Real Estate Trends Update 2002
Real Estate Trends Update 2002
Preparing the Vallarta Lifestyles Real Estate Market Update, something we have done for the past six years, was not quite as easy as it has been in past years. Although the marketplace has experienced strong growth during this time, it has become more difficult to write about in the last two years.
Growth has continued, with new developments under construction around the bay, but sales activity has remained basically the same. Prices do not seem to be increasing, nor are they declining. It has becme a more “normalized” marketplace. Those who have purchased Vallarta real estate have received value for their investment, especially when compared to other options such as the stock market. As Brock Squire of Coldwell Banker Previews points out, “Just look at the residential real estate market in the United States. Throughout this downturn in the economy, real estate has continued to perform well. That same effect can also be seen in Vallarta.”
Most real estate agents report seeing a drop in sales and prices for condominiums, but the market for houses has remained about the same. This observation is substantiated by Multi-List Vallarta, the Vallarta multiple listing service, which showed a slight drop in the number of condominiums sold and a 20% decrease in their average price. This decrease was not driven by a drop in pricing, but rather by the fact that people were shopping for a less expensive condominium than they were the year before. Another reason is that people are buying the more expensive condominiums directly from developers, whose numbers are not reflected in the MLS statistics. For houses, the number of sales compared to this time last year remained the same, but the average sales price actually increased from $433,000 to $500,000.
Overall, MLS sales activity so far has remained fairly consistent with 2000 and 2001; however, if we had access to the sales numbers for the increasing number of condominiums and houses being sold by developers, the numbers would certainly show a significant increase, indicating that Vallarta’s real estate market has remained basically unaffected by recent events such as 9/11 and the U.S. economic downturn.
In last year’s report we discussed the most prevalent trends in Vallarta real estate, and it has been interesting to review them a year later to see how these trends have been affected. For this year’s report, we will identify a couple of new trends that have recently emerged and reevaluate those trends discussed last year.
New Trends
More Sophisticated BuyersReal estate agents tell us that today’s clients do their homework and are more familiar with the way the real estate system functions in Mexico. In years past, agents had to spend time explaining how the real estate bank trust works to each prospective buyer. Today, this is not something they need to do as often and is very rarely an objection to buying. What has helped is the amount of information about real estate now available to the public. The multiple listing service now is available online (mlsvallarta.com) in a searchable database format and a complete list of its properties, with photos, is available in a new publication called the Real Estate Guide. Wayne Franklin of Tropicasa Realty, also the president of AMPI Puerto Vallarta, comments, “There is a more sophisticated buyer playing a larger role in the purchasing of property in Vallarta. Standards of construction, materials used, amenities offered and furnishings are strong considerations for this clientele.”
Real Estate as an Investment
Real estate has always been a good investment choice, and over the years it has proven to be the right one for many people. Now, with the lackluster performance of the U.S. economy and the stock markets, real estate is looked upon even more favorably. In general, real estate does not lose half or more of its value in a year, as has happened with stocks registered on the NASDAQ. To the contrary, for the past 20 years Vallarta has witnessed strong and consistent growth in its real estate markets. Many agents report seeing traditional stock investors take their money out of the stock market and put it into real estate, and Vallarta has benefited considerably from this trend.
Stronger Trends
Three trends noted last year have become even more relevant today: the increase in mega-developers, the growth along the North Shore and the increasing variety of real estate options throughout the Vallarta area.
Mega-developer Phenomenon
In the 13 years I have been involved with the Vallarta real estate market, I have seen it ebb and flow between being a resale market and a developer’s market. This has become even more evident in recent years, with developers now capturing a major part of the marketplace and with no end in sight to their dominance in supplying product to the community. For example, Bay View Grand, a condominium complex in Marina Vallarta, sold as many condos as the entire Vallarta MLS system sold last year. Developments such as Paradise Village and Mayan Island, traditionally timeshare developments, have entered the full-time market with major projects involving marina and oceanfront condominiums and golf course lots and homes. They are capable of meeting nearly all the needs of the real estate community right within their residential community. Purchasing a home in a mega-development provides many amenities, such as golf, tennis, spas, marina boat slips and shopping opportunities. And since it is all enclosed within a private development, security is well handled, which is especially important to those homeowners who are only in Vallarta during the winter months. This, along with the ability to take their timeshare in on trade, is probably most responsible for taking the mid-range market away from traditional real estate brokers over the past few years.
