Mexico Investment Property

Mexico Investment Property

Mexico’s bullish market is proving ideal for real estate investment, and shows no signs of following the slow down in the U.S. property market, according to Global Property Guides.

Described as a ‘tourism giant on an international scale’ by Sustainable Energy Policy Concepts (SEPCO), Mexico’s tourism industry is one of the country’s most important economic sectors, accounting for 9.4% of gross national product. The Secretary of Tourism commented that "Tourism is a real influence on economic development and generation of jobs and well being of communities... By 2025 tourism activity could generate as much currency as the energy sector."

"Mexico’s bullish market is proving ideal for real estate investment."

During the first half of 2007, Mexico received over 11 million international tourists generating $6.8 million, an increase of 9% in comparison to the same period of the previous year. Indicators from the Mexican Tourist Board rank Mexico as the 7th most popular travel destination in the world, with a total of 21.9 million visitors. The country is gradually moving up the popularity ranks, rising from 8th place in 2000.

Mexico has shown sustained economic growth since the beginning of the century supported by GDP figures rising year-on-year, according to the National Institute for Statistics.

Equally the country has seen a substantial influx of foreign direct investment (FDI) with a 52% rise to US$13.24 billion (€9.8 billion) during the first half of 2007. The Economy Department noted that it was the highest ever amount to be received in a half year, and has predicted that the 2007 yearly total could reach the second-largest amount ever received. The government has increased its forecast for total FDI in 2007 from US$18.3 billion (€13.55 billion) to an impressive US$23 billion (€17 billion).

Overseas property investors are welcomed into Mexico with limited restrictions. The Foreign Investment Law, 1973, allowed foreigners to purchase real estate anywhere in Mexico with exception of some restricted zones. These consisted of areas within 100 km (64 miles) of international borders or 50 km (32 miles) of the coastline at high tide. However, amendments to the constitution in 1993, now allows foreigners to purchase real estate within these zones by fideicomiso.

According to the OECD Mexico country profile for 2007, the country is hailed as a ‘solid long term investment opportunity to the real estate buyer’, promoting good capital growth and strong income potential from rental yields. The Mexican government’s consistent commitment to strengthen the economy, coupled with the intensifying demand for Mexican property from overseas buyers, is presenting sustainable and long term price growth. The Houston Chronicle commented of the increasing demand for property in Mexico, "Mexican beach resorts are so popular... condominium and housing developments are often sold out before construction is complete."

Global Property Guide research supports this view; the limited supply of quality residential rental units in comparison to the huge demand from expatriates, retirees and tourists has pushed up rental yields. For apartments and houses in Mexico City and Guadalajara City, rental yields are around 7.7%, but can be as high as 15% for properties of 350 square meters.