The Riviera Maya and Playa del Carmen real estate market have had some of the world’s most interesting growth rates and fascinating examples of regional trends. During the 1990’s the little village was known as the pier town where you grabbed the ferry to get to Cozumel. Now, during this decade, this little village has become more intertwined with the international business world, and consequently, adjustments to the real estate market have been witnessed from the direct effects of the world economic downturn. The loss of jobs and loss of corporate sales in the economies of the United States and Canada have reduced the number of buyers here in Mexico. The bankruptcy of several international banks on the world wide scene has also tightened the regulations on credits and the amount of available capital for investments. These and other economical occurrences have had a decrease effect on the demand here in the Riviera Maya market place, but interesting financing options for real estate buyers have also been introduced in greater varieties from bank institutions and creative transaction models from seller-financed sales are becoming more common. With economic turbulence, also comes opportunity. Surrounding yourself with regional-market-intelligent real estate experts is the first important step towards a safe Mexico real estate acquisition and profitable investment, and this recommendation is even more prudent during times of market adjustments.
Back in the 1980s and 90s Playa del Carmen was not THE destination, it was the Pier village where you picked up the ferry in order to get to Cozumel. This soon changed as people began to notice Playa del Carmen’s beaches and its growing international community. European backpackers began frequenting the area and the 5th avenue began to make a name for itself. Hotels and investors began to notice the potential of the area quite quickly. Hotel room inventories grew from 10,000 units up to 15,000 - 20,000 by the later 1990s. Today, the Riviera Maya hotels have more rooms than Cancun. With the tremendous growth in various industries in Playa del Carmen, the population boom began and the real estate market began taking off.
Over the past five years, Playa del Carmen has been one of Mexico’s strongest appreciation markets with returns in the double digits. During the first years of the 2000 decade, many investors would purchase pre construction condo units and sell them 8 or 12 months later with 30% or more appreciation. It was a boom all over the coast. In the middle of this decade, it was quite common to hear buyers comment, “I should have bought that property 2 years ago when I first saw it!”
These observations from the buying market in 2006-2008 were also accompanied by a decline on the appreciation rates. Each year, as the price per square meter crept upwards, the rate of appreciation began losing some steam as the world economic engine began skipping some beats.
2008 and spring of 2009 brought a unique occurrence to this regional marketplace. The recession from the northern neighbors brought its first effects onto the Riviera Maya market place and in the Mexico real estate industry. The appreciation rates had flattened and begun to drop slightly. Large amounts? NO, but very interesting amounts.
Some people like to say that the glass is half empty; but not the smart investor. The current scenario in Riviera Maya presents some fantastic opportunities for the investor who is open to options from professional and market-intelligent real estate experts. Financially leveraging off of the property is becoming more common when purchasing real estate here in Mexico. Large multi-national banking institutions that weathered the fall out of the financial crises remain in the market offering their mortgage products to non-Mexicans buying properties in this country. Some of these lenders have made recent adjustments to their requirements such as lowering the LTV ration from 70% downwards to 65%. Also the FICO scores might have increased in the spring of 2009 in order to reduce risks and to approach this year slightly more conservatively. If qualified, these financing options can create some interesting opportunities for investors ready to take advantage of market pricing that is adjusting downward. Developer and home owner financing options are increasing as well. Some of these home owner deals can be very attractive with interest rates equal or quite similar to the rates commonly seen from our home countries. However, such offers need close professional review of the conditions in order to protect monies, to protect the property, and to protect all parties involved in such transactions between non-financial entities. Certain contracts and bank trusts can be established giving ample protection and security to both the buyer and seller allowing for immediate physical possession while a percentage of the commercial value of the property remains outstanding. Many people feel that the time to invest into the Riviera Maya market has passed and it is too risky given the world economic conditions. However, this is an interesting period for investment with high potential, if you are able to hedge yourself with qualified and top experienced advise.
In fact, when reviewing the factors on some investment alternatives in the market it can be noted that 2009 is an even healthier market for investment purposes than the investment environment originally witnessed during the beginning of the years 2000. At the beginning of the Great Appreciation Boom of Playa del Carmen, there were still many risks in the market, there was the risk of new developers’ lack of experience, risk of the poor reaction and acceptance of the buying market, risk of the unknown infrastructure development to support the construction growth. Today, investors have first hand, regional real estate history data. The market absorption and projections are based more on historical facts and data rather than a guessing game or correlating future results based on similar marketplaces from other regions. Risks within investment alternatives can also be managed with the assistance of a well chosen team of regional experts. Purchasing finished products, versus the unknown results of investing within a new construction might be an example of strategies to take advantage of the current market conditions. These first hand facts and historical results give you and your consultant better data to manage your investments and increase your probabilities of strong returns.
The probabilities of continued long term growth are strong in favor of the real estate investor when purchasing properties in the Riviera Maya. Obviously there is a short term downturn. But as this article discusses, if you are able to surround yourself with TOP-knowledge and experienced advice, the summer of 2009 can present some incredible and unique real estate opportunities. For those who missed the appreciation wave of the early 2000s, this is your “Second Chance” to enter into the market before the next wave.
