From the conversations I have had with realtors and developers, the market has seemed to have bottomed out with a number of realtors experiencing good activity. The activity however, is with real estate that has been substantially reduced in price from its highs. But at least there is activity, good activity, something they haven’t seen over the last few years, which should help create a firm bottom for this cycle.

Unfortunately it is not the same for developers, many of whom face a situation where re-sale properties are selling for less than what they can build for. The developers who are selling are those that have entered into the market with new product involving smaller sized units with less amenities, so they can be competitive. We are even seeing the return of the one-bedroom condo, something the market hadn’t provided for some time.

Prices are down as much as 40%, back to what they were in 2003, before the market really took an upswing and real estate activity tripled in one year, as reported by the local MLS.

So it is definitely a buyer’s market. If you have been considering buying property in the region, its a good time to be looking.

That’s it for now, hope to be back soon.

John Youden

El Salvador: 71

Jamaica: 60

Venezuela: 48

Colombia: 39

Brazil: 22

Mexico: 15

Costa Rica: 11

U.S.A.: 5

Canada: 2

July was also an interesting month for the number of days these properties were on the market. Nine out of the 21 sales were on the market for over a year and one for four years. The average days on market for July was 775 whereas the average for the year has only been 380 (which is still quite high). So it seems that July was kind of a late Spring Cleaning; with properties that had been on the market for some time finally lowering or accepting a lower price in order to move the property. It is still a buyer’s market, and quite a good one at them. There are some very good deals out there.

In June there was also one sale for over a million ($1,250,000), which we removed as well to calculate average home sales price, as it was so far off the others. There were just three other house sales and they were all for under $170,000; even lower than July. Even condos fell to just over $200,000 for the average sales price.

In August home prices were back up to $381,000 (but just three home sales) and condos up to $250,000. The average sales price for a condominium is now back to what they averaged in 2007.

Days on Market has average 380 days so far this year.

An encouraging sign is that for the first time in awhile, American visits topped Mexican and Canadian visitors, in both July and August. Hopefully this is a trend for the upcoming high season.

The number of sales for the year is above 2010, although that’s not a hard year to beat! I think we’ll see 2011 in the future as the year the market started to bottom out and turn around.

A legislative initiative submitted by Baja California Sur Senator Luis Alberto Coppola Joffroy in July of 2007, which after (occasional) debate — and failures of committees to act — was ultimately rejected by the Mexican Senate last April.

This is unfortunate. As Barnard mentions…

…such a change could be huge for Mexico’s tourism industry and economy, considering the number of non-Mexicans who would like to live, retire or have a second home on a sunny beach with actual ownership and title to the property.  And this is to say nothing about positive publicity, or added income from fees and taxes, increased foreign exchange, investment opportunities, development and growth, and the creation of jobs for Mexican workers, among other things.

And there is the ongoing argument, why is it that Mexicans can go up and buy real estate in the U.S. or Canada, but Americans or Canadians cannot? (or at least not along the border or coastline)

And also, why is it that Americans and Canadians CAN obtain title if they buy in the interior of Mexico but not in the restricted zones and what possible ramifications could this hold for them? Well, a situation came up recently when the IRA stated that all Americans that have a foreign trust must report it to them. I’m sure when they did this they were thinking more of those who have monetary trusts that have been set up in a tax haven country. But unfortunately, this is also affecting Americans who own real estate along the coast or border of Mexico. But, Americans who own property away from the coast or border don’t have to file, as they have title and don’t have to use the trust system! Doesn’t quite seem right…

Barnard explains more about how the trust came about…

The Mexican Constitution, in Article 27 (an Article that in one way or another has been amended some 16 times since 1917), deals with national ownership and territorial jurisdiction of lands and waters, and it grants the state “the right to transmit ownership thereof to private persons, thereby constituting private property.”  However, the first paragraph of Part I of Article 27 continues:

“Only Mexicans by birth or naturalization, and Mexican companies, have the right to acquire ownership of lands, waters, and their appurtenances, or to obtain concessions for the exploitation of mines or waters.  The State may grant the same right to foreigners, provided they agree before the Secretariat of [Foreign] Relations to be considered as nationals with respect to said property and not to invoke the protection of their governments, for that very reason, in matters relating thereto; under penalty, in case of noncompliance with the agreement, of losing the property they acquired by virtue of the same to the Nation.  Under no circumstances may foreigners acquire direct ownership of lands or waters within a zone of 100 kilometers along the borders and 50 [kilometers] along the coastline.

It should be noted that many foreign residents already “own” restricted zone properties in Mexico, through fideicomisos.  However, a fideicomiso — in this case a type of real estate trust, with a Mexican bank designated as trustee and holding possession of the land title — is not direct ownership.  With a fideicomiso, the foreign buyer acquires tenure rights to the property through the (up to 50-year) trust, which is renewable and transferable.

But, as mentions above, means you have to report that you have this trust with the IRS.

