Have you thought about real estate in Mexico as a strategy against these difficult times? During inflation, during exchange rate adjustments, what is the best strategy for Mexico real estate? Let’s see what happens with a strong USD and Mexico real estate.
Exchange rate adjustments
When comparing two different countries with two different currencies, the effect of inflation on the exchange rate is to strengthen one currency and weaken the currency with the highest inflation. If you stop and think about it, the logic is simple. We all know that inflation is the rise of prices, which means that your 1 unit of currency is buying fewer products. Products include foreign currencies. It costs more money to buy foreign currencies. So the currency that is facing the most considerable inflation rates will be that currency that falls in value.
There are several other factors that put pressure on the exchange rates, not just inflation, so each currency exchange needs its proper evaluation.
Strong USD vs weak MXN
At the writing of this article, the USD has strengthened sharply against many foreign currencies. Such as the Euro, which is now trading at par, 1 USD is roughly about 1 Euro. This circumstance has not occurred since the early 2000s. The exchange rate was approximately 1.20 USD to purchase 1 Euro last month. The USD has been gaining strength against the Yen, and many other currencies, including the Mexican peso.
A strong USD is advantageous to Americans who are in the process of buying Mexican real estate when they have negotiated prices in pesos. For example, suppose you established your final real estate payment to be paid at 1,000,000 Mexican pesos for the 15th of July. Then, on the 15th of May, let’s say the exchange rate was 19 Mexican pesos per USD. In your calculations, you were preparing to pay USD 52,631. However, now with a gaining exchange rate reaching 21 Mexican pesos per USD, with a strong USD, you only need to send the amount of USD 47,619 south. You just saved USD 5,000. Your other expenses also decrease for additional savings.
What history taught us
Historically speaking, the USD has gained ground consistently over the past ten years. Obviously, the rates are not on a straight line appreciation year after year, but when you take a bird’s-eye view over the past 10 or 20 years, the overall trend is a growing strengthening of the USD. For this reason, you will find that many Americans and Canadians choose to retire to Mexico when the cost of living becomes an obstacle.
Suppose an American couple is earning a monthly USD income and are living in a country where all their expenses are in Mexican pesos. In that case, their wealth, if all consumption quantities remain constant, will actually be increasing.
So investing and retiring to Mexico is not all about the beautiful weather and the gorgeous beaches. When purchasing real estate in Mexico, many Americans and Canadians have a financial and retirement plan under work as well.
Contact one of our Top Mexico Real Estate Representatives to know more about investing in Mexico Real Estate. And remember…We make it happen!