Why is Vallarta Real Estate Priced in USD?

A question buyers and sellers of real estate in Vallarta often ask is why, when the official currency of Mexico is the peso, is real estate sold, or at least “tourism” real estate, sold in US dollars?

Vallarta is not alone. Other major tourism real estate destinations that are popular with Americans and Canadians also sell real estate in dollars. So how did this trend become established?

One of the reasons is that it makes it easy for Americans and Canadians to deal with. They don’t have to make the exchange rate adjustment, the price is what it is, in USD. When you have an peso exchange rate that is continually changing, (which it usually is), this means the price you’d be paying in USD is also changing. So if the exchange rate is 10-to-1 and the asking price was 1 million pesos, that converts to US$100,000. But if the exchange rates goes up to 11-to-1, well now the property is selling for roughly US$99,000. So to keep it simple, someone decided to just keep it in USD for the gringos.

But there’s another good, perhaps even better, reason.

Mexico has alway been plagued by inflation. At times there have been large jumps in the exchange rate, (like in 1994, again in 2008, and most recently in 2016), which can happen at anytime. Now for builders who have to pay for materials that originate from the U.S., or for products made in Mexico but with U.S. materials, if there is an exchange rate jump they could find that there profit margin has just been reduced, perhaps even losing money, because of an increase in building costs. So to cover or “hedge” themselves, they sell in dollars. Which in that case, if there is a rate drop, it can actually be to their benefit, as they’ll be receiving more pesos and the majority of their expenses are in pesos. Building a home or condo project can take over a year and a lot can happen in that time. So selling in USD made sense. And the tradition has continued.

It has a potential downside, however.

Properties are registered at the land title office in pesos. So, using the previous example, if you bought a condo for US$100,000 and it was registered when the exchange rate was 10-to-1, it would show on title at 1 million pesos. If a few years later you sold the property for the same price (US$100,000), but the exchange rate was now 11-to-1, this would show you were selling the property for 1.1 million pesos, meaning on paper your property appreciated by 100,000 pesos. And that’s taxable at 35%. Meaning, even though you sold the unit for the same price you sold it for, you’d still be liable to pay taxes, and in this case, 35,000 pesos. Now imagine if the exchange rate was now 15-to-1!

Now, it isn’t quite so simple, they are some expenses, in certain situations, that you can apply against the tax bill. If you are in this situation, however, it would be best to talk to a real estate lawyer to know exactly where you stand.

Alamar Launches New Construction on Delta II Tower

Alamar, the residential complex situated on the hillside behind La Cruz de Huanacaxtle on the North Shore of Banderas Bay, has announced they have begun construction on a new tower. In view of the fast progress in both the construction and marketing of Delta I Tower, whose sales surpassed all expectations, Alamar has announced that new construction for tower Delta II is now underway, and units will be delivered by September 2019.

Alamar is another success story of the real estate development company Grupo Real del Mar, a division of Tierra y Armonía, with projects such as Punta Esmeralda, Real del Mar, La Joya and La Joya de Huanacaxtle developed over the past few years in Riviera Nayarit.
Alamar has numerous common area amenities such as a large beach club (seen in the foreground above), jungle club, paddle tennis court, swimming pools, gym and trekking trails, as well as a Discovery Center and Concierge services.

At 27% sold out to date, Delta II is now a reality and at the same time an omen that very soon the launching of the presale at Delta III will take place, which is expected to surpass the achievements made in preceding stages of the Alamar development. For more information contact Alamar direct at (329) 295-5370, or visit their web page here, or their website.

New Aerial Images of Puerto Vallarta’s Most Popular Regions

MLSVallarta recently updated its aerial images of popular regions and sub-regions of Puerto Vallarta and Riviera Nayarit. You’ll find these new images in the headers of each of the regional and sub-regional description pages under “Regions.” Where once these images were taken from a plane, hanging out an open door, they are now taken using a drone equipped with a camera, making the job easier – and safer.

2018 Vallarta Real Estate Fair

Next Saturday, (March 3rd), the annual Vallarta Real Estate Fair of the Timothy Real Estate Group will be held between 9AM and 2PM at the Rivera Molino Plaza on the corner of Aquiles Serdan and Ignacio L. Vallarta in the Romantic Zone, and admittance is free.

Purchasing real estate abroad naturally comes with a lot of questions, from the practicalities and legalities involved with buying a home internationally to general concerns regarding how to make the most of your new life in your exciting new home in Puerto Vallarta. The Fair can put you in contact with experts in the fields of real estate, interior design, taxation and immigration, health care, vacation, property managers and long term rentals, mortgage brokerage and more.

