In late April of this year we contacted a number of real estate developments in and around Banderas Bay to obtain information with regards to their inventory and how sales have been. Not all were as obliging as in years past to review how their sales had been in 2010, and considering market conditions, that was to be expected. However, since we knew their inventory levels from past years, we could obtain an approximate number of what their sales were.
It is always difficult to obtain clear, factual statistical information regarding real estate sales in the Puerto Vallarta region. It is difficult to substantiate information other than by comparing to information given in past years. We cannot ascertain the complete accuracy of these numbers and the statistics generated from them. We do our best to obtain the best information possible and where we have had doubts about the accuracy, we have asked through alternatives sources to confirm the information received. It is not the best system, but it is the best system we currently have to give us a portrait of the current real estate development market.
We contacted every development we could establish was open for business and came up with 136 projects. Seems like a large number, but we found that about 15%, (18) of them actually had less than ten units in overall inventory, while about 30% had between 11-50 units . Twelve of these projects had more than 100 units in total inventory, which also encompassed 1/3 of total units on the market. (Note: we had previously reported this differently, (and therefore incorrectly) that there were 44 projects with less than 10 units. For this we had calculated how many units they have in their current inventory left to sell, not their total inventory).
For these 136 projects, we calculated they have about 2,300 units actively listed for sale. This is down from a high of 7,200 in 2007. However, what needs to be taken into consideration is a “Shadow” market that exists of dormant inventory.
Since 2008 we have found that many development scaled back the size of their project, some cancelled, but many decided to only release product in phases. A good example would be Alamar. We originally included that this project had over 600 units for the market. However, they only released for three towers, and eventually even put the third tower on hold. This reduced the number of units they have on the market but this doesn’t mean this product will not be released sometime in the future. There are still around 500 units that at some point Alamar will decide to continuing building and introduce this product to the market.
We calculate that there are about 2,500 of the shadow, dormant units on the market. Fortunately they do not directly affect our market at this time, but any new developer considering starting up a new project in the region should be aware of this inventory. As much of it hasn’t been constructed yet, but the land most likely has been paid for, they have the flexibility of introducing product that is more relevant to today’s market, such as smaller units with less amenities.
As has been reported in past years, 2007 saw 53 new project come into the local market providing a total inventory of 5,400 units. In 2009 only eight new project entered the market with 200 units. In 2010 there were nine new project providing over 400 units.
In 2007 there were 1,620 new project sales (this does not include re-sale property sales). This diminished to 685 in 2008, 340 in 2009 and increased slightly to 430 in 2010. However, one project, a large one, informed us of sales substantially above the others, and we suspect that these numbers were inflated or involved trades.
When we considered where the inventory is located, 1/3 was in the Marina Vallarta/Hotel Zone region, another 1/3 in Nuevo Vallarta/Flamingos, the balance evenly distributed between the regions on either side of these two: downtown Vallarta and the South Shore, and to the north, the North Shore and northern Riviera Nayarit.
The market is particularly difficult for developers right now. They benefited heavily during the boom years but now many find themselves with product that is not what they market may be looking for, developed at costs that makes it difficult for them to be competitive. They find themselves competing with the re-sale market (which is seeing good activity) and in some cases, competing with re-sales in their own project. But more on that in a future post.