From the Wall Street Journal:

MEXICO CITY — Mexico’s economy, battered by the financial crisis, expanded for the first time in a year during the third quarter, growing 2.93% from the second quarter, official data showed Friday. The expansion followed three consecutive quarters of contraction. In Mexico, the slump put more than a million people out of work at a time when drug-related violence has soared amid a crackdown on drug gangs.

“With this result, the Mexican economy has left behind the worst recession in the last seven decades,” Alfredo Coutiño, director for Latin America at Moody’s Economy.com, wrote to clients. Mexico’s 2.93% expansion translates into an annualized growth rate of roughly 12%. Compared with the third quarter of last year, Mexico’s economic output was down 6.2%, according to the National Statistics Institute. That shows the effects of the slowdown in the U.S. economy, where Mexico sends more than 90% of its exports.

Mexico also has been hurt by lower oil prices and oil production, fewer remittances from workers abroad and a decline in tourism. The outbreak of swine flu in March hurt restaurants and other businesses. The U.S. cash-for-clunkers program fueled demand for cars and helped Mexico’s export-oriented auto industry in the third quarter, when several plants lifted technical work stoppages.

Talk over Thanksgiving dinner with real estate friends, it continues to be very positive – they are busy! And the outlook of existing, returning PV homeowners, with regards to Vallarta/Nayarit, is positive as well. It should be, with the fantastic weather they are all returning to…

Google has launched another upgrade to their Google Maps that gets closer to looking like a national or international real estate search engine, as noted at SearchEngineLand. This follows with Google’s delivery of “Place” pages; information pages on businesses, landmarks, or, individual properties. If individual properties is the case, is Google looking at providing information on every real estate property, every home or condo in the countries it services? Hmmm… sounds a lot like what NAR just announced at their conference with the Realtor Property Resource (further explained at AgentGenius).

Google provides in the real estate listing place pages property information, photos, map placement, Street View imagery and functionality, nearby public transit details, and even AdWords ads. They are moving fast on this, with a major upgrade to what they have to offer for information on real estate in July and again earlier this month. A sample page from a home in Seattle shows the pictures and information Google is providing, so far.

Not sure what this means for sites like Trulia, Zillow, or eventually mlsvallarta.com, although I’m sure its going to take some time to make its way down into Mexico. Its all quite interesting, watching this unfold. The way real estate information is marketed and distributed is going through a major transformation.

A Realtor informed me recently that a condominium on the South Shore of the bay sold for $3 million this month. That’s definitely a record high price for a condominium in Puerto Vallarta, by a long shot. Good to hear there’s still that type of money floating around town looking at real estate…

UPDATE: Just informed that the actual sales price was actually $2.5 million. Still a big number for the Vallarta market…

If you are not familiar with any of the acronyms above, they stand for different forms of immigration status for foreigners in Mexico. When you enter as a tourist, you are given a three-month visa called an “FM-T” with the “T” standing for Turista or Tourist. I believe it is still possible to get an additional three-month extension for this. If you are going to stay longer than this, if you plan to work, to study, and a long list of other reason you may be here, you would apply for FM-3 status. And after five years of FM-3 you can apply for FM-2 status. After that its “Landed Immigrant” status, which not too many make it to.

I’m not here to write about each of these and what they entail, but more about what is really necessary if you are a homeowner in Mexico. If you come down here for less than three months at at time, and don’t spend the majority or your time here, FM-T status is all you need. This way you avoid all the long line-ups at immigration and don’t have to have your little booklet stamped every time you leave or come back into the country. Even if you stay longer than three months, you can always get a three-month extension.

So why do American or Canadian Vallarta homeowners apply for FM-3 or FM-2?

Well, at one time it was to try and not have to pay capital gains on their Vallarta home. But those days are over. Unless you are really living in Vallarta for the majority of the year, and you can back it up with telephone and utility receipts that it is your principal residence, you are not eligible for capital gain exemption. You will be paying the taxes, just like you would be back in Canada or the USA.

So if you don’t live here more than six months of the year, why hassle with anything other than FM-T? Keep it simple – those line-ups at immigration aren’t worth it!