Certainly all nations have border concerns and sovereign needs to safeguard their coasts and territorial limits; however is it (still) realistic for Mexico to fear a foreign invasion from the north?  Could anyone today believe that hostilities might be instigated by non-citizens who have met the requisite qualifications to reside in Mexico — full or part-time residents living under the rule of Mexican law? As well, in today’s world considerations with respect to coastal properties should include economic assessments and not simply the behind-the-times discrimination of Article 27.  The latter being prohibitions that inhibit foreign investment and cost the nation money — outmoded concerns that should be addressed through up-to-date regulations.

Exactly right. These rules regarding foreign land ownership, established nearly a 100 years ago, are no longer relevant as they are don’t in any way protect Mexico from getting invaded. Its silly to even think so. If anything they are holding back investment in the country.

Tianguis 2012 will be held at the Vallarta Convention center, an event that has always been held previously in Acapulco. Tianguis is the annual (and largest) travel fair and market for Mexican tourism. It brings in people from all over the place – nationally and internationally.

This came about because of strong cooperation between Riviera Nayarit and Puerto Vallarta to market the destination together as one. This is a great coup for the region, being the first place to hold the Tianguis since they decided to start moving it around the country. And great to see the two tourism offices coming together to make this happen. Hopefully its a sign of more compromise and working together on other projects down the line.

The Pan-American Games will also be taking place in the region, at least the water events such as sailing. This takes place this fall, primarily in Nuevo Vallarta. Good coverage should come out of this.

And the Miss Mexico pageant will be held in the region this September – that certainly should bring good coverage!

Very positive news regarding tourism for the region.

1. Mexico has begun allowing holders of U.S. visas to enter Mexico, opening up the possibility of tourists to the United States extending their trips south of the border.
2. Brazilians, Russians and Ukrainian visitors can gain travel permission to Mexico on the Internet, with no need for a visa. (In 2011 to date, Mexico has seen a 40.9% increase in Brazilian tourists, a 58.1% increase from Russia and 32.8% increase from China, according to Mexico’s tourism ministry.)
3. Finally, for travelers from other countries, visas to Mexico in many cases can be obtained through a travel agent, erasing the need for trips to embassies.

These are important changes that should make it easier for people to travel to Mexico. Point #1 is an excellent move, as it allows for people that are planning to visit the U.S. to now, with no additional paperwork, visit Mexico at the same time. And point #3, that visas can now be obtained through a travel agent and not have to visit an embassy, is also a great idea. But will it be enough?

Mexico has to look at other markets, especially over the next few years while the U.S. economy is on the road to recovery, and allow Americans time to really see the reports on violence in Mexico for what they really are: it’s taking place in very specific places, which in most cases are far from the popular tourist regions, and its being sensationalized. At some point Americans will begin to understand that millions of Americans visit Mexico every year without ever experiencing problems and actually have a very good time.

But until then, Mexico has to look elsewhere, just like U.S. investors are looking elsewhere, at emerging markets. The U.S. and Europe are going to be tied down with debt problems, both sovereign and public, along with high unemployment, for some time to come. Public debt and unemployment are going to make it hard for Americans to travel, while people in emerging markets are not experiencing similar issues. They are not plagued by high debt and unemployment. Investors are looking at foreign emerging markets for better returns, it looks like Mexico is as well for their tourist industry.

For U.S. travelers specifically, the Commerce Department’s most recent data – for 2009 — shows that 31.7% of all U.S. international tourists go to Mexico. From 2002 to 2009, while U.S. tourism to Canada fell by more than 27%, tourism to Mexico from the U.S. increased by 5.1%. This happened even though the overall number of Americans traveling abroad decreased, from a peak of 64 million in 2007 to 61.4 million in 2009.

These are impressive numbers, and coming from the U.S. department of commerce, not Mexico’s: 1 in 3 American international tourists in 2009 went to Mexico.

However, although these new markets may provide tourists, they most likely will not be providing people or families that may be interested in real estate. Mexico’s strongest target markets for real estate sales remains in the U.S. and Canada, where travel to somewhere warm is for most people, only 3-4 hours away. For the local real estate market to make a serious bounce back, it needs Americans buying second homes once again. With real estate values still falling in the U.S., it seems this is still a ways away. Although the local market seems to be holding its own, its a long ways from the boom years from 2003 to 2008.

Carnival Cruise Line has evaluated continued security concerns in Mazatlan, Mexico and extended their cancellation of visits to the port. Carnival Splendor’s 7-day itinerary from Long Beach, California will now feature two days in Cabo San Lucas and a 12-hour stay in Puerto Vallarta. Carnival Spirit will also continue her nine-day itineraries from San Diego and Los Angeles from September 2011 to March 2012. The amended voyage includes two-days in Cabo San Lucas along with visits to Puerto Vallarta, Manzanillo and Ensenada. “We have been calling at Puerto Vallarta on a weekly basis for many years and at this time have no plans to discontinue our visits there,” a representative from Carnival said in a statement to e-Travel Blackboard.

Princess Cruises has stated that the cancellation of visits to PV is only until the end of this year and then they will re-evaluate the situation. Perhaps by then they’ll understand the situation better, like Carnival and the American Consulate seem to.

Virgin America wants Puerto Vallarta to become its next destination. It announced today it will ask the U.S. Department of Transportation for regulatory approval to add flights to the Mexican resort destination from its hub in San Francisco. Virgin America also needs approval from Mexican aviation regulators.

