Recently there was a question in a local Vallarta paper asking David
Schwendeman and Terence Reilly was the mortgage meltdown in the US
affecting the mortgage market in Mexico?
There answer included the reasons why the mortgage market looks good for the foreseeable future.
They wrote about Supply and Demand, two of my favorite barometers for
markets. According to their status, 90% or more of properties in the US
and Canada have mortgages attached. The availability of mortgages for
residential financing has created in large part The American Dream of
everyman owning his own home.
90% of more of property in Mexico does not have a mortgage attached. We
all realize that there are a number of new developments coming on
stream, and many of them are being sold in pre-construction. There may
not be enough cash buyers for this inventory, but the availability of
conventional residential mortgages can allow for a much broader buyer
pool and stability and growth in the market here.
Also, there are mortgages now which can be put on existing properties
if the owner wants to finance and get a lot of cash back out. Buyers
can also now cross collateralize property in the states and get cash
out that way. Or, mortgages are still available now on the Mexican
properties.
The biggest contributor to the mortgage crisis in the US was the
practice of irresponsible, sub-prime lending. Too many people took too
much risk borrowing too much money, which collectively couldn’t be paid
back responsibly. In truth, a 20-30% down payment fosters a higher
commitment level to the purchase. A higher commitment level means less
chance of default and less risk for the bank. This means more
responsible lending.
Cross border loans are a little more difficult to qualify for than
mortgages which caused the problems in the US. These mortgages on
Mexican property, even by US lenders, require a higher level of
commitment from the borrowers, which minimizes the chances that we will
have the experience here in that the US is going through. There are no
sub-prime mortgages available in Mexico.
The Mexican Economy is tied to the US economy. All three countries,
USA, Canada and Mexico are North America. Tourism is essential to
Mexico’s economy. The west coast of Mexico has depended on US and
Canadian tourism, to a large extent.
We have continued to see increases in arrivals to Puerto Vallarta at
the international airport. The increase is attributed to the success of
new low-cost airlines as well as the greater number of routes and
flights operated from Los Angeles, Denver, Atlanta, and Calgary as well
other North American cities.
However, European investment is on the west coast of Mexico, now and
Euros are looking for a place to invest for value. Mexico can be
favored at this time over section of the US because of the lower cost
of living, i.e. labor, expenses to maintain, and the favorable climate.
The protection we have in the Bay against hurricanes is also a large
reason for some buyers and investors favoring us over Florida and parts
of the Gulf Coast of the US.
We have not seen a decrease in buyers looking for properties to buy. In
fact, the Canadian dollar being strong has brought renewed interest of
Canadians to shop for sunny properties in the Bay to ward of their cold
climate. Our market here charges in US dollars for the real estate, and
Canadian money now is equal to or higher.
Harriet Cochran Murray
This article is based upon legal opinions, current practices and my
personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I
recommend that each potential buyer or seller conduct his own due
diligence and review.
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