Met with a few local Puerto Vallarta Realtors yesterday for lunch and  presented some marketing strategies we are currently undertaking. Afterwards there was time to talk about the Vallarta real estate market and how they see things going. The opening remark to get the discussion going was by one Realtor who said, “Is it me or has there just been a significant up-tick in activity recently?” And that got them going. All agreed that there has been more activity and gave stories to back it up. One had recently just taken a listing and had it sell the same day, for full price! That hasn’t happened in awhile. The price ranges still tend to be the mid to lower end of the market, up to $300,000, but they all agreed that there was more interest and activity in the $400,000 to $650,000 range as well. The million-plus market is still weak, the “discretionary”  market; they haven’t seen a strong return here yet. Although they did talk of a few deals/offers currently in the works in this price range, it wasn’t much.

I was having suspicions that the market had been improving as it became nearly impossible to schedule the meeting – they were all just too busy. Two that were supposed to attend just couldn’t make it. All during lunch the blackberrys and iPhones were constantly ringing. It sure made for an upbeat mood for the meeting!

Took advantage yesterday of a beautiful day to visit Punta Sayulita, a new land and home development that’s situated just south of Sayulita. And as the seas were calm, decided to go by jetski from Punta Mita. It was a great trip as this an amazing part of the Riviera Nayarit coastline. There are some beautiful homes built on the cliffs here and tucked into a very green jungle landscape.

When we arrived we anchored the jetskis and swam in to the beachclub/presentation room for Punta Sayulita, which is located right on the beach next to Don Pedro’s in Sayulita. They have beach chairs set up, a great lounge area under a palapa roof with a bar, and plenty of information about the new development. They have kayaks, surfboards and paddleboards, so if you want to spend a day at the beach and also become familiar with a great new real estate development, keep this in mind.

Punta Sayulita is being developed by Brett Ellsworth and Kevin Roberts of Contact Development Company (CDC). They have been active in Mexico for many years, primarily as real estate consultants. But a few years ago they decided to get into the development game and Punta Sayulita is their first project.

Punta Sayulita consists of a point, lush with jungle, that juts out into the Pacific just south of Sayulita, offering both northeasterly views up the coast  and back to Sayulita, plus all the way around until you are facing southerly towards Punta Mita. The elevation is steep, so there are great views available. The beachclub village is unique, a central gathering spot for owners with a gym, restaurant, pool and bar and sports facilities. There are two types of homes they will be building, Casitas and Casas, offering very nice floor plans and a style that will fit in well to the jungle landscape. There are also a few choice lots available on the very point. They start the infrastructure in January, but for now there are trails to follow to see the lots that have been roped in so you can see their size and views (but take good walking shoes!).

They have now begun their sales launch and you can find more information by visiting their beachclub in Sayulita or on their website, www.puntasayulita.com. Sayulita’s always fun to visit, this just gives you one more reason!

Before heading back we had lunch at Don Pedro’s – as good as ever! A big of a chop heading back, but the wind was with us, so it was an enjoyable trip.

We’ve been working on an upgrade to our MLS Search, featured at MLSVallarta.com, for the past few months and its now ready to go live.

We’ve built it around Google Maps, which is definitely the best and most accurate mapping system for the region. You’ll find properties from Multi-List Vallarta (the re-sale MLS) and Multi-Dev Vallarta (the pre-sale or new properties MLS) included. We also have a view to see just developments; where they are located and what amenities and features the property has. You can click on the full information view to see more photos of the development and see its current inventory.

We’ve also cleaned up our Puerto Vallarta and Riviera Nayarit Maps and Regions page, with descriptions, photos and maps, outlining the borders of each region, on the website as well. And our Articles section features more articles about real estate than you’ll find anywhere else.

Building on this new platform allows us to improve it in many ways going forward. And this is now the most comprehensive and most sophisticated MLS Search available in Mexico, for any destination.

The next update will have an Advanced Search feature, allowing to refine your searches even more. For realtors that are members of  Multi-List Vallarta, we are also updating some features in the Member’s Only section. We’ve increased the map size, so its much easier for you to pinpoint where your new listing is located. And we will be adding this week another feature that calculates Average Listing Price and average Cost per Meter. We certainly welcome comments and suggestions.

