Mexico’s positive Tourism Dept. changes

July 28, 2011

In a piece featured with CNN a few days ago, a number of positive measures are mentioned with regards to what Mexico is doing to help its ailing tourism industry.

  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.



If Zell thinks Latin America is a good investment…

September 25, 2010

…then perhaps that should be taken as a very good sign. Zell seems to know real estate, when to get in and when to get out. Zell and company bought into Mexico’s biggest homebuilder, Homex, in 2002 and sold in 2008 for a $500 million profit. Knowing this market, you couldn’t have timed that any better. And now they are looking to get back in.

He did the same in the US, selling his company to Blackstone Group for $39 billion right at the peak of the market.

Gary Garubundt, who heads up Equity International, founded the company with Zell, and he’s once again interested in getting back into Latin America.

“The scale of this middle class growth and evolution is much more powerful than the violence that’s occurring on the border and in other areas of the country,”

You can read more here.

Housing fading as a means to build wealth?

August 23, 2010

This article was featured in the New York Times recently.

Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.
The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming. More than likely, that era is gone for good.
It also allowed for a lot of people to buy homes in Puerto Vallarta!

Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg. The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming. More than likely, that era is gone for good. (Read more here)

Doesn’t sound like great news for real estate investing does it? But Barry Ritholtz, who is quoted in the article, had this to say afterwards on his blog:

It is safe to buy 2 kinds of properties right now: The first is simply math: If you are planning on living in a specific location for at least 10 years , then the calculus of rent vs own likely favors the buyer once you figure in mortgage tax deduction. The numbers are obviously determinative, so do the math of your income, tax situation, and alternative rental options. Renting might put you into a less desirable school district in parts of the country; that is a non-monetary factor that needs to be considered.

Second, I would not be afraid to buy a “unique” or vacation property. By unique, I mean not a tract home or development, but a something special: Beach front, lake side, mountain view, etc. kind of place that cannot easily be replaced or reproduced. The kind that 10 years from now, you kick yourself for not buying. A truly unique purchase avoid Real Estate regret.

There you go. Buying a unique vacation property, especially beachfront, is still a good investment, the kind you can look back upon, ten years from now, and were glad you made the purchase, or regret that you didn’t!

The Competition

May 30, 2010

This article was recently featured in the American Chronicle, previous to that the Miami Herald. Florida is competition for Vallarta, not just for the Canadian market, but also the Mexican market:

Nearly 800 Canadians will jam a hotel ballroom near the Toronto airport Sunday to hear the gospel of Florida real estate. Lured by rock-bottom prices, international buyers are now flocking to buy Florida properties. It’s especially true in countries where the currency is strong against the dollar.
“We’re telling Canadians this is a once-in-a-lifetime opportunity — the perfect storm,” said Brian Ellis, who heads Toronto-based Florida Home Finders of Canada. “The prices are just incredible and the Canadian dollar has been so strong.”
At least three of five buyers in the Greater Downtown Miami condo market are coming from abroad, estimates Jenny Huertas, international sales director for Condo Vultures, a real estate advisory and research firm.
Luxury condos are once again popular among Latin America buyers who purchase them as investments but also as a home base while their children attend school here, they attend to business interests or escape strife at home.
But for his Canadian buyers, Ellis scours South Florida for condo units at around the $150,000 price point. “We’re basically the Wal-Mart. We’re for the average Joe.”
And these days average Joe Canadian can afford much more. For decades the U.S. dollar was worth more than the Canadian dollar and buying in the U.S. was always more expensive for Canadians. But in September 2007, the Canadian dollar reached parity with the greenback for the first time in 31 years. It fell back again, but now the Canadian loonie, which takes its name from the loon pictured on the one-dollar coin, is near parity at around 95 cents.
So Ellis has been offering his Florida real estate seminars to packed houses in Ontario and is thinking about taking the show on the road to Montreal. There was so much interest in the latest seminar that he had to schedule two sessions for 400 people each this Sunday. Most of his Canadian buyers are what Ellis calls “end-vestors,” meaning they plan on renting a unit out for now with an eye toward using it themselves down the road.
Two sessions for 400 people each? That’s a lot of prospects. I like that “they plan on renting a unit out for now…”, what’s the chance of that?
Though Home Finders is now working with one Sunny Isles Beach property where condos are listed for up to $350,000, the Sun Vista Gardens in Tamarac is a more typical offering. There, buyers can find a one-bedroom for under $75,000 and a two-bedroom for under $100,000. That same one-bedroom, used to cost $190,000, according to Florida Home Finders’ website.
Under $75,000 gets very hard to compete with in Vallarta. And that’s quite the drop from $190,000.
Ellis said he’s actually having a hard time coming up with enough Florida properties in the $150,000 range. Of course, he’s picky. He’s looking for good value, a good location and properties without legal complications. Most of the Canadians want condos, but Ellis said he has some requests for single-family homes.
If he’s lacking in properties in the $150,000 range he should start looking at Vallarta; lots to choose from down here.
Meanwhile, Ellis keeps telling Canadians what a great deal Florida is: “We believe Florida is in for quite a rebound. We just don’t know when.”
Ahh, yes, when will it rebound? Recent market numbers show that the US real estate market is still reeling. And the Canadian market, have they just begun a downturn? Lots of chatter online about this market cooling down rapidly.

