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Property investors look to Mexico as an alternative to the US

A number of real estate organisations are reporting a surge in interest and investment is leading to improved infrastructure and soaring numbers of tourists.

Demand is rising but real estate agents believe a surge in new building could result in over supply in a few years time in some areas.

One place where demand has risen is Loreto. Mexico's National Fund for Tourism Development, FONATUR, has invested heavily in the small fishing village. 'It is now regarded as an up-and-coming tourist hotspot, following the lead of popular tourist destinations such as Cancun and Ixtapa,' a spokesman said.

Advances in Loreto's infrastructure include an international airport, marina, utilities, wastewater treatment plant and improvement and expansion of its road system. Resort development includes two hotels, a tennis centre and a golf course.

In Merida, the capital city of Yucatan, there are urban and coastal properties at affordable prices, according to Brian Murphy, owner of real estate firm Mexira.

He reports that a colonial home in the downtown area can be purchased for less than $100,000. A savvy investor could also buy a 20- to 25-meter tract of nearby beachfront for a similar amount of money.

Because cheap, undeveloped land surrounding the city is abundant, Merida should see considerable growth in the next 10 years, according to Murphy.

Guadalajara, the second most populous city in Mexico and a major high tech industrial hub, is currently seeing rapid development. But this could result in over supply according to Mary Wick, co-owner of Wick Barazza Real Estate. 'Prices for luxury condos range from $200,000 to $3 million, but supply is quickly outstripping demand, and prices are expected to drop within the next one or two years,' she said.

Nestled in the center of Banderas Bay on Mexico's Pacific coast, Puerto Vallarta has rapidly developed into a boomtown for vacation properties and second homes. Vallarta is home to 350,000 residents, with a community of 6500 expatriates, according to the Tourism Board.

Although prices for condos and villas have risen by an average of 10 % each year for the last 10 years, prices are expected to flatten soon as a result of overbuilding, according to Tere Kimball broker and partner for Prudential California Real Estate.

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