Punta Mita, on the northernmost tip of Banderas Bay, got off to a slow start, but finally took off this past year with strong sales throughout the high season. With an18-hole Jack Nicklaus golf course, a Four Seasons hotel, a Rosewood hotel in development and incredible real estate opportunities, Punta Mita is redefining luxurious living in Vallarta. This year will see the release of new product lines, including townhouses and condominiums, that have not been available up to this point. In addition, the Four Seasons will be offering their version of high-end timeshare, building luxury villas that come with the services of the Four Seasons on the hillside behind the hotel. The Rosewood hotel will have 70 rooms and will also offer homes for sale.
North Shore Growth
There is no doubt that the future for real estate growth is to the north. The downtown and south shore areas will always be popular, but their potential for growth is limited. There are a number of reasons for this, but the most obvious is that there is much more land available for development in Nayarit, stretching from Nuevo Vallarta to Punta Mita. Much of it is inside large developments, but there are also small communities such as La Cruz de Huanacaxtle, Bucerias and El Anclote. And, since the land is relatively flat, it is much easier and less expensive to build there.
Joining the three mega-developments along the North Shore mentioned earlier, Paradise Village, Mayan Island and Punta Mita, is a new arrival, Flamingos Club Residencial. Flamingos has just begun clearing land near the Flamingos Golf Course for a 500-home residential community. They are focusing primarily on the local market, offering all the services of a regular community, including a school, shopping center and sports facilities; however, it also should be attractive to the Guadalajara and Bajio markets.
Real del Mar, a high-end private residential community just north of La Cruz de Huanacaxtle, has experienced strong sales in the million dollar-plus range and presently has many homes under construction for new homeowners as well as for spec. Demand has been strong enough for them to begin on their second and third phases of development.
Variety of Options
The variety of real estate options has always been a main selling feature for the Puerto Vallarta market, and the list of choices only continues to grow. One can choose from beachfront or hillside oceanview properties. There are homes along the river, in traditional Gringo Gulch, condos surrounding the marina, and properties lining the fairways of the many golf courses. You can be in town or preserve your privacy in one of the small communities to the north. There are homes located along the streets of downtown Vallarta or along private streets inside gated residential communities that are completely self-sufficient and secure. And within these gated communities, developers are ensuring they offer a range of options. Sierra del Mar, a gated residential community on the south shore just a few minutes from Puerto Vallarta, began by selling only homesites; however, they identified a demand for turnkey luxury homes and decided to enter the spec-home market. This helped sales greatly and led to the creation of a whole new division within the company of Sierra del Mar. As new developments and projects continue to be built, the marketplace will continue to expand with new options and possibilities.
Gordon Edwards, a local resident/home builder and who built the first home in Conchas Chinas with Bernardo Applegate, says he believes that Vallarta is one of the best real estate markets in the world right now. When you consider its close proximity to its major market, the United States, and the options available, there are not too many places that can compete with it.
Unchanged Trends
Vallarta Real Estate as a BargainEven though Puerto Vallarta has experienced strong growth over the past five years and prices have risen considerably, real estate is still very reasonable when compared to similar markets. However, although real estate may be well priced, the cost of living in Mexico has continued to rise and has begun to affect the market. Hector Desautels and Tom Yablonsky of Exotic Realty note, “People are coming to find a bargain in Mexico and it does not exist, at least not in Vallarta.” This was especially noticeable for those coming down expecting lower prices after 9/11; however, the numbers show that prices were hardly affected and sales remained the same as past years.
