This is just ridiculous…

The Billion-Dollar House 

What would you do if your net worth were $22 billion? If you were Indian businessman Mukesh Ambani, you might build yourself the world’s most expensive home. As designed by Chicago architecture firm Perkins + Will, the in-progress glass-tower is estimated at $1 billion and is known to feature, at the least, a health club, multiple “safe” rooms, 3 helipads, 168 parking spaces and require 600 servants to maintain, and physically, the structure stands at 27 stories, or 570 feet tall.  

  

MLS Inventory Increased Slightly

MLV inventory increased slightly to 822 properties currently on the market, up 40% year-to-date.  MLV Inventory Totals I’m out of town for the next week so postings for me for a bit. But I wouldn’t mind seeing a few more comments posted regarding some of my most recent entries. I’d like to hear what you have to say about the postings and the market in general. John Lifestyles 

New Residential Development Inventory Stats

At the beginning of 2007, we added up how many new properties were being held by developers and this totaled 5,600 units. We asked how many of those were sold, sold in either 2006 or previous years. It was reported that 2,160 were defined as sold or no longer available for sale, leaving an ending balance of new properties on the market of 3,440. Please note that we are not sure if these properties actually sold in 2006 or took place in a previous year, that information is not available to us. All we know is that going into 2007 there were 3,440 units for sale with new developments. 

During 2007, more than 50 new real estate developments came on line, adding nearly 3,800 new properties to the market. Of these about 1,700 sold, leaving us a balance, going into 2008, of approximately 7,200 new development properties. In other words, we ended 2006 with 3,440 new development units on the market, we ended 2007 with nearly twice as many, or 7,200 units. Of this, the overwhelming majority are condominiums. 

If we continue to add new products to the market, but are only selling 1,700 a year, we’re going to have problems. Selling like we are it would take us nearly four years to sell out IF no new product was added. That isn’t so bad; many projects are projecting sales over a 2-3 year period.

However, there are two new, very large projects coming onto the market in 2008, (Alamar and Las Villas de Mexico), and just these two projects alone total 1,800 units, or equal to the total number of units we sold in all of 2007. So you better make that at least five years to sell out, which becomes concerning IF sales do not increase. So far it looks like we may be remaining flat, or consistent with last year, with little or no increase. 

Should make for interesting discussion at the upcoming Puerto Vallarta Real Estate Conference, to take place this year in early May. We’ll be releasing the actual date in a couple of weeks, after confirming the availability of our guest speakers.

New Development from Grupo Real del Mar

Grupo Real del Mar, following on the success of Real del Mar, Punta Esmeralda and La Joya, have launched their newest and most ambitious project to date, Alamar. Nestled in the hillside behind La Cruz de Huanacaxtle on 34 hectares, Alamar will have an impressive footprint of less than 20% of the land, creating plenty of areas for gardens, walkways, a water effects. The development consists of 17 towers, each of ten levels and approximately 50 units per building. In total there will be just over 800 condominiums. As well, they will have a beach club, on the beach in front, accessible only for owners.Alamar has a lot going for it, especially when it comes to price, views and location. La Cruz is a fun town with some great restaurants. And it is home to the recently opened Marina La Cruz, which has over 200 boat slips, fuel and dry dock facilities. The views of Alamar look back in the direction of Puerto Vallarta and out over most of the bay, looking east and south.And the prices… two bedroom condominiums start at just $250,000 USD; a great price for the package.  These prices will continue to rise, however, as the project develops. Special “family & friends” prices are available for just the next couple of weeks. This is certainly going to be very interesting competition for many other projects that may be in this price range but can’t offer the amenities or views. And Grupo Real del Mar have a very distinguished and credible reputation that they bring to Alamar.

Homex gets into the Tourism Real Estate Market

Desarrolladora Homex, is a home development company that, at least up until most recently, focused on affordable, entry-level and middle-income housing in Mexico. They have become the fastest growing of the major home developers in Mexico in the last two years, based on the percentage increase each year in number of homes sold, revenues and net income. It is one of the most geographically diverse homebuilders in the country. 

Homex is now expanding their product line and this year will begin offering tourism real estate, focusing on the USA/Canadian markets rather than their traditional Mexican market. They have plans for large resort developments across Mexico, including Riviera Nayarit. They have obtained land just west of Punta del Burro on the north shore of the bay and plan to build more than 800 homes in a gated community, with prices starting at around $500,000 USD. This is a price-point that should prove very attractive to potential second-home purchasers.

Mexican housing booms despite US crisis

There’s a good article in the San Jose Mercury News that explains well how Mexico’s real estate and housing market is currently doing.

Long thrashed by swings in the U.S. economy, Mexico now boasts a thriving housing sector whose record growth leads Latin America—a sign of increased economic stability and an outlet for investors looking to escape the U.S. downturn. 

…President Felipe Calderon has set a national goal of a million new mortgages a year by 2010. On Monday, he unveils a set of measures to ensure growth continues, with plans to boost Mexico’s small resale market and combat the urban sprawl that has begun to carpet valleys with hundreds of thousands of matchbox rowhomes.

