on a part-time basis or as a con­sul­tant.
“They’re look­ing for dif­fer­ent blends – three days a week, for exam­ple, or maybe six months a year. Many want or need the income, but that’s not the only moti­va­tor. Peo­ple tend to iden­tify strongly with their work, their dis­ci­plines, and their careers. Many wish to learn, to grow, try new things, and be pro­duc­tive indef­i­nitely, through a com­bi­na­tion of com­mer­cial, vol­un­teer, and per­sonal pur­suits.”
This quote from Dychtwald’s arti­cle is basi­cally how local real­tors describe their buy­ers recently. They are not retir­ing in the tra­di­tional sense, but are tak­ing a mid-life break to try some­thing dif­fer­ent, per­haps to return to work later on, although most likely in a dif­fer­ent man­ner than before.
#2 Down­town is TrendyIn the late ‘80s and early ‘90s, when Marina Val­larta sales were going strong, sales for the down­town neigh­bor­hoods of Los Muer­tos, El Cerro and Gringo Gulch were adversely affected. These mar­kets remained quite stag­nant right up into the late ‘90s. Today, the down­town areas are hot, described by Sil­via Elias of PV Realty as “trendy.” “There is such a lack of sup­ply that we have a list of peo­ple wait­ing for good prop­er­ties to come on the mar­ket.” Despite the strong demand all around the bay, the down­town area has not been neg­a­tively affected, rather the reverse – the mar­ket is stronger than ever. Peo­ple are buy­ing up older homes to ren­o­vate or what­ever lots are still avail­able to build. With traf­fic con­ges­tion get­ting worse for Val­larta, the down­town area has the advan­tage that you can park your car at home and walk to many restau­rants and shops.
#3 South Shore Niche Mar­ket­There are fewer and fewer good build­ing lots avail­able in Las Ama­pas and Con­chas Chi­nas, as most have been picked up by devel­op­ers for small con­do­minium projects. One of the more suc­cess­ful devel­op­ers in this area is Terra & Mare, with La Cima and Hori­zon con­do­mini­ums. Mod­ern, larger and very chic, their style is now being copied by oth­ers, not just in this area but all around the bay. One of their newest devel­op­ments, Avalon, has not even bro­ken ground as of this date and already half of the project’s con­do­mini­ums are spo­ken for. The steep ter­rain and lack of large build­ing sites have held back larger con­do­minium devel­op­ers, which has added to the unique­ness of this area. The real estate that is avail­able tends to be sin­gle fam­ily homes or con­do­minium projects with less than 50 units.
#4 Nuevo Vallarta/Flamingos Pop­u­lar­i­tyTwenty years after its ini­tial launch, the mega-development of Nuevo Val­larta is finally becom­ing what its orig­i­nal devel­op­ers had hoped for. With a large marina, three golf courses, the longest beach in the bay and plenty of devel­opable land, today it is the most com­pre­hen­sive real estate devel­op­ment inside the bay. Prospec­tive real estate buy­ers can choose from ocean­front, golf course, marina or canal con­do­mini­ums, homes or home sites – some­thing no other devel­op­ment can presently offer. The dri­ver of this growth is pre­dom­i­nantly Par­adise Vil­lage and the Sovernigo fam­ily. Along with first-class real estate options, their ameni­ties are very com­plete, with a full-service spa, El Tigre golf course, a shop­ping cen­ter, a beach club and the recently opened Sports Club, which offers an incred­i­ble array of activ­i­ties that can­not be matched by any other regional devel­op­ment.
#5 North Shore GrowthSixty-five per­cent of the new con­struc­tion in 2004 was in Nayarit, pri­mar­ily in Nuevo Val­larta and along the North Shore. That trend will con­tinue into the future, as this is where land is avail­able to build the larger, higher-density devel­op­ments. Access is cer­tainly bet­ter now with the four-lane high­way and the widen­ing presently tak­ing place on the road from Costa Ban­deras to Punta de Mita. And with the announce­ment of FONATUR’s (Mexico’s fed­eral resort devel­op­ment sec­tor) mega-development in Litibú, out­side the bay just north of Punta Mita, the back coastal high­way that leads to Sayulita is also being upgraded from a gravel road to a wide, paved high­way. These improve­ments mean that Punta Mita is less than 40 min­utes from the air­port and open up access to the incred­i­ble coast­line that stretches up to Sayulita.