Strong National Market
What has helped the real estate market remain healthy, even with the slowdown in the U.S. economy, has been the diversification caused by the strength of the Mexican economy. After the last peso devaluation in 1995, the national market literally stopped buying real estate and focused more on selling what they had. Now Mexicans are buying again, and this has helped diversify and strengthen the local real estate market. The Bajio region (León, Guajajuato, Queretaro), along with the traditional Guadalajara market, is being actively promoted by both agents and developers. Even Monterrey has shown interest in Costa Vallarta. With improvements on the road to Guadalajara, more and more people from this area become prospects for weekend homes or vacation properties.
Weaker Trends
Fractional PhenomenonFractional ownership has been very successful north of the border, and it makes sense – most people do not need a vacation home all year round. It will certainly be an important part of the Vallarta real estate market in the future, but it has not taken off as we had expected when we wrote about it last year. Fractional home ownership works for those who want to spend more than just a week or two in Vallarta and, more importantly, who want to obtain title (or establish a trust) protecting the value of their investment. Punta Mita will be offering fractional ownership in the near future with their Four Seasons Villas, which will be luxurious homes delivered with the services and quality of the Four Seasons hotel.
Nasdaq-Vallarta Relationship
Last year we noted that it seemed as if drops in the NASDAQ affected the local real estate market and it went down as well. Thankfully, we were very wrong about this, since the NASDAQ has had a dismal performance, while local real estate continues to thrive. If there is any relationship between the two, it is that people seem to be taking their money out of the stock market and putting it in real estate, and some of that money seems to be making its way into the Vallarta market.
I conclude that, if Puerto Vallarta can ride through an economic downturn the way it has over the past two years, when the U.S. economy does get back on its feet, Vallarta real estate will really take off. And, with the amount of development taking place around the Bay of Banderas, there will be plenty of product available for those interested in living in paradise.
http://www.mlsvallarta.com/puerto-vallarta-real-estate/moreinformation/puerto-vallarta-real-estate-articles/real-estate-trends-update-2.shtml
Preparing the Vallarta Lifestyles Real Estate Market Update, something we have done for the past six years, was not quite as easy as it has been in past years. Although the marketplace has experienced strong growth during this time, it has become more difficult to write about in the last two years.
Growth has continued, with new developments under construction around the bay, but sales activity has remained basically the same. Prices do not seem to be increasing, nor are they declining. It has becme a more “normalized” marketplace. Those who have purchased Vallarta real estate have received value for their investment, especially when compared to other options such as the stock market. As Brock Squire of Coldwell Banker Previews points out, “Just look at the residential real estate market in the United States. Throughout this downturn in the economy, real estate has continued to perform well. That same effect can also be seen in Vallarta.”
Most real estate agents report seeing a drop in sales and prices for condominiums, but the market for houses has remained about the same. This observation is substantiated by Multi-List Vallarta, the Vallarta multiple listing service, which showed a slight drop in the number of condominiums sold and a 20% decrease in their average price. This decrease was not driven by a drop in pricing, but rather by the fact that people were shopping for a less expensive condominium than they were the year before. Another reason is that people are buying the more expensive condominiums directly from developers, whose numbers are not reflected in the MLS statistics. For houses, the number of sales compared to this time last year remained the same, but the average sales price actually increased from $433,000 to $500,000.
Overall, MLS sales activity so far has remained fairly consistent with 2000 and 2001; however, if we had access to the sales numbers for the increasing number of condominiums and houses being sold by developers, the numbers would certainly show a significant increase, indicating that Vallarta’s real estate market has remained basically unaffected by recent events such as 9/11 and the U.S. economic downturn.
In last year’s report we discussed the most prevalent trends in Vallarta real estate, and it has been interesting to review them a year later to see how these trends have been affected. For this year’s report, we will identify a couple of new trends that have recently emerged and reevaluate those trends discussed last year.
