Real Estate

What’s Propelling the Value of Real Estate in Mexico?

Property prices have been rising steadily in Mexico over recent years, and this article gives insights into what propels the value of real estate here

Property Value Graph

Fully revised and updated for 2020

Property prices have been rising steadily in Mexico over the last decade—driven by a range of forces including the country’s stable macro-economics, foreign residents moving here and buying property for retirement, and the emergence of residential mortgages offered by Mexican banks making home ownership a possibility for the growing Mexican middle-class.

Mexico is a vast country with wide regional variations in lifestyle, typography, climate, infrastructure, transport links, and local amenities.  This means that the country’s real estate markets are highly localized, and accurate data in regard to prices and historical trends is not easy find in aggregate as it is in the US, Canada and Europe.

In recent years, a series of web portals have emerged which aggregate property listings nationally: MetrosCubicosVivaAnuncios and InMuebles24 are the principal ones to review.  These sites are helping to bring additional data together for buyers and sellers, but remember that asking prices and sale prices are rarely the same. (Real estate agents tell us that closing prices on property here are generally between 10 and 15 per cent lower than market asking prices, depending on the location, state of the property, as well as individuals’ situations surrounding the transaction.)

There is no publicly-accessible ‘official’ central register of house prices in Mexico, and even some of the ‘informal’ registers which exist may peddle doubtful data, as sellers are not always forthcoming about the full details concerning the prices at which properties changed hands. Official registers do exist —on records at local government and Notary Public offices— but getting access to these data is tricky, and generally has to be undertaken in-person on state-by-state (or even municipality) basis, making it near-impossible for any individual to build a precise picture of what is trending regionally or nationally.  Note also, that untitled properties sold on agrarian terms won’t appear in most statistics, and the buyers’ pool in this market is smaller because these properties cannot be financed or used for collateral.

Some private firms and government agencies exist that commission data-gathering exercises and compile reports based on those data. The depth and scope of their data may be limited, but they add perspective and insights for potential buyers.

Well established local realty agents are among the better people to talk to for an indication of prices in a given market; the disadvantage of this information source is that agents are inevitably vested in talking-up the product they sell.  An excellent way to gauge local prices is to base yourself locally for a while (see renting) in the area where you are interested in investing: there is no substitute for getting to know the locale, talking to the locals and probing friends about recent market activity, scoping-out the different neighborhoods, and in doing so obtaining a first-hand sense of the local market.  Doing this can also help you to negotiate a better price: foreigners can be seen to overpay for property here by assessing ‘value’ to prices in relation to their home-country instead of in relation to local market characteristics and conditions.

Homeowners in Mexico can hire the services of a property assessor —a valuation agent— who, for a fee of around US$200-300 will compose a detailed valuation report that will be founded on an array of factors including research of recent sale prices in the area, the desirability of the locality, amenities the property offers, as well as the size and condition of the current land and construction. Sellers use this report as supporting evidence for their asking price —and some sellers might assert that the valuation is Gospel— but these valuations constitute a professional opinion, not a buyer’s tangible offer.

While various disconnected data sources exist to help sellers and buyers gauge the present market value for real estate, the price of a piece of land or a property in Mexico is most-often determined somewhere between “what the current owner is willing to accept” and “what a buyer is willing to pay.”

Most foreigners who have been purchasing real estate in Mexico over the years have purchased using cash, by trading down from —or out of— property markets in their home countries and exchanging these for a home in Mexico, oftentimes as part of a retirement plan.  This form of direct capital investment has provided an additional support mechanism for the residential property market here, and with buyers not subject to the usual pressures of property repayment schedules and interest charges, the market can remain stable even as prices soften or fall.

The palpable buoyancy in Mexico’s current property markets doesn’t show any immediate signs of abating, although future prices will ultimately be determined by the same factors which are driving the current trend —primarily capital flows and demographics, although other macro events can also cause price swings— and no one can justly predict how markets will shift and reform in years to come.

It’s for this reason that we recommend you consider your lifestyle needs as you scout for a place to live and especially when you invest in a home in Mexico.  The advice in that article shares some deep insights about the types of areas which are likely to continue benefiting from investor interest; the common threads are: good value for money, the strength of the local community, the location’s character, development potential, and local amenities which people commonly seek when moving to a new place.

Popular places like southern Baja California, Puerto Vallarta, and the Riviera Maya are continuing to experience high demand as Americans look south for beachfront property of the type that has become unaffordable in the US to all except the ultra-wealthy.  Foreign residents are also turning their attention inland, beyond the coasts to highland colonial cities where the year-round climate is temperate and improving transport links and local amenities increase the appeal of these locations.

Residential property in Mexico continues to attract buyers from abroad for another reason: the total cost of ownership is lower than it is in the US, Canada or Europe.  Lower property taxes (although these have been rising in recent years, albeit from a low base); lower construction costs (but land prices have been rising significantly); lower ongoing maintenance fees; and a lower cost of living continue to make Mexico an attractive base for making a home investment.

Find detailed information about property by browsing our guides and articles about real estate in Mexico.

The information contained in this article is published in good faith and is not intended to constitute personal, professional, legal, financial or investment advice, nor replace the services of professional advisors.

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