By Patrick Hobson, Discover Mexico
Mexico has long been a favorite destination for Americans and Canadians. Mexico’s seemingly endless beaches, warm weather, and equally warm people have been charming us for years. Once again last year, Mexico was #1 for US citizens, with 27% of the 52 million Americans traveling internationally choosing Mexico. Although Mexico was narrowly edged out by Canada, as Canadian citizens' first international travel choice, travel to Mexico was up 13% in 2006 with Canadians making 794,000 trips.
Apparently holidays south of the border are not enough any more. The Dallas Morning News has reported that one-million Americans (25% of all Americans living aboard) now live in Mexico at least part of the year, and 385,000 live there year round. This represents an increase of 500% over ten years ago. Interestingly enough, the North American ex-pats are not just living in Mexico, but also investing. According to the National Association of Realtors, one-million Americans and Canadians have already purchased property in Mexico.
The well-traveled American and Canadian baby boomers are forgoing the secluded mountain cabin and lake retreats of their forefathers for spectacular oceanfront homes on sweeping sandy beaches and golf villas situated on championship courses located in their favorite Mexican costal pueblo. The ex-pats are attracted by the warm tropical weather, an active yet relaxed lifestyle, the affordable cost of living as well as access to quality medical and dental care. Mexico’s close geographic proximity is a plus as many of theses boomers are still working. Nearly 1 out of 5 expect to use the second home as their primary residence after retirement. Meanwhile, they dream of enjoying endless days of tropical breakfasts with fresh-squeezed orange juice on their veranda following a morning walk on their favorite Mexican beach.
Mexico truly has it all…wonderful climate, rich culture and affordable living. Initially, many baby boomers are drawn to the coastal resort areas where they first vacationed. Although it boasts stunningly beautiful beaches in the Caribbean and Gulf areas, the country is not just about beaches. Mexico boasts grand, sophisticated cities where wide boulevards are adorned by historical monuments and elegant cafes and upscale shops rival the best offerings of the great cites of Europe. Quaint silver mining towns give way to colonial cites rich in tradition where life evolves around gracious squares and beautiful baroque churches. And magically, whether one is in the mountains of the high Sierras, the jungles of the Yucatan or exploring the Mayan ruins near Chichen Itza, one never fails to stumble upon a sleepy little pueblo where the hands of time seemed to have stopped, but somehow the cerveza is always icy-cold.
Understanding, second home ownership is one of the fastest growing sectors in the real estate industry with 70 million Americans and nine-million Canadians approaching the point in their lives when they have the time, financial means, and lifestyle orientation to purchase second homes. While many different types of people buy second homes, higher-income, young retirees, and baby boomer households dominate the Mexican second home market. The principle motivation for purchasing a second home is for personal use and enjoyment, but a significant number of baby boomers also view second home acquisition as a means of safeguarding and enhancing their net worth. It is estimated that these ex-pats already own $30 billion of Mexican real estate and will invest another $5 billion in the next two years.
When considering investing in a foreign country, it is prudent to consider the county’s currency, the climate for foreign investment and the general state of its economy and political stability. On all accounts, Mexico presents low risk and substantial upside potential. Last year, the World Bank named Mexico as one of the world’s top 10 reformers in making the country a 'best' place to do business. Banking reforms in 1998 allowed full foreign ownership of the country[s banks, which has attracted substantial foreign investment. Modern Mexico has a growing GDP, the highest level of direct investment in Latin America and has demonstrated admirable political stability in the era since NAFTA.
From an investment standpoint, attractiveness of Mexico has not gone unnoticed by the major institutional investment banks and investor conglomerates. In December 2006, Citigroup announced that it had provided $200 million of its own capital for its new $600 million CPI Capital Partners North America fund, which focuses on real estate in Mexico and the United States. Like Citigroup, Merrill Lynch also backs its regional real estate funds with its own money, but to an even greater degree. Another large player, California Public Employees Retirement System, the larges retirement fund in the world, recently invested $285 million in real estate in Mexico and Brazil.
Not all of the investment has been passive. The Related Group Inc. of Miami, the largest builder of luxury condos in the United States, has announced that it will develop $1 billion worth of real estate in Mexico in the next two years. Another U.S. builder, Front Porch Development Company, has published that it will launch Mexico's first “active adult" 400 home retirement community outside Puerto Vallarta with the home prices ranging from $400,000 to $1.2 million. All this activity has transpired with little fanfare, unlike Donald Trump’s widely reported all-time single-day real estate sales record of $122 million constituting an 80% sellout of the first phase of his much heralded Trump Ocean Resort south of Tijuana.
Obviously, the major institutional investors are focusing on Mexico. Their property analysis has monitored the socio-economic and cultural trends and we are witnessing a major shift in capital directed south of the boarder. Small wonder, the baby boomer demographics are undeniable- 8 out of 10 are homeowners who have accumulated the vast majority of their wealth through home ownership. They own nearly 60% of all vacation homes and are enchanted by Mexico. Clearly Mexico’s time has come.
