Property owners in Mexico are increasingly opting to value their real estate holdings using U.S. dollars (USD) instead of in pesos as a strategic move to protect properties from the peso’s depreciation against the dollar.
In fact, from January through September of 2016, the number of real estate advertisements in Mexico City that were written in dollars increased nearly six times over the number recorded during the same period last year, rising from 188 to 1,109, according to Propiedades.com.
"When there is a phenomenon of depreciation, pricing real estate in dollars instead of our national currency prevents loss of competitiveness and protects the appraised value of the real estate,” stated Leonardo Gonzalez, a real estate analyst at Propiedades.com “In addition, properties that are valued in pesos can lose their reference of value with respect to other properties internationally."
According to experts, in Mexico City, which is the capital of the country, this phenomenon is mainly seen in areas of upper middle-class or higher social status.
"When you see that many of the properties begin to sell in dollars, there is an uncertainty in the economy,” stated Ricardo Marentes,CEO of consulting firm Marhe. “Right now the global economic situation is still unstable, so people opt to guarantee the investment of their properties in dollars.”
This is also happening in tourist and residential areas,such as the many luxury condos for sale in Tulum, Puerto Aventuras, Playa del Carmen and other parts of Mexico’s Riviera Maya. In these areas, luxury, resort-style living is the norm, a reality that has made it one of the best places to move abroad and an area that is ripe for anyone who is interested in owning luxury condos and investing in Mexico real estate.
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“This year, nationwide real estate ads written in dollars represent about 20 percent of the total,which is 5 percentage points more than last year,” shared Ivan Flores, director of Coldwell Banker Vive.
In other parts of Mexico, such as Guadalajara,Monterrey,Tijuana,Cabo San Lucas and industrial areas of Queretaro, as well as some colonies in the Mexico City area (CDMX),such as Real de las Lomas, or San Bartolo Ameyalco (in the Alvaro Obregon delegation), he has also observed the phenomenon of valuing real estate in dollars. These areas are simply going along with the national trend,with up to 20 percent of real estate marketing done in USD,while in some parts of Santa Fe, nearly all real estate transactions now occur in the greenback, according to experts.
"In cases like Puebla where you can find very good products,and rapid growth is expected due to the opening of new auto plants,we saw about 1 percent of real estate ads in dollars at the end of the second quarter of 2016,” stated Claudia Velazquez, director of operations at Softec. “But with the arrival of more foreigners to the region,this could easily be increased. "
So far in 2016, the peso has depreciated more than 13 percent, and as of September 21 the Mexican currency hit record lows against the US currency, overcoming the barrier of 20 pesos per dollar.
In Polanco, Lomas Verdes, and Bosques de las Lomas (north of Mexico City), more than 60 percent of real estate transactions now occur in U.S. dollars.
Experts explained that due to the sliding exchange rate, properties priced in pesos lower their value against the dollar quoted. They estimate that the difference in prices from dollars to pesos can be up to 31 percent in neighborhoods like Polanco.
"If you want to enter the market for buying and selling real estate in Mexico, it is likely your best strategy to set the price in dollars as a hedging mechanism against international volatility, at least until the elections are held in the United States," Gonzalez added.
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