Every Summer we feature a special Vallarta real estate issue in Vallarta Lifestyles. Below is the introduction that will be included. I’ll be posting the “Trends” as I seem them through the week.
How things can change in a short period of time. Vallarta’s real estate market has been hit on many sides this past year, making it difficult for the market to move ahead. Issues such as the global economic crisis or the swine flu scare are not actually “trends” in that they have, or are becoming long-term new directions in our marketplace, however, they are certainly facilitating new trends that for the most part, are new to this market.
It all began with the crisis that started in the USA and soon spread out to effect most of the world’s economies. It came late to Mexico, but when it did, especially in October of last year, the results were obvious and very apparent. It was like the tap had been turned off, especially for new product developers. After a slow summer, and hoping for better as the high season was approaching, well, it just didn’t happen. Sales were extremely slow as people battled with uncertainty of just how deep and severe the downturn would be.
In the Fall there was even discussions of a US economic depression, things were looking so bad. But that’s not talked about now. Now its more about “green shoots”, “V” or “W” or “L” shaped recoveries – the forecast now seems to be that, for the most part, the worst has been averted and now its just a matter of time – on how and when the market recovers.
From October until April there was a definite trend I’ll refer to as Risk vs. Uncertainty – a term I picked up from economist Frank Knight in an article featured in the New Yorker. People are used to dealing with risk. They face it in business situations, when they are considering what they should be doing with their investments. Its a part of life, with some people able to handle large risks better than others. Here is how Frank put it:
“Risk describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty describes a situation where it’s not even clear what might happen, let alone how likely the possible outcomes are. Uncertainty is always a part of business, but in a recession it dominates everything else: no one’s sure how long the downturn will last, how (shoppers) buyers will react, whether we’ll go back to the way things were before or see permanent changes in consumer behavior.”
Before we can expect any significant change in our current market the level of uncertainty must diminish. Unfortunately we seem to be living more and more in a world of uncertainty. Perhaps just getting used to living with it will be enough to reduce uncertainty and get the market back on track. And lately, either this is happening, or uncertainty has been reduced. It is at least a lot less than it was six months ago.
What has certainly been interesting is the mainstream media’s take on problems and issues faced in Mexico, primarily with regards to the swine flu scare and the “narco traficos”. Although both are/were serious issues, neither has really effected this region in any serious manner. There were very flew cases of the flu, but its impact managed to practically empty every hotel room in the region. Mexico’s response was a strong one, and praised around the world by major health organizations. The cost to the country, however, was severe as tourism is its 3rd largest industry. The drug wars between the drug cartels and with the army is also serious, but again, has not effected this region. No tourist or American/Canadian homeowner has in any way been effected by this. But the way both of these issues have been portrayed in the American media, has had very serious results. I hope this does not become a “trend”, which in some ways can be seen as Mexico-bashing. But as quickly as it can start, it can disappear. As soon as the elections ended in Iran and their problems started, Mexico was off the front page of mainstream media. Again, not to say these are not issues, but they certainly were and have been overblown. With that said, let’s take a look at what have been some of the trends that seem to be happening in Vallarta’s and the overall Mexican real estate market.