For buyers, sellers and residents, the Fair is an invaluable experience to maximize the investment potential of your real estate and enjoying the best of the Puerto Vallarta lifestyle.

So mark your calendar – March 3rd from 9-2…

Is Puerto Vallarta Safe?

First, if tourists visiting Mexico is a good indicator how safe Mexico is, then it certainly is as 38 million people visited Mexico in 2017, 12% more than they year before.
But we cannot ignore the fact that Mexico does have a crime and violence problem, aggravated by the drug cartels. 23,000 people were killed in Mexico last year, making it one of the most dangerous places in the world. What needs to be taken into consideration is that Mexico is a very large country and there are places where the overwhelming majority of these crimes are taking place, but many areas where crime is no where near as common. Mexico’s Minister of Tourism, Enrique de la Madrid, recently stated that eighty percent of all destinations in Mexico are safe. And Puerto Vallarta is certainly one of those safe destinations.

As a country, the US government’s travel advisory system rates Mexico at a Level 2, which is the same as for Germany. Traveling to Mexico is fine, but tourists should exercise increased caution. They recommend that visitors:

  • Use toll roads when possible and avoid driving at night.
  • Exercise increased caution when visiting local bars, nightclubs, and casinos.
  • Do not display signs of wealth, such as wearing expensive watches or jewelry.
  • Be extra vigilant when visiting banks or ATMs
  • The U.S. government has Level 4 warnings (meaning “Do not travel there”), for the states of Guerrero, Colima, Michoacán, Sinaloa and Tamaulipas. The state of Jalisco (where Puerto Vallarta is located), is at a level 3 (reconsider travel), and certainly has had its share of drug cartel activity, but the areas most affected are hundreds of kilometers away from Vallarta. For Puerto Vallarta itself, there is no travel warning in effect by the U.S. government travel advisory system.

Visitors and expats to Puerto Vallarta and Riviera Nayarit should feel safe, as safe as they would back home, as long as they take the precautions recommended. Millions visit Vallarta each year and very few altercations are reported.

Southside Vallarta New Real Estate Developments

The area that has seen the largest increase in new real estate development in recent years is the southside of downtown Puerto Vallarta. There has been boom in boutique condominium projects situated a block or two from the beach, in the “colonia” commonly known as Emiliano Zapata.

So is it southside Vallarta or Emiliano Zapata? Well, it is both, and more. It is also known as Old Town, or “Zona Romantica” and actually entails the colonia referred to as Olas Altas as well. So let’s back up a bit so we can better understand the borders of this area. The river Cuale runs through the middle of Puerto Vallarta, separating it into to two regions that are actually quite different from one another. And although the southside is sometimes known as Old Town, it is not, it is actually younger than the northside of the Cuale. In Vallarta’s early years there were no bridges over the Cuale, which limited development so most of Vallarta began on its northern shore. It was only with the construction of a bridge that the southside began developing.

North of the Cuale is more touristic, with the primary part of the promenade, lined with bars, restaurants and nightclubs. There is less tourism real estate here, and what there is, is on the hillside behind. But it hasn’t seen any of the recent development that the southside of the Cuale has seen.

In MLSVallarta this area is known as South Vallarta, and its borders would be the Cuale river on its northern border, the ocean and beach (Los Muertos) on its western border, and hillside neighborhood of Amapas to the south. Its eastern border is the #200 highway that runs around and south to Costa Careyes and Manzanillo. Most of the real estate activity, however, nestles close to the beach area of Los Muertos.

Primary real estate activity has been situated along two popular streets; Venustiana Carranza and Basilio Badillo, which run up from the beach eastwards. Development here is drastically changing the look of these streets, as small homes and shops have been torn down to be replaced by condominium towers and upscale shops and restaurants on the ground floor. Most is still under construction, but already many commercial endeavors have moved in and are open for business.

To view a map where all these developments and more are located, visit the Developments Page of MLSVallarta.

On the corner of Carranza and Constitución is the project Zenith with now finished condominiums available and shops and boutiques situated below. Across the street, under construction is Urban and next to it is Pavilion, which takes up most of what is left of this block. Further down from Zenith is Loft 268, which is on the corner of Carranza and Ignacio Vallarta.

Zenith offers 44 units with one and two bedroom units. There’s underground parking available and other amenities include heated infinity rooftop pool, fitness center and storage lockers. Prices start at US$250,000.