Jim Scherrer, a Vallarta homeowner (and fan of PV) since 1984, is now also involved in real estate and has written more than 70 articles about real estate in Puerto Vallarta over the past couple of years. Here’s one of his most recent articles that provides some positive benefits for Canadians interested in real estate in Vallarta:

For more than 50 years, the de facto world currency has been the US dollar with many of the world currencies being pegged against it (some countries have even eliminated their own currencies in favor of the US dollar). As an example, Canadians feel a sense of wealth when the Canadian dollar is on par with the US dollar; the opposite when the Canadian dollar devalues to .70 US dollar, i.e., when the Canadian dollar will purchase only 70 cents worth of US goods and services. The following graph shows how the Canadian dollar has strengthened from $.77 US to $.96 US or by 25% during just the past seven months.

(Click on images for better viewing) Currently, the global economy is changing and as the US dollar continues to erode, many foreign currencies have strengthened significantly relative to the green back. Consequently, savvy Canadians should now be looking at currencies outside of the US and evaluating their own newfound purchasing power in those foreign countries. For instance, the Canadian dollar has virtually exploded in value recently relative to the Mexican peso. The graph below depicts how the Canadian dollar has risen in value from an equivalent of 7.1 Mexican pesos in 2003 to 12.6 pesos today in 2009.

Now, let’s compare this increase in the purchasing power of the Canadian dollar to the increase in purchasing power of the US dollar, both relative to the Mexican peso. The graph below clearly shows that during this 6 ½ year time frame the US dollar increased in value by a bit more than 20% relative to the Mexican peso whereas the Canadian dollar increased by a whopping 75%!

It’s quite understandable, that toward the end of 2007 when the Canadian dollar reached par with the US dollar, the Canadians were major buyers of real estate in Mexico. However, by March of 2009, the Canadian dollar had slipped to a low of $.77 US and Canadian buyers were virtually eliminated from the Mexican real estate market.

Next, let’s closely review the Canadian and US dollars relative to the Mexican peso during the past year. Because the recent strengthening of the Canadian dollar has far outpaced the US dollar relative to the Mexican peso, you’ll see that during the past year, the US dollar has barely appreciated in value over the Mexican peso while the Canadian dollar has exploded in value by nearly 25%. The ramifications that this phenomenon has had on the Canadian purchasing power in Mexico are addressed below.

During the past decade many tourist zones and retirement havens in the resort areas of Mexico experienced exponential growth. Along with this growth came significant real estate price appreciation; so much so that real estate prices in many Mexican resort cities were no longer within reach of many Canadian retirees, especially when the Canadian dollar plummeted in value in 2008. Well, we have good news for you fortunate Canadians holding those wonderfully strong Loonies; that’s no longer the case!

In Puerto Vallarta, real estate prices of recently built condos have dropped by anywhere from 20-35% during the past year alone. This reduction in value was caused mainly by the global recession, however the swine flu scare and the media hype over the border town drug war (1,200 miles away!) were also contributing factors. With the tremendous glut of unsold new condos recently introduced to the market by developers combined with the many condos that were purchased at pre-construction prices by speculators now just trying to recover their investment, PV is a true buyer’s market.

Last year you could buy a $400,000 condo with all the amenities and breathtaking views for 10% off list price or for $360,000. Today, you’ll have no problem finding that same condo offered at $300,000. Okay, that seems like a pretty nice savings of nearly 17% but remember, these Mexican condos are all priced in US dollars; Canadians must now evaluate these costs in terms of Canadian dollars! A year ago when the Canadian dollar was worth $.77 US, $360,000 US dollars was equivalent to $468,000 Canadian dollars. Today, with the same condo selling for $300,000 and the Canadian dollar worth $.96 US, it will cost only $315,000 Canadian dollars. That’s a savings of $153,000 Canadian or 32.7% (as opposed to the apparent 17%) in just one year!

Until as recently as 4 years ago there were no mortgages available to any North Americans buying resort property in Mexico. At that time, a number of US based mortgage companies introduced mortgages to US citizens buying property in Mexico but not to Canadians. That all changed a couple of years ago when the major mortgage companies finally made the same mortgages available to Canadians. These fixed and variable rate mortgages require at least 20% down and can have terms for as long as 30 years at rates generally about two points above those in the States or at approximately 7% at this time.