To get an idea of how strong growth has been, Tierra & Armo­nia, devel­op­ers of Punta Esmer­alda and Real del Mar, sold 100 prop­er­ties in the first four months of 2005, and Punta Mita matched their 2004 sales just mid­way through 2005.
#6 Con­do­minium Tow­ers­Bay View Grand started it all a few years ago with their 14-story con­do­minium project in Marina Val­larta, and then fol­low­ing it up with 15-story Porto Fino. Extremely suc­cess­ful, BVG sold out in just over two years, prov­ing there was a strong demand for these types of devel­op­ments. Shangri-la soon fol­lowed with 18 floors, and now two projects have pushed the enve­lope even fur­ther with 24-story tow­ers break­ing ground beside the Hol­i­day Inn. Although these two projects are just get­ting started, they have already gen­er­ated more than $25 mil­lion USD in sales. With this kind of suc­cess, it seems the trend will be for more tow­ers in the future.
#7 Price Appre­ci­a­tion­Ap­pre­ci­a­tion has been a strong trend for the past three years and quite con­sis­tent over the past 15. We are still below com­pet­i­tive mar­kets like Hawaii and Los Cabos, so this trend should con­tinue, espe­cially for beach­front prop­er­ties. Aver­age con­do­minium and home sales in the MLS showed a 25% increase since 2002; how­ever, this increase would be even higher if it included the recently con­structed projects, which have sell­ing prices above the MLS resale mar­ket. Strong demand will con­tinue to drive up prices, at least until sup­ply can begin to catch up, which doesn’t look like it will hap­pen any­time soon.
#8 Mul­ti­ple Prop­erty Buy­ersIn active real estate mar­kets, it is com­mon for peo­ple to take advan­tage of quickly increas­ing appre­ci­a­tion by buy­ing mul­ti­ple units in condo projects and then doing what is com­monly referred to as “flip­ping” the units. This prac­tice was very pop­u­lar while Marina Val­larta was being built up, for exam­ple. Today, buy­ers are again pur­chas­ing more than one prop­erty, but in a dif­fer­ent man­ner. They are buy­ing a home for them­selves and then a sec­ond or third prop­erty that may con­sist of raw land or a home that needs to be fixed up. The dif­fer­ence is that the buyer of the past did it purely as an invest­ment, a pas­sive invest­ment. Today’s buy­ers are pro-active. They are buy­ing the prop­er­ties so they can be involved in the con­struc­tion process of build­ing or ren­o­vat­ing. It fol­lows another trend: Peo­ple are mov­ing to Val­larta to live, but not to do so pas­sively by spend­ing time on the beach, ten­nis court or golf course. They want to be kept busy, and real estate devel­op­ment is an inter­est­ing out­let for them. It has also proven to deliver a much bet­ter return than they have tra­di­tion­ally earned in the money and stock mar­kets.
Financ­ing­For the past 10 years, I have writ­ten reg­u­larly that acces­si­ble financ­ing is just around the cor­ner. Well, financ­ing is still not avail­able after all these years, although there are cer­tainly many large lenders and banks that are try­ing to make it hap­pen. With the mar­ket we cur­rently have, with wait­ing lists and mul­ti­ple offers on prop­er­ties listed, we really don’t need financ­ing! The mar­ket is doing just fine on a cash-only basis. With financ­ing com­ing online, the mar­ket may just start mov­ing faster than would be best for it. There­fore, I’m of the opin­ion that if it takes a few more years to get eas­ily acces­si­ble financ­ing here in Puerto Val­larata that’s just fine, and I’m hop­ing that will be the trend for 2005 and 2006.

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