In recent years, dollarized properties in Mexico’s prime tourist destinations, including Puerto Vallarta, have emerged as a robust investment option. These properties have demonstrated their strength as a reliable store of value, particularly when compared to alternatives valued in pesos. However, this trend has also contributed to a rapid increase in rental prices, affecting both local residents and investors.
A Dual-Protection Investment
Specialists from development marketing firms across the country emphasize that dollarized properties offer a unique double protection for final buyers. On one hand, investors secure real estate in destinations that historically generate significant added value over time. On the other hand, these properties predominantly attract buyers from the United States and Canada, resulting in transactions that are typically quoted in dollars.
This dual protection becomes especially significant when considering the economic volatility that can impact currency values. For instance, a Mexican buyer earning in pesos who purchases property in a foreign market like Miami faces the risk of their debt increasing if the peso depreciates against the dollar. In contrast, when purchasing real estate in Mexico, developers offer prices and financing options in pesos, often at a predetermined exchange rate, shielding buyers from currency fluctuations.
As an example, those who invested in pre-sale properties at the beginning of 2024 secured prices at an exchange rate of 17 pesos per dollar. As the peso depreciated to 20 pesos per dollar, the value of these properties appreciated by approximately 15% when sold in dollars, highlighting the financial benefits of such investments.
Profile of the Modern Mexican Investor
Recent statistical studies reveal that the typical Mexican client investing in these properties is an entrepreneur aged between 48 and 62 years. These investors are often seeking a second home or an asset that can generate liquidity over time. The pre-sale model, particularly when dealing with reputable developers, allows for real estate appreciation even before the buyer takes possession of the property.
A striking example is an affordable development launched in 2017, where one-bedroom apartments were initially sold for $150,000. Today, those same properties are valued at $250,000, representing a more than 60% increase in dollar terms.
Economic Indicators and Future Prospects
According to the General Economic Policy Criteria released by Mexico’s Treasury, the nominal exchange rate is expected to close at 17.6 pesos to the dollar by the end of 2024, with an average exchange rate of 17.1 pesos for the year. This economic forecast, combined with prevailing uncertainties, is prompting more Mexicans to consider dollarized properties as a viable investment, given their dual valuation in both pesos and dollars.
Historically, properties in tourist destinations popular among foreigners, such as Cancun, Riviera Maya, Tulum, Puerto Vallarta, Mazatlan, and Los Cabos, were primarily valued in dollars. However, many tourism companies and real estate developers have experienced significant revenue losses due to the peso’s recent strength, which has affected the profitability of rooms and properties also sold in dollars.
Balancing the Market for National Buyers
To mitigate these challenges and maintain demand among Mexican buyers, many hoteliers and developers now set property prices in dollars at the current market exchange rate but offer a fixed exchange rate for transactions in pesos. This strategy ensures that properties remain attractive to both foreign and national buyers.
For example, a property marketed to Americans for one million dollars would be valued at 18.46 million pesos at the current exchange rate. However, the same property might be offered to Mexican buyers at 17 million pesos if the exchange rate is fixed at 17 pesos per dollar. This pricing approach prevents the erosion of demand among national buyers while continuing to attract international investors.
Opportunities for Mexican Buyers
This pricing strategy presents a unique opportunity for Mexican buyers. If the peso devalues significantly in the future, those with mortgages in pesos would not be burdened with foreign currency debt, and they could potentially sell the property to foreign buyers at a higher price in dollars.
The Appeal of Dollarized Destinations
The most dollarized real estate markets in Mexico include destinations like Cancun, Riviera Maya, Tulum, Puerto Vallarta, Mazatlan, and Los Cabos. In Puerto Vallarta, for instance, Bahía de Banderas is also a highly sought-after area. These locations feature a mix of properties designed for locals who earn in pesos and others tailored for foreign buyers with designs, views, amenities, and security features that appeal to an international clientele.
Additionally, the rise of vacation rental platforms has expanded the appeal of these properties. Many investors now purchase real estate for dual purposes: enjoying the property themselves during part of the year and renting it out during other periods to generate income. This flexibility adds another layer of value to dollarized properties in these tourist hotspots.
In recent years, dollarized properties in Mexico's prime tourist destinations, including Puerto Vallarta, have emerged as a robust investment option. These properties have demonstrated their strength as a reliable store of value, particularly when compared to alternatives valued in pesos. However, this trend has also contributed to a rapid increase in rental prices, affecting both local residents and investors.