New Trends
More Sophisticated BuyersReal estate agents tell us that today’s clients do their homework and are more familiar with the way the real estate system functions in Mexico. In years past, agents had to spend time explaining how the real estate bank trust works to each prospective buyer. Today, this is not something they need to do as often and is very rarely an objection to buying. What has helped is the amount of information about real estate now available to the public. The multiple listing service now is available online (mlsvallarta.com) in a searchable database format and a complete list of its properties, with photos, is available in a new publication called the Real Estate Guide. Wayne Franklin of Tropicasa Realty, also the president of AMPI Puerto Vallarta, comments, “There is a more sophisticated buyer playing a larger role in the purchasing of property in Vallarta. Standards of construction, materials used, amenities offered and furnishings are strong considerations for this clientele.”
Real Estate as an Investment
Real estate has always been a good investment choice, and over the years it has proven to be the right one for many people. Now, with the lackluster performance of the U.S. economy and the stock markets, real estate is looked upon even more favorably. In general, real estate does not lose half or more of its value in a year, as has happened with stocks registered on the NASDAQ. To the contrary, for the past 20 years Vallarta has witnessed strong and consistent growth in its real estate markets. Many agents report seeing traditional stock investors take their money out of the stock market and put it into real estate, and Vallarta has benefited considerably from this trend.
Stronger Trends
Three trends noted last year have become even more relevant today: the increase in mega-developers, the growth along the North Shore and the increasing variety of real estate options throughout the Vallarta area.
Mega-developer Phenomenon
In the 13 years I have been involved with the Vallarta real estate market, I have seen it ebb and flow between being a resale market and a developer’s market. This has become even more evident in recent years, with developers now capturing a major part of the marketplace and with no end in sight to their dominance in supplying product to the community. For example, Bay View Grand, a condominium complex in Marina Vallarta, sold as many condos as the entire Vallarta MLS system sold last year. Developments such as Paradise Village and Mayan Island, traditionally timeshare developments, have entered the full-time market with major projects involving marina and oceanfront condominiums and golf course lots and homes. They are capable of meeting nearly all the needs of the real estate community right within their residential community. Purchasing a home in a mega-development provides many amenities, such as golf, tennis, spas, marina boat slips and shopping opportunities. And since it is all enclosed within a private development, security is well handled, which is especially important to those homeowners who are only in Vallarta during the winter months. This, along with the ability to take their timeshare in on trade, is probably most responsible for taking the mid-range market away from traditional real estate brokers over the past few years.
Punta Mita, on the northernmost tip of Banderas Bay, got off to a slow start, but finally took off this past year with strong sales throughout the high season. With an18-hole Jack Nicklaus golf course, a Four Seasons hotel, a Rosewood hotel in development and incredible real estate opportunities, Punta Mita is redefining luxurious living in Vallarta. This year will see the release of new product lines, including townhouses and condominiums, that have not been available up to this point. In addition, the Four Seasons will be offering their version of high-end timeshare, building luxury villas that come with the services of the Four Seasons on the hillside behind the hotel. The Rosewood hotel will have 70 rooms and will also offer homes for sale.
North Shore Growth
There is no doubt that the future for real estate growth is to the north. The downtown and south shore areas will always be popular, but their potential for growth is limited. There are a number of reasons for this, but the most obvious is that there is much more land available for development in Nayarit, stretching from Nuevo Vallarta to Punta Mita. Much of it is inside large developments, but there are also small communities such as La Cruz de Huanacaxtle, Bucerias and El Anclote. And, since the land is relatively flat, it is much easier and less expensive to build there.
Joining the three mega-developments along the North Shore mentioned earlier, Paradise Village, Mayan Island and Punta Mita, is a new arrival, Flamingos Club Residencial. Flamingos has just begun clearing land near the Flamingos Golf Course for a 500-home residential community. They are focusing primarily on the local market, offering all the services of a regular community, including a school, shopping center and sports facilities; however, it also should be attractive to the Guadalajara and Bajio markets.