It is the opinion of many that the Canadian dollar will continue to strengthen. After all, the Canadian banks didn’t make all the foolish sub-prime no-doc loans that were made in the US, the Canadian unemployment rate is somewhat less than in the US, and Canada is rich with natural resources with worldwide demand. Knowing this, it seems only logical that having a mortgage in Mexico based on US dollars would be a very wise investment; it would be paid off with ever strengthening Canadian dollars.

Let’s assume we bought that condo for $300,000 US ($315,000 Canadian) and made a down payment of $100,000 US ($105,000 Canadian). A 30 year fixed rate 8% mortgage of $200,000US would result in payments of $1,467/month US ($1,528 Canadian). Of course, if and when the Canadian dollar again reaches par with the US dollar, your payments will be reduced from $1,528 to $1,467 Canadian. Now, let’s get a little aggressive and assume the Canadian dollar will reach $1.05US. At that exchange rate, your monthly mortgage payments would drop to $1,397 Canadian. It’s not too far a stretch to predict an annual savings of $2,000 Canadian or more based solely on the exchange rate differential. Of course, if the Canadian dollar were to plummet for some unforeseeable reason, these mortgages can be paid off after 2-5 years (depending upon the loan) with no pre-payment penalty.

Finally, let’s evaluate the cost of living in Mexico. For starters, let’s assume that a year ago we were considering a lifestyle in Vallarta based on a budget of $10,000 pesos per month. With the annual inflation rate in Mexico of 5%, the same goods and services in Mexico will be $10,500 pesos this year. A little more than a year ago, when the Canadian dollar would purchase 9.5 pesos, $10,000 pesos was equivalent to $1,052 Canadian. Today, with the favorable exchange rate of 12.7 pesos per Canadian dollar, the $10,500 peso budget will cost a mere $827 Canadian, i.e., a savings of $225/mo or a 22% reduction in the cost of living in just one year!

In summarizing, it’s obvious that the time has never been better for Canadians to explore the opportunities that exist in Mexico today. International monetary circumstances are ideal for Canadians concurrently with the condo supply and demand equation in Mexico heavily tilted in favor of the buyer. In terms of Canadian dollars, you can expect to find incredible condos at 30-35% lower prices than just a year ago and your cost of living will be 20-25% less than it was a year ago.

Of the nearly 50,000 expats living in Vallarta, we estimate that close to 30% of them are Canadians. Needless to say, the winter weather in Puerto Vallarta is more conducive to most outdoor activities (excluding snow boarding and ice hockey!) than anywhere in Canada. So, why hesitate? Come on down this winter and have some fun in the sun with your fellow countrymen and while doing so, save a significant portion of your nest egg on your retirement residence in Paradise. It’s now certainly well within your financial reach and as they say, “if you snooze, you lose”; you’ll never find a better time or place to invest those Loonies than now in Mexico!

Written by Jim Scherrer, Info@PVREBA.com

www.pvreba.com

It may not be the most active real estate market right now, but there are developers looking ahead, planning for the future when the market does come back. C&C Capital, a Guadalajara-based real estate development company, has announced two large mega-development projects for 2010, Nahui and Punta Raza, with sales commencing in December and January.

The first is Nahui, a 2,100-acre development situated west of La Cruz de Huanacaxtle, in between Real del Mar/Arena Blanca and the beach of Destiladeras heading west towards Punta de Mita. The property has over 4.5 km of oceanfront and more than 243 meters of elevation change. The highway to Punta Mita, at least the stretch from La Cruz to the hotel Paladium will ultimately be relocated behind this property, freeing up valuable coastal property. The new access point will be on the easterly side of the new development of Alamar in La Cruz.

Phase I of Nahui will include sites for timeshare development called Tau Nahui resort, an anchor hotel, and for a collection of small boutique hotels and residential product options built onto the hillside behind overlooking the bay. Both Tau Nahui and the boutique hotel components will provide an ongoing stream of leads for real estate available on the hillside behind. The idea and hope of the developer is that Nahui will evolve into a west-coast version of Playa del Carmen, (a very successful and popular resort town near Cancun), however with more thoughtful, planned development.

A pedestrian pueblo (the Village) at the property’s western edge facing the beach will provide a publicly accessible retail dining and entertainment center and plaza, and will be the village hub not just for Nahui but for the region.