Time to change the Mexican Constitution?

April 21, 2010

The topic is coming up again, but this time its gaining a little more steam. There are now a few stories floating around regarding changing the constitution so foreigners can own property outright in Mexico. Good timing as well with last year’s news that all Americans have to claim with the IRS all trusts they have outside of the country. Since real estate along the coast of Mexico has to be in a bank trust, that meant a lot of Americans were supposed to file. But the law is not fair. If an American buys a home in Guadalajara, its outside of the zone and they can actually obtain title and do not need a trust. So they don’t have to file with the IRS. But someone buying in Puerto Vallarta, does. Doesn’t make sense. Perhaps finally changing the rule (Mexican can buy and obtain title in Canada and the USA!) will take care of this. And wasn’t this supposed to be done a long time ago, according to NAFTA?

This was posted on the International Living site:

A group of senators in Mexico’s Congress has proposed a measure that will make it easier for foreigners to invest in Mexico’s tourism sector, one of the country’s top sources of revenue and jobs. The measure may also simplify Mexico’s real estate laws, which confuse some foreigners and discourage them from buying there. The only catch: To achieve their goal the senators must change Mexico’s Constitution.

The proposal, now being reviewed in senate committees, would allow foreigners to buy real estate through direct deed anywhere in Mexico.

Read more…

Canadian real estate association opens MLS to FSBOs

March 23, 2010

“At a conference on Monday Canada’s real estate agents voted to open MLS to private sellers who will gain access by paying a flat fee – as yet unspecified.”

FSBOs: For Sale By Owners.

Now that’s a major move. Seems the Canadian government feels that the association’s MLS is a monopoly and has ordered them to open it up. And so they did…

So are the American MLS systems next? They’ve received similar rulings lately…

Vallarta Realtors attend NAR Convention

December 1, 2009

Harriet Cochran wrote recently at PVMirror about her recent attendance at the NAR convention:

Recently a group of local realtors in Ampi* attended the NAR or National Association of Realtors convention in San Diego, California. This meeting gave us the opportunity to meet and talk to realtors in the rest of North America. While the NAR is USA based, there is always a large international presence of Canadian and Mexican realtors.

This year we were told that attendance was down from 35,000 participants to 19,000 and the number of vendors offering real-estate related products had 400 booths instead of a normal 800. These figures meant at least a 50% decrease in participation in the single largest real estate event for professionals in the United States.

Those are huge drops in attendance and participation and are telling on the state of the real estate markets in the USA.

All agents, once meeting us and realizing we were from Mexico, asked us how safe it was “back home.”  Fear of health and safety, made it difficult for the agents to even care if we have good news about great values for sale in our market.   The amount of misinformation spread in the media coverage about Mexico, seemed to be the only information the average agent in the conference had in his memory bank.  These agents certainly have been busy with their own problems, and another country’s problems are not a priority to them at this moment.

Until we can overcome the fear of going to Mexico, USA and Canadian agents will not be interested in talking about our real estate market.  They will not appreciate our property prices are not volatile.  They will not care we do not have highly leveraged mortgages with borrowers paying little or no down payments. Our 10% appreciation each year for the past 10 years, with 20% in 2004 and 2005, doesn’t mean anything when fear of the swine flu or drug wars and murder is in one’s head.

Very good points, and what the local real estate industry should be concentrating on in getting the word out on how things really are in Vallarta. The “fear” of going to Mexico is the market’s biggest obstacle to overcome. What makes it most difficult is that, at least for Vallarta and Riviera Nayarit, it is unwarranted. But in this case, perception is reality, and that’s what needs to be dealt with.

For the near future, we need to network and make personal contact as often as possible with agents from the USA and Canada. We need to invest time in writing blogs, sending newsletters, and using social networks. We need to present in as many ways as possible, the other side of the news to our clients and friends of what is happening in Mexican real estate. We want them to appreciate quality of life we have.

Its good to hear a local Realtor saying this. This is what the local real estate association should be concentrating on, trying to overcome the negative reports generated about Mexico. They should begin a campaign involving blogging and social networking efforts to get the real story out, involving testimonials from the many American and Canadian homeowners that truly enjoy their lifestyle in Vallarta and Riviera Nayarit.

Read Harriet’s full report here.