Monday, September 19, 2011

Why real estate values increase in Playa.

How come things like 25% return on property value happen here in the Riviera happen over a 5 year period?  Recognizing that when you buy property here in the Riviera, you own a piece of land in a tropical paradise-  what are the forces at work that are really driving value to your realize your return.  The answer is twofold.  It is cyclical and it is related to Mexico´s general development.   

Property in the Riviera also comes with a few uniquely separate characteristics because of it´s touristic appeal. Like any investment, it does need time to mature.  So to the discretion of the buyer/future owner: this is good news worth following.

On the localized and cyclical levels, there is first, the need to insure that you take a compliant position with your property. Keeping the fideicomiso paperwork in due order and creating an excellent paper trail toward your asset is priority one. Second,  it may termed what is called ¨sit back and watch¨ attitude.  This is where it is positive to have a clear goal articulated to your own interest BEFORE executing a transaction. Nothing pays you back more you’re your own diligence.  Work to understand your personal points of flexibility, how much can you ¨stomach¨ the ups and downs of the market and how flexible are you to sell when the offer comes in the door? Those are the kinds of questions you want to be asking yourself.  
Also, as you do your ground work in preparation, take some time to befriend other property owners in the Riviera and have some good question to ask how their experiences have played out.  As with any vacation area property, it’s also good to consider the time value with which you will be using the property. 

The other supporting reason for increase in property value is the basic overall Mexican economic growth.  Here is a compiled list of facts from several sources: During the global crisis the country’s economy survived even though it suffered big losses. Moreover, in 2010 the country’s GDP showed a 5% increase. This year it is expected to grow by 3.4%. Potentially, it is a rich state. Its GDP per capita in 2010 was $13 800. In Latin America it yields only to Chile ($15 000).  It comes 11th in the world in terms of population (about 114M) It also comes 14th in the world in terms of territory.   The USA is one of Mexico’s major outlets. It is a member of the Organization for Economic Cooperation and Development (OECD) and a full member of G-20. Out of all the Latin American countries only Mexico can boast hosting the Olympic Games and 2 FIFA World Cups.

So why does real estate value increase? It´s cyclical, so be sure you are on top of your own ´sense of timing´ before jumping in.  It´s dependent on the Mexican economy as a whole, so be sure you´ve got a true gauge on its performance as well.

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