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"Holding our own"
By Harriet Cochran Murrray for Cochran Real Estate - February 2008

“An economic principle of supply and demand predicts that in a competitive market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity.  Change in equilibrium is reflected in a shift of demand or supply.”
                                                                                                    Wikipedia

Well, some of the suspense and wondering about what is happening in our Mexican market has ended for me.

We seem to be holding our own and we are now experiencing serious offers made by American citizens as well Canadians. The profile of an American buyer several months ago included lack of confidence in the future, and sometimes an expectation that prices here would plummet and one could buy at distressed prices. Well, confidence has returned or the only buyers here right now are confident and making offers. They are not getting “fire sale” prices and that is good for a healthy market. I am talking about individual buyers, not institutional ones.

New and Preconstruction: Prices are holding but terms for purchase can be more flexible, depending on the developer. Those who have access to construction funds (from sources other than the purchasers themselves) are able to offer a delay in the balance of the purchase funds until the actual closing months (sometimes a year or two) after construction begins. So a buyer can put down a 30-35% down payment and wait to pay the balance or obtain a mortgage when he actually closes on the property.

What’s popular:  A smaller new project in Amapas has almost entirely sold out as construction is far enough along to show the personality of the property. New larger projects for condos further south and along the Rio Cuale are offering a number of amenities to attract buyers.  Bucerias is the second proud location for a popular project first built in Amapas in Puerto Vallarta. Inside Punta Mita 4 Seasons continues to appeal to their buyer profile: golf, exclusivity, amenities, security and privacy.

Resale: The market is still active for good properties which are already built and furnished. The buyer is choosing the best location and amenities he can afford. Inferior or badly priced properties are losing out to the competition. Buyers may come in and offer a 10% discount, but the sellers get can get 95% of asking price if they are unique. T Value to the buyer equals a good price for the seller. I have seen this principle to hold, regardless of price range.

Areas of the Bay: We are experiencing demand throughout, from the south shore and Mismaloya to north of San Pancho. Chacala is a well appointed community on ocean/beach front further up the Pacific coast line. Not currently well known except for some lucky buyers from San Diego, Canada, and Mexico, Chacala has the infrastructure only a well-funded developer can provide. Location and amenities remind one of inside the Punta Mita 4 Seasons project. No, there not two world class golf courses in Chacala at this time.

Certainly the La Cruz/Bucerias market has benefited from the popularity of the new marina coming into their area. Buyers, who have boating as a main interest, are able to shop for condos and homes around the marina, where before their choices were Marina Vallarta and Nuevo Vallarta if they wanted to be near their boat. 

Further south from Mismaloya, 3 and 4 hours further south, there are big plans and evidence of beautiful long stretches of white sandy beach being converted into private land for resell.  While these projects will take a few more years to become well-known, opportunities for forward thinking buyers exist now. A new comment from some clients is their desire to go further south. For the past few years, north has been the big topic of conversation when new development has been discussed. Well this has changed. It is interesting to me that a percentage of owners of properties in Vallarta now are asking about choices further south.  They love PV, but remember when it was less popular. These owners desire to go south and are not candidates to trade what they now have for property in the north end of the Bay.

Remodeling or tear downs: For the past two years, we have experienced a great amount of interest from buyers for properties needing rehabbing around the Guadalupe church and south of downtown PV.  This may apply to areas north as well, but we have experienced high demand in popular well developed areas, for remodeling projects. In two recent cases, there was so much interest in remodel projects in the 400,000 USD range, that 4 to 5 serious buyers per property were making offers.

Regarding all current inventories in the Bay: If the property doesn’t have flair or a distinctive personality, it needs to be a good price to attract the buyer who can only buy what he can afford. Savvy developers, who are going after the entry level buyers, are pricing inventory to attract these buyers in the 150,000 USD -300,000 USD price range for condos. Price and location are important, and to keep sales prices down, most kitchen appliances are not included in the price. Cabinetry and light fixtures may not be included either.

How many buyers need mortgages to buy in our current market? I don’t really know. Lenders are weeding themselves out and the strong ones are getting much better on mortgage terms, ease of closing, time frames. The buyers who have put a down payment on a preconstruction project may be the clients for a mortgage in about 12 months when the property is complete and ready to pass title to the buyer. We will have to see what happens. In resale, there do not appear to be many buyers who need financing. 

Are institutional buyers in our Bay of Banderas Market? Rumor has it that they are here in some preconstruction properties as investors through REITS. What we don’t know yet is if there are International REITS. In 2005, the Mexico passed legislation to create their style of a REIT in their own country. These Mexican REITS failed to attract foreign investors such as individuals and pension funds, because the law required the dividends paid to be divided among every state in Mexico. If anyone knows this law has changed, I would like to hear from you. If other North American REITS are investing here now, the pension fund managers shouldn’t have a problem paying out dividends.
 
"People only see what they are prepared to see."
                               --Ralph Waldo Emerson

Since many markets in the US have been overbuilt and properties are being foreclosed, some US investment will be placed in foreign real estate markets. Mexico and Canada should be appealing to US investors as well as international players.

“Money often costs too much."
       --Ralph Waldo Emerson

Currency Exchange: For international buyers who are buying in a currency other than their own, finding a good currency specialist can save a lot of money over the term of the transaction. As more buyers buy internationally, they should research their foreign money requirements. Purchase funds and ongoing maintenance costs can be less expensive if buyers have a plan for money conversion at the best possible terms for themselves. Fluctuating exchange rates over the term can make a big difference in the final cost of buying and owning a foreign property.

Harriet Cochran Murray v
E-mail: harriet@casasandvillas.com

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