Urban also offers one and two bedroom units with amenities such as a sun lounge and infinity rooftop pool, open terrace with dining area and an outdoor kitchen for common use. Prices start around US$250,000.

Pavilion has 62 units that are studios, one and two bedroom. Amenities include a rooftop lap pool and lounge area, two heated Jacuzzis and fitness room. Prices start at US$198,000.

Loft 268 offers one and two bedroom units and amenities such as a rooftop area with infinity pool, Jacuzzi, gym, bar and BBQ area. Prices start at just under US$300,000.

2017 was a Great year for Vallarta Real Estate

It isn’t too difficult to determine that Puerto Vallarta and Riviera Nayarit are once again experiencing very active real estate markets, with the amount of construction taking place, (especially in downtown Vallarta) and by the size of the real estate publications. It isn’t back to 2007, but it certainly seems to be heading in that direction.

Statistics from the regional real estate association, AMPI, back this up, showing that real estate sales in 2017 were up 36% over the previous year (reported by Harriet Cochran in the PV Mirror). The association had $1.6 billion in inventory on average in 2017 and managed to sell $262 million of it, or 16%. That makes for a relatively strong market, which is reflected in the difference between the list and sales price, which was only 7%. And because of this, the average sales price of properties is appreciating, with a 4% increase manifested for last year.

The average sales price for a condo was $277,000, which is still below the average price back in 2007, before the downturn, meaning the market certainly still has room to grow and for prices to continue to appreciate.

Trends in Puerto Vallarta’s favor are that it is just 3-4 hours away from home for many Americans, there is a very strong and active expat community, and it is relatively safe, at least compared to some other areas of Mexico (and some American cities!). The weather is exceptional, and we are certainly having an amazing season this year with 30º C. average temperatures and clear blue skies. That must really mean something to the many Americans and Canadians who have seen one of the coldest winters on record. And there is of course the numerous activities one can do, such as golf, fishing, surfing and sailing, that are doable all year round. And then there’s the restaurants, the theaters, the markets…the list goes on and on.

International Living Retirement Index

Each year the staff at International Living compile an index that lists what they consider to be the most popular retirement destinations in the world. To create the list they take into consideration climate, cost of living, retiree discounts, infrastructure, accessibility of healthcare, amongst other things. Mexico came out in third position for 2016, just behind Panama and Ecuador.

They write, “Whether your dream retreat is a graceful colonial home with lavish gardens, a simple beachfront bungalow where you can prop up your feet on the rail and watch the tide roll in, an expansive hacienda with enough acreage for horses to roam, or a cliff side villa with sunset views and cool, steady breezes, you are likely to find it in Mexico.”

For Americans and Canadians, Mexico perhaps tops the other two because of its close proximity their home countries; both Panama and Ecuador are quite a ways away from home for most North Americans. Living in Mexico can meet getting back home can be just a few hours away, definitely a big plus.

The site contains a lot of very useful information for those considering retirement and are not sure where they’d like to spend their retirement days.

Vallarta Real Estate Development Sales Surge

There is a cycle in real estate which follows the ups and downs of the economy. When the economy is doing well new development properties are in vogue and re-sales tend to lag. There’s plenty of money in the market and people have cash to spend. And when it comes to real estate, what they often want is something new with the latest features and amenities. Its a little like what takes place in the car industry; with new models released each year to tempt current car owners to upgrade. The housing market, in an upswing, is no different, be it in Canada or the USA, or here in Puerto Vallarta. But when the market slows down after a market crash or adjustment, such as what happened followed in 2008 and 2001, the cycle tops out, begins its descent, and development properties sales suffer while re-sales regain market share.

Puerto Vallarta is currently in the middle of an upswing in this cycle, with new developments popping up all around the bay and in hot demand.

During these good times developers try to outdo the competition by offering more “bells & whistles,” something more special and unique. Units become larger, terraces wider and deeper, kitchens have every kind of appliance, bathtubs are Jacuzzis, and common areas features spas, gyms, massage rooms, two-car covered parking, concierge service and on and on it goes. Having been through a few of these cycles I’ve developed a bit of a sense as to when it may be peaking, and that’s usually when amenities go from being practical and useful to ostentatious and over-the-top. Right now? We are still a ways from reaching that over-the-top level.

When the market eventually crashes or corrects, however, (which it always does), these over-the-top properties are somewhat harder to sell as all those extras have a cost, and in a down market people don’t have money for them, nor want to part so easily with they have. Many developers get stuck with units they can no longer sell for top dollar and now realize the wonderful amenities they added to help them sell their product are now working against them. As the market tightens people want smaller units, less extras (as they add to the overall cost) and less amenities (as they drive up the maintenance fees).

