Property Futures

Real Estate News, Reviews and Investment

Real Estate in Mexico Doing Well

Article: Growth in manufacturing in Mexico is driving industrial property demand.

Following the Global Recession, prices dropped up to 30% from their peak in some towns.  People in Mexico are fond of saying that Mexico sneezes if the United States catches a cold – and prices are still down in coastal resorts such as Cancun and Puerto Vallarta. But bargain hunters are starting to show signs of returning to the market.

Image of pueblo in desert

Mexican property analysis

Places on the tourism circuit in Mexico are showing signs of recovery in the aftermath of the Global Recession. Since the Mexican real-estate market is dependent on the US economy, the problems of 2008 had an immediate effect on the second-home market in Mexico.

The construction industry continues to show signs of growth and the future outlook is one of the most stable in Latin America.

  • The election of Enrique Peña Nieto is also good news because he has a reputation of being interested in infrastructure growth and has a good record of attracting foreign investment.
  • Growth in the medium term should continue to be in the region of 5% annually.
  • Residential and nonresidential construction growth will continue to be stagnant at around 2% of 2012.
  • Structural problems, especially in the residential property market, will continue to restrict growth.

Over the next decade, manufacturing will continue to be the principal driver of economic growth but we should start seeing a greater focus on the services sector.

The industrial real estate market in Mexico

The industrial property market experienced a good time in 2011 and 2012 and is expected to reach new highs in 2013.

There is a growing demand for industrial real estate with the growth of foreign companies establishing manufacturing operations in Mexico as production increases in every sector of industry.

This surge in demand is due to:

  • Increase in wage and transportation costs in Asia
  • Economic stability in Mexico
  • Free-trade zone position
  • Competitive manufacturing and logistics costs

The combination of shelter services and the attraction of just-in-time manufacturing processes contribute to manufacturing growth.

The educated workforce helps to spur the demand for quality manufacturing space from the likes of the automotive giants such as Ford, General Motors and Toyota.

Residential real estate in Mexico

At this point, only houses with moderate prices in the range of USD $400,000 to USD $600,000 are in demand. This may be attributed to buyers with more expensive properties acquired at the height of the real-estate boom in the United States.

  • Luxury housing in the countryside around San Miguel goes for between USD $900,000 to USD $2.8 million.
  • Property with exceptional features in the area of the Centro can cost as much as USD $4 million.
  • Foreign buyers come from the United States, Canada and Europe.
  • Canadians have increased in number because of the strength of the Canadian dollar.
  • There are also some Italian and Spanish buyers.
  • Mexican buyers are becoming more common, especially in the moderate price range.
  • Foreign investors can easily buy land, though there are some restrictions on land on the beachfront or near the border.  Approval must be obtained from the government but the process is both quick and cheap.

The bottom line

Industrial real estate appears to be a good investment at the moment.  Residential property may also be worth a closer look because prices are beginning to rebound and there may be good bargains to be had.

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