Catching a Wave of Appreciation in the Riviera Maya Real Estate Market
The Riviera Maya and Playa del Carmen real estate market has had some of the most exciting growth rates in the world and fascinating examples of regional trends. During the 1990s, the small town was known as the pier town where you caught the ferry to get to Cozumel. Now, during this decade, this small town has become more intertwined with the world of international business and, consequently, has witnessed adjustments in the real estate market from the direct effects of the global economic recession. The loss of jobs and the loss of corporate sales in the US and Canadian economies have reduced the number of buyers here in Mexico. The bankruptcy of several international banks on the world stage has also tightened regulations on credit and the amount of capital available for investment. These and other economic events have had a dampening effect on demand here in the Riviera Maya market, but interesting financing options for real estate buyers have also been introduced at a greater variety of banking institutions and are becoming models creatives of seller-financed sales transactions. more common. With economic turbulence, also comes opportunity. Surrounding yourself with savvy real estate experts in the regional market is the first important step toward a safe Mexico real estate acquisition and profitable investment, and this recommendation is even more prudent in times of market adjustment.
In the 80’s and 90’s, Playa del Carmen was not THE destination, it was the pier town where you took the ferry to get to Cozumel. This soon changed when people began to take notice of Playa del Carmen’s beaches and its growing international community. European backpackers began to frequent the area and 5th avenue began to make a name for itself. Hotels and investors began to notice the potential of the area quite quickly. Hotel room inventories grew from 10,000 units to 15,000 – 20,000 in the late 1990s. Today, Riviera Maya hotels have more rooms than Cancun. With the tremendous growth of various industries in Playa del Carmen, the population boom began and the real estate market began to take off.
In the last five years, Playa del Carmen has been one of the strongest appreciating markets in Mexico with double-digit returns. During the early 2000s, many investors bought condo units before construction and sold them 8-12 months later at 30% or more appreciation. It was a boom all along the coast. In the middle of this decade, it was quite common to hear buyers comment, “I should have bought that property 2 years ago when I first saw it!”
These buying market observations in 2006-2008 were also accompanied by a decline in appreciation rates. Each year, as the price per square meter rose, the rate of appreciation began to lose some steam as the global economic engine began to jump.
2008 and the spring of 2009 brought a unique event to this regional market. The recession in our northern neighbors brought its first effects on the Riviera Maya market and on the real estate industry in Mexico. Appreciation rates had leveled off and started to fall slightly. Large quantities? NO, but very interesting quantities.
Some people like to say that the glass is half empty; but not the smart investor. The current scenario in the Riviera Maya presents some fantastic opportunities for the investor who is open to options from professional and savvy real estate experts in the market. Property financial leverage is becoming more common when buying real estate here in Mexico. The large multinational banking institutions that weathered the consequences of the financial crises remain in the market offering their mortgage products to non-Mexicans buying property in this country. Some of these lenders have made recent adjustments to their requirements, such as lowering the LTV ratio from 70% to 65%. Also, FICO scores could have increased in the spring of 2009 to reduce risks and approach this year a little more conservatively. If qualified, these financing options can create some exciting opportunities for investors ready to take advantage of downward adjusting market prices. Financing options for developers and homeowners are also increasing. Some of these deals for homeowners can be very attractive with interest rates equal to or fairly similar to rates commonly seen in our home countries. However, such offers need close professional review of the terms to protect money, protect property, and protect all parties involved in such transactions between non-financial entities. Certain bank contracts and trusts can be established that provide ample protection and security to both buyer and seller, allowing immediate physical possession while a percentage of the property’s market value remains outstanding. Many people feel that the time to invest in the Riviera Maya market has passed and it is too risky given the global economic conditions. However, this is an interesting period for investments with high potential, if you can protect yourself with qualified advice and the best experience.
In fact, when reviewing the factors on some investment alternatives in the market, it can be noted that 2009 is an even healthier market for investment purposes than the investment environment originally witnessed in the early 2000s. At the start of the Great Boom of Valuation of Playa del Carmen, there were still many risks in the market, there was the risk of the lack of experience of the new developers, the risk of the bad reaction and acceptance of the buyer market, the risk of the unknown development of infrastructure to support the construction growth. Today, investors have first-hand historical regional real estate data. Uptake and market projections are based more on historical facts and data than on a guessing game or correlation of future results based on similar markets from other regions. Risks within investment alternatives can also be managed with the help of a well-chosen team of regional experts. Buying finished goods, in the face of the unknown results of investing in new construction, could be an example of strategies to take advantage of current market conditions. These first-hand facts and historical results give you and your consultant better data to manage your investments and increase your chances of solid returns.
The odds for continued long-term growth are strong in favor of the real estate investor when buying properties in the Riviera Maya. Obviously there is a short-term recession. But as explained in this article, if you can surround yourself with the best knowledge and expert advice, the summer of 2009 can present some incredible and unique real estate opportunities. For those who missed the appreciation wave of the early 2000s, this is your “Second Chance” to get into the market before the next wave.