…Behind the boom are six years of economic growth and stability, and a national shortage of 6 million dwellings. While interest rates are falling, just 6 percent of Mexico’s 25.7 million homes are financed with mortgages—compared to about 67 percent in the U.S. Most Mexicans still inherit their homes, buy them with cash, or build them by hand.

…That pent-up mortgage demand in a nation of 108 million means lenders can be choosy, enforcing strict standards that held delinquency rates below 4 percent in third quarter-2007, compared to 5.6 percent in the U.S.

…”Mexico is in the early stages of expansion,” said 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.”

…In the U.S., lenders looking to expand their portfolios granted risky mortgages to borrowers with weak credit, but in Mexico, that “subprime” category doesn’t exist, because lenders don’t need it to grow. Also, few Mexicans flip homes or refinance mortgages, keeping the market more stable.

…”Mexico doesn’t have a credit issue. We can still choose our borrowers because demand is so great,” said Mark Zaltzman, chief financial officer at Su Casita, one of Mexico’s largest mortgage lenders.

…Even as home lending soars, overall debt remains low, making a Mexican credit bubble unlikely. Major mortgage insurers, including U.S.-based AIG United Guaranty and Genworth Financial, now back Mexican loans, slashing risk and making it easier for lenders to bundle and sell debt to investors as mortgage-backed securities—raising capital to grant yet more loans. 

 

Slow going for Trump Resort near Tijuana

Two years after a high-profile sales event, Baja project stuck in red tape, slow market

By Sandra Dibble of the San Diego Tribune.

Donald Trump’s decision to lend his name to a lavish coastal condo-hotel project in Baja California brought worldwide visibility to the region’s unprecedented building boom.A sign, now tattered but shown in its better days, displayed a photo of Donald Trump and touted the development south of Tijuana.

 But two years after a San Diego sales event that drew hundreds of would-be purchasers, the planned three-tower Trump Ocean Resort has yet to break ground and development has slowed along the Tijuana-Ensenada strip known as the Gold Coast. A 10-mile drive from the border, a half-dozen workers poured concrete into a trench yesterday. Orange fencing surrounded a large deep hole. A wind-tattered billboard displaying a giant photograph of Trump rose over the 17-acre site overlooking the Coronado Islands.Tijuana officials say the developer received a land use permit in 2005, allowing 526 units to be built on the property that juts out into the Pacific Ocean at Punta Bandera.But the developer has yet to receive a construction permit from Tijuana’s Urban Development Department, the key city agency that gives the go-ahead for new projects. “Going through the files, we can’t find an application,” said director Miguel Angel Zavala.So far, U.S. buyers make up more than 90 percent of the project’s clientele, said Carlos Palafox, director of development for Irongate. To date, 167 units have been pre-sold in the first tower, which will have 232 units on 26 stories and is scheduled to open at the end of 2009, about six months behind initial projections, Palafox said. Last year in Rosarito Beach, building models of the Trump Ocean Resort were displayed for prospective buyers in a sales office. About 40 percent of the space has been spoken for in the second 26-story tower. Buyers who sign a contract agree to put down 30 percent of their unit’s cost over a specified time period, Palafox said.

But with the downturn in the U.S. market, Baja California’s coastal real estate sales have fallen. Rafael Liceaga, a well-known Baja California real estate broker, said sales have fallen about 40 percent to 50 percent since the height of the boom but remain above pre-boom levels. “There continues to be much movement, many transactions,” said Eduardo Rosales, president of the Rosarito Beach branch of AMPI, a national realty agents group. Despite recent setbacks, “the location is strategic,” said Rosales. “People are investing and are going to continue to invest.”

 40-50% sales have fallen? That’s a huge drop and although we have seen a slowdown in Vallarta, nothing at all like this. Properties are not selling like they once were, before developments were even finished, but they are still selling. But I do agree with Rosales, location is strategic.

But now a new market is developing, as buyers have begun scouting for foreclosure properties and “properties that people are trying to sell ASAP,” said Gustavo Torres, a broker in the Rosarito Beach area and vice president of the local AMPI branch.

I’m currently working on numbers to identify how many  new development properties are actually on the market and then will compare than with the year before’s numbers. I should have that our by next week. Initial numbers show, though, that we are certainly doing better than the Rosarito Beach area. 

Int. Real Estate Report by NAR

On the website for NAR (National Association of Realtors), there is a study recently done (2007) regarding Americans buying real estate abroad. I was expecting to find something that would prove interesting, but most of the information, even though the report was done last year, is very dated. It seems that NAR, or the US government, hasn’t been keeping up on this trend.  