People who had purchased previously at lower prices can sell at these prices whereas it becomes much more difficult for developers to continue building as they can’t build something that would compete with the price of resale properties. They either have to lower their prices substantially or hold on and wait, (for those that can afford to wait). Real estate offices that concentrated exclusively on marketing developer new product now find they have no to little inventory and scramble to try and get what listings they can in the resale market. Vallarta certainly saw this with the type of units developers started offering in about 2012. In order to compete with the pricing of the re-sale market they built smaller units with less amenities.

So an economic bull market delivers a booming developer market whereas a bear market drives the re-sale market. What’s interesting right now is that both markets are hot, local realtors inform us. Developers are selling, in some cases up to 50% sold out before breaking ground. But re-sales are also in high demand, enough that there is a lack of good quality listings. Agents are in that good, but uncomfortable position where they have quality prospects but don’t have the quality listings to show them.

The hot region in 2017 was Central Vallarta, and more specifically in Emiliano Zapata where the must-have amenity this time round involves rooftop common areas that feature a swimming pool (and especially trendy if there’s a sitting area in the middle of it), a bar, lounge areas and perhaps a spa and/or gymnasium. As most of these new projects are not on the beach, this is the one place where all owners can be assured they have access to an ocean view.

Over the next couple of weeks MLSVallarta plans to feature a popular region of the tourism real estate market that has experiencing strong development growth. We’ll begin with the current most active region, Emiliano Zapata, in the second part of this series about new developments in the Vallarta and Riviera Nayarit region.

Maximize the Return on your Puerto Vallarta Home

For those who have have a second home in Puerto Vallarta, while still maintaining a property back in the U.S. or Canada, there are concerns regarding what to do with it when it is not being regularly used. If the property is left vacant, it is usually a good idea to at least have someone regularly checking on the property, especially over the summer months when humidity levels are high. They can air it out on a regular basis, clean it, and ensure that there are no problems with the water, electricity and appliances. Once humidity gets into furniture, rugs and clothing, it is difficult to get out and leaves a rather unpleasant smell in the apartment.

But many have discovered ways to make better use of their apartment, rather than leaving it vacant during the times it isn’t being used. Here’s some ideas to get a better return on your investment:

  1. Rent It: The most common idea for obtaining better use of one’s apartment is to rent it out. Renting brings in income that can help offset the costs of holding the property, such as paying for HOA fees. There are a number of rental agencies that can assist with this and also provide support for regular cleanings. Or, you can try organizing it on your own using online rental sites such as VRBO.com, Airbnb.com, HomeAway.com and even Booking.com is now involved in short term rentals.
  2. Exchange It: You can also exchange your property for one located in another country or place through online exchange sites such as Homeexchange.com. This works best if it is your (and their), second property, as you don’t have to do simultaneous exchanges. They can use your place during the winter while you could use their summer property at a later date. It offers a lot more flexibility for both properties. You don’t receive any income, but you get the use of a property somewhere else that you otherwise would have paid for. Exchanges can be in the U.S. or Canada, or elsewhere such as in Europe or Australia. These sites offer thousands of options. There, however, a cost to join, so you want to ensure you will use the service.
  3. Swap It: A newer but similar service to exchanging isLoveHomeSwap.com, which provides points instead of direct exchanges. You provide your property for a “swap” and in exchange you receive points that you can use at a later date for another property in the system. It provides even more flexibility in the exchange process.
  4. Barter It: You can also exchange your property for services you may need. Perhaps there is work to be done around your primary home. You can offer the contractor or service provider the option of exchanging part of the work for time at your property in Puerto Vallarta. You pay less and they get a nice vacation (and pay less taxes). Not as flexible as an exchange service, but I’ve heard of people bartering their property in PV for dental and legal work, construction jobs and regular services such as pool and gardening around the home.
  5. Lend It: This doesn’t provide a source of income, but lending your property to family and friends certainly will embolden them more towards you! You may want to say you’ll lend it at whatever the operating costs may be, to cover a portion of HOA and utility fees.
  6. Gift It: Another idea I have heard people doing it gifting a stay at their property and obtaining a tax deductible receipt for it. Perhaps there is a non-profit organization that holds raffles or auctions to raise money. You can offer a stay at your property, give it a value, and they can provide you with a tax receipt in exchange.

There you go, six great ideas for putting your property to better use when you are not using it!