Phase II, or Club Nahui, will be situated on the eastern most section (next to Arena Blanca/Real del Mar) of Nahui that will include a gated ocean- and golf-oriented property overlooking the Pacific, anchored by a 100-room hotel, planned to be operated by the 6-star Capella Hotels and Resorts company with 120 branded residences. The product will include seaside estates, 3- and 4-bedroom hillside villas, stacked flats with penthouses and custom residential estates, all sharing views to the ocean. 400 to 450 residential units will eventually encompass the complete project.

The hotel and the residential units will be built around a Rees Jones-designed signature golf course, and will have a beach club, tennis center, golf clubhouse, an Auriga spa. The 18-hole golf club and clubhouse will be open to public play with preferential times reserved for residents and guests.

Nahui North is the third phase of the development, positioned above the existing highway and up into the hills behind. The site is being planned for large ranch-sized lots and is envisioned as an eco-community, designed to ensure preservation at this partially segregated corner of Nahui.

The other project of C&C Capital is Punta Raza, and it is situated just south of Guayabitos, about an hour north from Vallarta’s airport. A new four-lane road is scheduled to be bid out in 2010 which would  shorten travel time to and from Puerto Vallarta, but let’s see when that actually takes place. For now though, it isn’t actually that far away.

Punta Raza encompasses 293 hectares with 2.75 kilometers of beach in a single strip and 3.24 kilometers of rocky ocean frontage dotted with pocket beaches and private coves. This really is a spectacular piece of property. I remember flying over it about ten years ago and thinking, it was a developer’s dream with its beachfront, hillsides behind and area large enough for a golf course. The development will feature up to seven luxury hotels, anchored by a 400-room Grand Hyatt Hotel and a 200-room Park Hyatt hotel with 60 Park Hyatt residences. Tau Punta Raza, a timeshare operation, will be the first to open. The site will eventually accommodate up to 1,000 oceanfront and ocean-view single family detached home sites and condominium units, and will feature a private residents-only club. A deep water, 250-slip marina and adjacent village and commercial area is also planned.

Both are very ambitious projects, especially with the market the way it currently is. However, the developer seems to understand this and is launching both projects in phases, all phases to be independent, making build-out much easier. It is understood as well that price points for real estate are going to be very competitive, especially during the early phases of this launch. I think that’s a smart move in this market, you have to do all you can to get people to buy, especially pre-sale!

Had dinner out on the town with a few Realtors a couple of nights ago, some of the top in the industry and who between them have many years selling and developing real estate in the region. Its been a tough year for them all. They have had to make major changes in their operations, scaling back, closing down satellite offices and getting more involved in the day-to-day operations of their businesses. When times were good they could spend more time away from the office, working on pet projects such as developing real estate. But now they are back at the office, keeping a very close eye on the bottom line – its all about cash flow these days.

For some it is rentals that seem to be keeping them going, and for other offices out there. Rentals have been good, at least compared to sales. The upper-end of the market for real estate sales has basically come to a standstill. Luxury properties are just not moving. It seems people are taking a year off, renting a few places to try them out, rather than jumping in and buying something themselves. There are still inquiries, people are interested, they just want to be a little more secure about the state of the US economy before moving forward with something. The active market right now is under $500,000 USD. There is some action above that, but nearly all below $1 million. And for the properties that are selling around $1 million, the eventual sales price was significantly below the asking/listing price.

There is some concern whether there is a “shadow” market, involving people who want to sell but are waiting for the market to get better. The number of listings in the MLS service Multi-List Vallarta has leveled off for the past year, so sales seem to be keeping up with new listed properties. But are there many people out there waiting, and when these properties will come on the market, how will it effect it? There are still a lot of investor-held properties out there; they have to put them on the market sooner or later.

In 2003 the MLS tripled its sales from the year previously. Tripled – in one year. Well sales have now been cut by about 2/3s, so are we getting back to “normal”? Problem is there’s a lot more inventory now than back then. Its not outrageous, and we’re better off than some other markets in Mexico, but its there and its going to take some time to get it back to normal. Fortunately for the health of the market nearly all the properties are held free and clear, as financing is still a small part of the market.