Expert points out the effect of foreigners’ arrival on the housing sector

Published July 3rd, 2022

The interest of foreigners in living in tourist areas has caused Quintana Roo and Baja California Sur to present the highest increase in the price of houses and apartments in the country, according to the Federal Mortgage Society (SHF).

With an average price of one million 467 thousand pesos, homes with mortgage credit in Mexican territory rose 7.7% between January and last March compared to the same period in 2021. However, Quintana Roo and Baja California Sur, the two states with the economies most dependent on tourism, showed increases of 12.4% and 12.2%, respectively.

“Inflation in the United States impacted the price of real estate, so Americans see it attractive to invest in real estate in Mexico, either to acquire a second home or to retire in a beach location,” said Andres Barrios, director of Ancana, a company dedicated to the sale of vacation homes.

“During the pandemic, there was a boom in the vacation home sector, not only from local clients, but also from foreigners and, at the beginning of 2022, in certain destinations more focused for Mexicans, we have seen a certain drop in terms of the number of sales versus last year, but we continue to see a lot of interest from foreigners to continue buying in Mexico,” he exposed in an interview.

Foreigners’ favorite destinations are the beach resorts, the Riviera Maya, the Pacific beaches, and the Baja California peninsula.

“In the United States, even though the first drop in home prices has just occurred during May, we are far below what they can buy there. So, Mexico has become a very attractive destination,” commented Barrios.

By municipalities, Los Cabos was where housing prices increased the most in the first three months of 2022, with an increase of 13%. It was followed by Solidaridad, in the Riviera Maya, with 12.7%. In third place was Bahia de Banderas, in the Riviera Nayarit, where real estate rose 12.6%, and in fourth place was Cancun, with an increase of 12.2%.

Barrios pointed out that in the Baja California peninsula, the inventory of three-bedroom homes, with a value of 700 thousand to 2 million dollars, has practically run out, while the new pre-sale inventory is being absorbed quickly.

“In Tulum, there is a lot of construction, buildings are going up and sales have continued. And now, with the new airport, prices will continue to rise, which will bring more tourists to the area,” he said.

Foreigners also came to San Miguel de Allende and Puerto Vallarta to buy the remaining housing inventory and now the old houses are being sold to remodel them and put them up for sale. According to SHF, new homes rose 8.5%, and used homes rose 7.1% between January and March of this year.

As to whether Mexicans have been displaced from their places of origin by the arrival of foreigners, the director of Ancana commented that in the case of new developments located in Tulum and Baja California there is no displacement of residents, while in Cancun the real estate market is very stabilized.

However, he explained that in San Miguel de Allende he has detected some migration to more distant areas, and in Playa del Carmen, Mexicans are moving to the periphery, not near the beach, where housing is cheaper.

Real estate analysts anticipate that, in a scenario of high inflation, housing prices will continue to increase.