As part of the initial investigation, a general search of the Internet was undertaken seeking information on Americans buying homes abroad. This work uncovered a set of estimates of the number of Americans living abroad by country. A Geneva, Switzerland-based organization for Americans abroad provided a 1999 list, sourcing the “U.S. State Department Website.” This file contains the most recently published figures on the number of Americans overseas and provides a baseline; however, no further data exists to determine a trend. A search of the State Department website turned up no similar information. Conversations with the State Department’s Public Information Counselor Affairs section revealed that after the events of September 11, 2001, these statistics were no longer compiled in a public database for security reasons.    

 The last report was done in 1999? And it is no longer done because of security reasons? 

Americans seem to like to stay close to home. Table 2 lists the estimates for the top 10 countries, the cumulative total and percentages. In 1999, Mexico accounted for about 25% of allAmericans living abroad, with Canada a distant second at 17%. Note that the numbers andpercentages drop off dramatically after Mexico and Canada. The United Kingdom (England,Scotland, Wales, and Northern Ireland) is ranked third at just over 5%, with Germanyaccounting for about the same percentage of American residents. Israel and Italy comprise 4%each. Well at least the trend at that time showed that Mexico accounted for most Americans living abroad, even coming out ahead of Canada. With the boom in real estate in Mexico since 1999, and with the Canadian Dollar not valued on par with the US Dollar (making Canadian real estate more expensive), Mexico most likely is attracting more than 25% of all Americans living abroad.  

American Citizens Living Abroad – Top Countries: 1999

U.S. Citizens % of All U.S.Country/Region in Country Living Abroad

Mexico 1,036,300 24.9%Canada 687,700 16.5%United Kingdom 224,000 5.4%Germany 210,880 5.1%Israel 184,195 4.4%Italy 168,967 4.1%Philippines 105,000 2.5%Australia 102,800 2.5%France 101,750 2.4%Spain 94,513 2.3%Total of Top 10 2,916,105 70.0%  

What do these figures tell us about Americans living overseas? First of all, Americans abroad tend to be located close to America. Both Canada and Mexico are familiar and close to home. The Caribbean islands have become popular vacation areas for Americans as well as the home of many offshore corporations. The Dominican Republic, with 82,000 Americans abroad, exceeded all of the individual countries in Central and South America. Only Brazil, Colombia, Argentina, Venezuela, Costa Rica and Panama are likely to have property ownership potential for many Americans.* While the current political situation in Venezuela is negative regarding the U.S., Costa Rica and Panama have been pushing vacation condo development to North Americans since the late 1990s. 

 I think what these numbers tell us is that there needs to be better studies done than this. Using numbers from 1999 really can’t help us much at all. Americans buying abroad is a major trend, especially for Baby Boomers, and more in depth studies should be undertaken. Again, this study completely misses what has taken place in Mexico over the past five years, which has seen phenomenal sales and growth – selling real estate primarily to Americans.

Outstanding Appreciation

Since 2003, prices for homes and condominiums for the Vallarta real estate market have risen steadily. This is not only a sign of a healthy market, its also something that real estate owners very much appreciate. In 2003 the average condominium was priced at US$196,000 according to Multi-List Vallarta, the MLS service for the regional real estate associations. By 2007, that average price had risen to US$351,000. For homes the increase has been even greater. The average home was priced at $256,000 in 2003, whereas in 2007 that had increased to $693,000, not a return over just five years. 

Because of the lack of sales prices on properties going back to 2003 (sales have only been reported consistently by board members since 2005), we have used the “list” price of properties, homes didn’t actually sell for these prices. Using the actual “sold” prices available for 2007, the average condominium sold for US$338,000, which is only 4% off the list price. The average “sold” price for a house in 2007 was US$631,000, which is about 9% less than the listing price. And the average spread between list and sold for all properties in 2007 was 7%, up from 3.1% in 2006 and 4.6% in 2005. All in all, it all adds up to five remarkable years.

Compared to the US market, which has seen housing prices fall throughout the year, (except in primarily second-home markets), Vallarta’s market is very strong, with a substantial gain in appreciation for both homes and condominiums. And this only takes into consideration the re-sale market. New home and condominiums sales have traditionally been selling at list price, and at prices substantially above the re-sale market. People prefer the new product with the latest styles in design and architecture, as well as the most modern amenities, and are willing to pay more for it. So if the development products were also included in these numbers, appreciation would be even higher, especially for condominiums.

It should also be noted that there was a very large spread between the lowest price sale in 2007 (US$87,000) and the highest price (US$2,470,000). There are still affordable homes and condominiums available in Vallarta. They may not be on the beach or have an ocean view, but they are here and they are selling.

Fractional is really getting interesting, with now boats and yachts available with your fractional real estate purchase:

La Vida, a luxury oceanfront community of only 23 residencias located just minutes north of the Puerto Vallarta airport in the romantic seaside village of Bucerias, announced today that a limited number of five-year fractional yacht ownerships will be included with purchase.  For a limited time, new purchases at La Vida will receive a five-year fractional yacht ownership.  These new owners will select from one of many different types of watercraft available to each of them for 15 days a year.  Members can select from a speed boat, a 50ft. motor yacht, or a 45ft. sail boat among others to enjoy..