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Should You Invest in Mexican Real Estate?

Pool and beach at Playa Esmeralda Puerto Vallarta, Mexico
Credit: Harriet Murray

Should you invest in Mexican real estate? I believe the facts show that Mexico is a great investment opportunity for Americans, Canadians and investors from other countries. Mexico offers foreign investors an attractive investment opportunity in an economy that is undergoing dramatic improvement and growth.

As business opportunities grow in Mexico, so does the demand for prime real estate. Investing in Mexico’s real estate market over the last few years has shown increasingly strong returns. Thanks to its combination of iconic cities, unusual tourist attractions and the economic expansion of its professional middle class, the real estate industry is experiencing substantial growth in competitiveness. Becoming part of this vein of success within Mexico is easier than many might think.

The latest AMPI (Mexican Association of Real Estate Professionals) report tells us that real estate and tourism are the largest contributors to the Mexican economy. The tourism industry is one of the greatest growth drivers for the country and has a significant impact on the real estate sector.

Why should you choose Mexico? Mexico is considered the second-largest economy in Latin America, enjoying a strategic position as a bridge between the major powers of North America and the countries of Latin America. The economy has a business-friendly culture and consequently receives one of the highest amounts of foreign direct investment (FDI) in Latin America.

Though there are real estate markets all around Latin America that are experiencing similar growth rates, investing in Mexico’s is a good move. The country can offer a solid return on investment (ROI) and a diverse range of locations that few countries can provide.

One of the main reasons to consider investing in Mexico is its inexpensive nature. With a generally advantageous currency conversion rate, this will make a primary investment in Mexican real estate or development cheaper and allow an investor to buy more significant properties while maintaining a margin of safety. Furthermore, if building in Mexico, labor costs are far cheaper than those in more developed regions.

Unlike in many countries, Mexican law allows foreigners to acquire real estate without a residence or a work visa. This allows foreigners to invest from their home country and generate income from rent or the elevated resale of their Mexican real estate.

In terms of the offering of real state for sale, residential properties were the most popular with 73.2 percent, followed by land with 13.1 percent. The balance was comprised of corporate, commercial and industrial sales.

The commercial and residential markets are also projected as areas of opportunity for real estate investments due to the incentives created by the new government reforms and attractive interest rates. The International Council of Shopping Centers forecasts market growth of up to 23 million square meters by 2025, representing a 35 percent increase over the current 17 million square meters.

To promote foreign investment, including investment in real estate, Mexico enacted new regulations designed to relax the restriction on foreign investment, which formerly limited foreign ownership of Mexican companies to 49 percent.

Under the new regulations, foreign investors can now own up to 100 percent of many enterprises, including real estate and real estate development companies without prior authorization from the Foreign Investment Commission.

Foreign investors are now on equal footing with local investors and are no longer required to engage a Mexican investment partner.

Mexico will continue to offer foreign investors proximity to the world’s largest market, a solid communications infrastructure, ample supplies of energy, low labor costs and skilled and trainable labor resources. The liberalization of the foreign investment rules is a clear indication of the very favorable attitude the government has taken towards foreign investment. The combination of a rapidly improving economy and stable profitable base foretell an excellent ongoing investment environment.

Here is a quick overview of some of the benefits of investing in Mexico real estate:

  • Population and demographic bonus.
  • Reduced cost of living without sacrificing quality of life.
  • Free trade agreement with Europe in effect since 2000.
  • 2nd largest economy in Latin America.
  • 10th foreign direct investment recipient.
  • Mexican government has pledged to Increase investment in infrastructure and ensure a higher rate of return on those investments.
  • 10 percent capital gains tax on equities.
  • An autonomous Central Bank.
  • The Mexican financial system has a capitalization rate that exceeds international standards.
  • Strong international reserves.
  • Mexican exports represent 49 percent of its GDP. Mexico is the 12th largest exporter in the world.

I recommend that each potential buyer or seller conduct his/her own due diligence and review. Sources of data for this blog are AMPI Mexico and a Puerto Vallarta investment specialis