If you are buying or selling property in the current market, you need to understand the peso and the dollar in Mexico real estate transactions and their benefits.
Pricing in U.S. dollars is prevalent only in Mexico when foreign buyers are strongly interested in selected locations. Mexican beach areas have historically attracted not only locals as renters and buyers, but also American and Canadian expats. When more foreign buyers are in these markets, the trend has been to accommodate them by pricing the real estate in their currency.
Mexico City real estate generally is priced in pesos, but the U.S. dollar has now become part of transactions in more popular expat neighborhoods in the city. Not all of Mexico has this demand, so Mexican pesos are the form of payment in most of the country.
If an area has high demand from Canadian expats, then Canadian dollars are the other form or payment.
The Mexican peso is now among the 15 most traded currency units in the world, and is the most traded currency in Latin America. The exchange rate is particularly strong for expats now because of a number of economic factors. The U.S. dollar has been yielding about 24 pesos lately.
In the Bay of Banderas, some sellers are pricing their properties at a fixed peso rate. The peso rate can be for a limited amount of time and then changed with market changes or fixed for the term of the listing.
Here is an example: Listing agents realizing they have a property more popular with Mexican nationals, need to attract them as the buyer for their listing. So, the price is only in pesos and does not require a buyer to buy U.S. dollars at the current rate. This strategy can open up the market to more buyers who function in the peso economy.
A young couple wrote me with a few questions recently. They are buying land and building near Lake Chapala. They have converted all of their U.S. dollars into pesos and are now concerned there are still sellers who are expecting U.S. dollars in their market.
Clever builders have now opened up the option to buy in U.S. dollars or pesos. The developer prices currently are in U.S. dollars. The price offered to the buyer is discounted and then he/she has a choice to pay in either currency.
All developers of pre-construction properties are offering different discounts, depending on the percent paid toward the purchase price. Typically, payments are made to developers on a schedule for them to receive the majority (or full) sales price when the time comes for the buyer to take possession of the property.
Why would an American want to buy in pesos? If the developer offers you a peso price (for a limited time or number of sales) at a fixed rate below the going exchange rate, you have received an additional discount. If you can purchase the property at 22 pesos when you receive 24 pesos for the sale of your U.S. dollars, this is your additional discount. You have exchanged U.S. dollars for more pesos, so you have an amount to use for your buyers closing costs, which are in pesos in Mexico. Or you can use fewer U.S. dollars to buy the number of pesos you need for the purchase price or the deposit.
This is the first time since I have lived here (1997) when I have seen the flexibility of the two currencies with incentives to all buyers.
Buyers who have Mexican pesos find this more attractive than the cost of buying U.S. dollars right now. Buyers with U.S. dollars can cash them. If they can buy in pesos at a rate below the current exchange rate, they may be incentivized to buy one property over another one.
The goal of listing agents and their sellers is to sell the property in this current market. The difference in currencies can lead to some options that were not so apparent before 2020.
Any buyer, however, should use caution and perform his/her due diligence, with professional advice, to determine the credentials of the developer and evaluate the risks.
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his/her own due diligence and review.