Real del Mar, a high-end private residential community just north of La Cruz de Huanacaxtle, has experienced strong sales in the million dollar-plus range and presently has many homes under construction for new homeowners as well as for spec. Demand has been strong enough for them to begin on their second and third phases of development.
Variety of Options
The variety of real estate options has always been a main selling feature for the Puerto Vallarta market, and the list of choices only continues to grow. One can choose from beachfront or hillside oceanview properties. There are homes along the river, in traditional Gringo Gulch, condos surrounding the marina, and properties lining the fairways of the many golf courses. You can be in town or preserve your privacy in one of the small communities to the north. There are homes located along the streets of downtown Vallarta or along private streets inside gated residential communities that are completely self-sufficient and secure. And within these gated communities, developers are ensuring they offer a range of options. Sierra del Mar, a gated residential community on the south shore just a few minutes from Puerto Vallarta, began by selling only homesites; however, they identified a demand for turnkey luxury homes and decided to enter the spec-home market. This helped sales greatly and led to the creation of a whole new division within the company of Sierra del Mar. As new developments and projects continue to be built, the marketplace will continue to expand with new options and possibilities.
Gordon Edwards, a local resident/home builder and who built the first home in Conchas Chinas with Bernardo Applegate, says he believes that Vallarta is one of the best real estate markets in the world right now. When you consider its close proximity to its major market, the United States, and the options available, there are not too many places that can compete with it.
Unchanged Trends
Vallarta Real Estate as a BargainEven though Puerto Vallarta has experienced strong growth over the past five years and prices have risen considerably, real estate is still very reasonable when compared to similar markets. However, although real estate may be well priced, the cost of living in Mexico has continued to rise and has begun to affect the market. Hector Desautels and Tom Yablonsky of Exotic Realty note, “People are coming to find a bargain in Mexico and it does not exist, at least not in Vallarta.” This was especially noticeable for those coming down expecting lower prices after 9/11; however, the numbers show that prices were hardly affected and sales remained the same as past years.
Strong National Market
What has helped the real estate market remain healthy, even with the slowdown in the U.S. economy, has been the diversification caused by the strength of the Mexican economy. After the last peso devaluation in 1995, the national market literally stopped buying real estate and focused more on selling what they had. Now Mexicans are buying again, and this has helped diversify and strengthen the local real estate market. The Bajio region (León, Guajajuato, Queretaro), along with the traditional Guadalajara market, is being actively promoted by both agents and developers. Even Monterrey has shown interest in Costa Vallarta. With improvements on the road to Guadalajara, more and more people from this area become prospects for weekend homes or vacation properties.
Weaker Trends
Fractional PhenomenonFractional ownership has been very successful north of the border, and it makes sense – most people do not need a vacation home all year round. It will certainly be an important part of the Vallarta real estate market in the future, but it has not taken off as we had expected when we wrote about it last year. Fractional home ownership works for those who want to spend more than just a week or two in Vallarta and, more importantly, who want to obtain title (or establish a trust) protecting the value of their investment. Punta Mita will be offering fractional ownership in the near future with their Four Seasons Villas, which will be luxurious homes delivered with the services and quality of the Four Seasons hotel.
Nasdaq-Vallarta Relationship
Last year we noted that it seemed as if drops in the NASDAQ affected the local real estate market and it went down as well. Thankfully, we were very wrong about this, since the NASDAQ has had a dismal performance, while local real estate continues to thrive. If there is any relationship between the two, it is that people seem to be taking their money out of the stock market and putting it in real estate, and some of that money seems to be making its way into the Vallarta market.
I conclude that, if Puerto Vallarta can ride through an economic downturn the way it has over the past two years, when the U.S. economy does get back on its feet, Vallarta real estate will really take off. And, with the amount of development taking place around the Bay of Banderas, there will be plenty of product available for those interested in living in paradise.
http://www.mlsvallarta.com/puerto-vallarta-real-estate/moreinformation/puerto-vallarta-real-estate-articles/real-estate-trends-update-2.shtml
posted by La Punta Realty at 2:42:00 PM
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