The last 10 years of the millennium has brought many
changes to the real estate market of Southern Baja. The effects are very
evident by the market itself, not only in the area but also, the bordering
communities. New phrases have been coined, describing the area. It is no
longer referred to simply as Cabo San Lucas, but with the development of
Cabo, San Jose Del Cabo and on around which is now Eastcape. The
area runs from Cabo North almost to Lapaz with many small bay villages
along the beautiful sandy beaches. Timeshares ownership and vacation
condos have been joined by luxury fractional ownership of condos and dream
homes. New laws and international agreements have made property ownership
easier than ever before. Market trends have been weathered and the
industry professionals have established an association of conformity to
keep up with the demands of the marketplace.
Major Influences Creating
Change
One important change has been the acceptance of the
Mexican real estate trust. Originally it was not only difficult for the
realtor to explain the trust system in the purchase of Mexican owner
rights to foreigners, it was difficult for the foreigner to accept it.
Where today the trust system is more easily understood and accepted.
The "Trust" or "Fideicomiso" which the government
established in 1973, gives the foreigner the equivalent rights of title.
The trust actually gives foreigners the ability to acquire real estate
through a bank trust, allowing anyone of the privately held banks to act
as trustee. The bank holds the property title in trust to which the
purchaser is the trustier or beneficiary. The purchaser has all rights of
property ownership and may improve, lease, sell and pass as inheritance,
just as a regular title. With new foreign investment laws and the Fair
Trade Act NAFTA, in 1992, institutionalized how business is done
between the United States, Canada and Mexico. These changes gave the real
estate purchasers investment protection reducing the distortions within
the industry. According to top Mexico real estate professionals, the NAFTA
agreement was the major reason for the real estate boom in the coastal
areas of Mexico. It gives the purchasers security in buying real estate in
Mexico.
Because of the new changes there is an additional
important change. With the advent of increased property for foreign
investment, including rights to and deeds for, came the long-term
financing with FHA underwriting standards, with long-term fixed interest
rates and title insurance. This allows US and Canadian residents to borrow
US funds using Mexican property for collateral. These factors along with
good US and Canadian economics keep the market strong and increases
investment opportunity with forward growth.
Property Market Influence
Changes
Although over the past 10 years the purchaser
demands have changed greatly. The Mexican style and charm has been
maintained. Many of the items such as sub-zero refrigerators, central air,
customized kitchens and bathrooms were simply unavailable 10 years ago.
The turn key home or condo with or without staff, everything needed to
move in the day of closing, is another new advancement.
Also, unheard of 10 years ago was the multi-million
dollar plus market. According to Multi-list , the most expensive home on
the market at that time was $900,000.00, the market is definitely on the
up swing with seven properties listed in the 1-2 million dollar price
range. The 2 million plus price range has many listed today. Some of the
industry professionals say it is over reaching the market, while others
say it is an example of the strength and confidence of the market.
The custom, pre-sale and spec home market is largely
responsible for the large amount of new construction. Then you add the
volume of re-sale properties in all price ranges, it is quick to see the
steady increase over the past 5 years. This is another sign of the
strength of consumer and lender confidence in the market.
We have all heard the old saying, the key in buying real
estate is 3 things location, location and location. The most sought after
properties all are keyed by location and location in the Baja means view,
value, design and price.
The market main stream has remained to be the two-bedroom
condo and the three-bedroom single family vacation home which
traditionally maintain the largest inventory. The new concentration in San
Jose Del Cabo luxury units has spurred the prices where in 1990 there were
98 two-bedroom condos had an average list price of $116,564 and in the 2nd
quarter of 99 there are 74 with an average price of $205,925. The market
in 3 bedroom homes is increasing dramaticaly in the last 3 years. However, the
market for the homes with 4 Bedrooms or more, has increased in numbers and
in price. Over the 10 years these prices have tripled.
These statistics show steady upward market growth and
return of investment for foreign investors in Southern Baja.
Buyer Changes
Realtors
agree that the buyers today are more sophisticated. They watch the market
trends, becoming much more market savvy than ever before.
One top realtor says, "We have been forced to stay on the
cutting edge by a highly successful high-end type client. They range from
45 to 70 years old, retired or semi-retired, who want to spend 2 or 3
months in the sun. Our market is increasing, more East Coast Americans,
Canadians and Europeans are purchasing, yet 60% to 70% of the buyers are
from the Mid West and West Coast of the US."
Another top realtor says, "We are seeing younger buyers
today buying with cash - couples in their 30's and 40's who are buying
condos. And the alternative-lifestyle market is also showing substantial
growth. She also notes that there is a growing national market of
businessmen and their families who are purchasing here."
The Realtors agree that Foreign developers are also
investing knowing what the buyers want and are willing to produce it. The Baja
has been and remains a lucrative market because of the easy access and the
close proximity to the US and Canada and the buyers know their investment
dollar will be spent on a home with all the conveniences they are used to
and expect.
Community Changes Show Good
Investments
The strong economic growth of the market and the
need for expansion has driven the market beyond the borders of Cabo . The development trends is swinging to the Eastcape
area concentrating from San Jose Airport North to Buenavista, in mainly
residential retreats.
The residential communities including world class fishing, spas,
upscale club houses and ultra-modern homes. Statistics show very
substantial gains in the market. In 1989 a beachfront home with three lots
in Cabo listed at $890,000. Currently there is a comparable property
listed in the same area for three-million dollars. Further more in today's
market just a residential beachfront lot in the same area list for
$700,000 to $950,000. However, the double and triple gains are in spotted
areas, not all areas show such tremendous gains. However, when one takes
into consideration the occupancy levels of the resorts, coupled with the
investment increases in East Cape, you quickly realize where a big
percent of the market wants to be.
Along the shoreline two major ecologically conservative
housing developments have taken the market to the pristine beaches of
these outer reaches proving that buyers simply want to get away from it
all. Realtors agree this northward expansion shows the continued
popularity and security that foreign investors find in Cabo.
Real Estate Industry
Changes
It is always a matter of supply and demand. Within
six years the market demand was dwindling. By 1994, there were essentially
no new projects or developments and the Mexican economy soon put a stop to
whatever market there was. Transactions basically consisted of re-sales
which took care of the excess supply. Prices reflected this downward
swing, some leveled and a few markets show loses.
In 1997, the demand begin to return for unavailable
product - supply and demand again. Now at the dawn of the millennium all
Cabo area is experiencing unrecorded growth. With growth come issues. The
main issue on the minds of the realtors today is the need for more
regulation within the real estate industry. AMPI was formed ten years ago
to provide a professional structure for a uniform industry and to maintain
a measure of congruity and ethical values.
The realtors are demanding the governmental licensing of
agents as well as formal training of new agents entering the industry. The
biggest concern is the need for AMPI to deal with the situation
implementing suspensions, fines, or other tactics which need to be
imposed. The general opinion of the professional realtor is that, "It does
not cost more to do it right."
All of these ingredients lead to an increasingly
progressive and professional real estate sector, One that Cabo can proudly
march onto the 21st century with. One that will continually increase the
productivity of a very bright future for the investment real estate market
of East Cape.
