Puerto Vallarta, Mexico—Tourist areas and border areas of Mexico are witnessing an unprecedented surge in housing costs throughout 2024, thanks to a strong peso, sparking significant concerns within the country’s real estate sector.
The Problem
Gregorio Sánchez, Corporate Business Director of the Mexican Real Estate Bank (BIM), highlighted the alarming trend in a recent market analysis. States such as Baja California, Jalisco, and Quintana Roo have reported real estate price hikes of up to 30% within mere months.
“The super peso has adversely impacted the real estate market, especially in dollarized areas or regions tied to tourism. This has driven up prices for foreign buyers, particularly in border areas,” Sánchez explained.
The average cost of housing in Mexico’s border and tourist regions now ranges between $200,000 and $300,000, making these properties increasingly unaffordable for the domestic market, where wage growth has not kept pace with housing price inflation.
Negative Effects
Sánchez lamented that the rising housing costs pose significant challenges for banks like BIM, which provide construction loans that are repaid through property sales. The higher margins on property costs mean unsold properties or delayed sales lead to difficulties in meeting loan payments and covering monthly interest. This scenario also contributes to a growing inventory of unsold housing units.
The states most affected by the housing price surge due to the super peso include Baja California—particularly Tijuana and Mexicali, given their proximity to the major development hub of San Diego—as well as prominent tourist destinations like Cancún, Tulum, and Puerto Vallarta.
“Today, the super peso is detrimental to the housing industry for Mexicans. A 30% increase in home prices overnight severely impacts purchasing power, as salaries do not rise by 30% overnight. Consequently, houses that were once affordable are now out of reach,” Sánchez added.
Impact on the State
In the case of Sinaloa, Sánchez noted a predominantly domestic consumer market in the major tourist center of Mazatlán, particularly following the completion of road projects like the highways to Chihuahua and Durango.
“We do not see a significant foreign market in Mazatlán; it is mainly internal, driven by the completion of the highway to Chihuahua, which has turned the region into a vital corridor and bolstered Mazatlán’s local tourist development,” he reiterated.
National Effect
According to the Ministry of Finance and Public Credit (SHCP), the use of cash dollars in Mexico is concentrated primarily in border and tourist areas, with a relatively minor share in remittances sent by expatriates.
SHCP data indicate that 45% of the nation’s cash dollars are concentrated in just ten municipalities, characterized by distinct features. The reasons for using cash dollars vary between border and tourist areas, with the former driven by goods or real estate purchases by foreigners, and the latter by tourist expenditures.
The exponential rise in housing costs in these regions underscores the complex interplay between currency strength, foreign investment, and domestic affordability, posing significant challenges for Mexico’s real estate market moving forward.
Puerto Vallarta, Mexico—Tourist areas and border areas of Mexico are witnessing an unprecedented surge in housing costs throughout 2024, thanks to a strong peso, sparking significant concerns within the country's real estate sector.