If approved, Puerto Vallarta would become Virgin America’s third destination in Mexico. Cancun and Los Cabos are the others. Virgin America says it hopes to begin the route in time for the winter travel season. Virgin America would go head-to-head with Alaska Airlines’ nonstop service on the route.

“We’ve seen a strong demand for travel to our Mexican destinations and we’re looking forward to giving our flyers another world-class leisure option,” Virgin America CEO David Cush says in a release. “We’re proud to be growing and offering travelers a very unique flight experience at a time when most airlines are shrinking their schedules and reducing the amenities provided to fliers.”

Guadalajara, Jal., July 13, 2011—Statement of Daniel F. Keller, U.S. Consul General to Guadalajara, concerning statements attributed to U.S. Consular Agent in Puerto Vallarta.

“I am deeply disturbed by statements which appeared in a recent news report published by at least two news media organizations based in Puerto Vallarta under the headline, ‘Preocupa a Consulado Inseguridad en Puerto Vallarta.’ The statements, which are attributed secondhand to U.S. Consular Agent Sra. Kelly Trainor, are taken out of context and attribute to Ms. Trainor things she did not say.  Moreover, the statements are made to falsely imply that the U.S. Consulate is concerned by the present security conditions in Puerto Vallarta. The U.S. Consulate General has issued no advisories against travel to Puerto Vallarta and is not aware of any incidents that would have a significant impact on our current security assessment.  The Consulate is prepared at all times to respond to legitimate inquiries from media representatives — which did not happen in this case, American citizens, and other interested parties.  This specific report, regrettably, is irresponsible and does not meet the standards of professional journalism.”

When the latest bloody headlines from the drug war in Mexico reach headquarters in New York, Ken Chandler, the manager of an American electronics manufacturing plant here, jumps on the phone. He is not begging to come home. He is begging to stay. “We try to put them at ease, to say it is not time to pack up,” said Mr. Chandler, who oversees the company’s operations in this border city, where the military arrived last week to help purge drug cartel members from the police department.

Not that his employer, Spellman High Voltage, needs much assurance. Like a crop of other manufacturers at the border, including six companies in this city alone, Spellman is expanding its operations, with a new plant under construction after making a calculation that offers one of the starker paradoxes of these violent days in Mexico. Despite the bleak outlook the drug war summons, the Mexican economy is humming along, not without warning signs, but growing considerably faster than that of the United States.

Over all, jobs in Mexico’s manufacturing sector increased 8.2 percent to 1.8 million as of January, the most recent figures available, driven mostly by what Mexican officials called regaining health in the auto and electronics industries, the engine of the economy along the border.

Mostly American-owned and in border states, the plants import raw materials duty free and export assembled products, lowering the cost of goods in the United States and providing jobs that pay more than the Mexican average (typically $8 to $16 per day on the assembly line) but a lot less than American wages.

Some of the new or expanding plants come at the expense of plant closings in the United States. Electrolux, which makes washers, dryers and other home products, closed a plant in 2009 in Iowa but opened one in Juárez last month that is expected to employ 400 people. Others are from investors farther afield. Foxconn, a Taiwanese firm that makes iPhones, Dell computers and other electronics, is one of several Asian companies taking root. It opened a plant in Juárez last summer. Down the coast from here, Posco, a Korean steel manufacturer, has announced plans to expand its operations with a second plant that will employ 300 people by 2013. Several other companies plan to built or expand in other states as well.

Over all, the Mexican economy, the second largest in Latin America after Brazil, grew 5.5 percent last year, its fastest pace in a decade, and is expected to grow 4.5 percent this year, driven largely by manufacturing as well as internal growth from an expanding middle class. The American economy, by contrast, is expected to grow between 2.7 percent and 2.9 percent in 2011, the Federal Reserve projected late last month.

Economists say Mexico’s growth would be even stronger without the cartel violence, which in the last five years has left more than 40,000 people dead, according to the count by national newspapers.

Why do they have to put it that way? Over 90% of those killed were narcos killing each other or being killed by police and/or the army. The other 10% consists primarily of the army or police killed fighting against them. There has been little “collateral damage”, as Rumsfeld used to like to say…

The Bank of Mexico reports foreign investment was $17.7 billion last year, far off pre-recession levels of $25 billion and fed in good measure by a single transaction, the purchase of a one of the country’s largest beer companies by Heineken.

Security costs are rising to protect property and shipments, and safety remains the top concern expressed by potential investors, said Bob Cook, the president of the El Paso Regional Economic Development Commission, which helps recruit businesses to Ciudad Juárez, Mexico’s most violent city. “But we are still working with more companies now than we did three years ago,” he said. Business is business, and the proximity to the United States is hard to pass up. The rising cost of labor, transportation and the renminbi have made some companies reconsider Mexico instead of China, he contended. Despite several murders a day, trade between Juárez and Texas rose 47 percent last year to $71.1 billion, he said.

“Central location, great infrastructure, suppliers and labor pool,” he said. “Those things haven’t been tampered with by organized crime.”

See the full story here.