You Haven't Heard? Baja is Booming!

In the last 20 years, the value of Los Cabos coastal land has increased from $20 a square meter to over $2,000 a square meter (1 square meter equals approx. 10 square feet). The proximity of Baja to the U.S., and California in general, has triggered a booming real estate market with no end in sight. The Baja Peninsula, with its pristine blue skies, fresh air and sparkling turquoise waters, promises land investment opportunities unequaled in the U.S. since the 1950's.

A SUMMARY OF MARKET CONDITIONS AND TRENDS

Due primarily to strong demand from affluent U.S. second-home buyers, major resort and second-home destinations around the Sea of Cortez and along the Pacific Coast of Mexico have seen prices, sales volumes, and overall demand surge to record levels over the past several years. Second-home demand in these markets was only moderately strong in the early 2000's, but market conditions began improving in 2004 before surging dramatically in 2005.

2006 was also a strong year in most of these markets, with prices reaching all time record highs; however, sales volumes have remained fairly constant in most of these markets, with several even posting declines. Notably, though, market conditions in Los Cabos have remained stronger than in most other markets, with prices, absorption, and sales volumes continuing to increase.

Based on the results of recent assignments in Los Cabos, on the East Cape, in La Paz, in Loreto, in Puerto Peñasco, in San Carlos, in Mazatlan, in Puerto Vallarta, and in Manzanillo, it is estimated that total second-home sales (excluding timeshares, but including re-sales and developer-owned product) in Mexican oceanfront resort areas on this stretch of the Pacific Coast and around the Sea of Cortez jumped from approximately $1.3 billion in 2004, to about $1.85 billion in 2005, to about $2.03 billion during the 12-month period from September 2005 to September 2006. The vast majority of this volume – likely more than 80 percent – comes from U.S. buyers, with Canadians and Mexicans accounting for the remainder.

FIDEWHAT?

Property Ownership in Mexico

The changes in real estate ownership in Mexico have created the Baja boom. In 1971, President Luis Echeverría Alvarez wrote a presidential decree allowing Mexican banks to hold property in trust for foreigners. The Fideicomiso is the name for the Beneficial Trust, and you can consider it as safe as the deed to your home in the U.S. or Canada. As beneficiaries of a property, you have all the rights customary to full ownership. You may use, build, rent, will or sell the beneficial rights in the trust at anytime, conforming only to the general laws established for all people. The term of the Trust is 50 years, and it’s automatically renewable by law; in other words, the title to the property may rest in one beneficiary indefinitely, provided that it’s renewed within the terms established by the law.

Today, the availability of U.S. long-term financing, combined with U.S. Title Insurance, continues to have a profound impact on the market broadening the previous cash-only market. U.S. mortgage companies offer long-term financing using your Mexico property as collateral. U.S. Title Insurance is available on all eligible properties from, First American Title. Fidelity Global Solution and Stewart Guarantee Title.

Investing in Baja

In real estate, the three biggest factors determining success are said to be location, location, location.  While we very much believe in this, in today’s real estate market, the biggest factor determining return is timing.  At a time where the real estate market in the U.S. has cooled, slowed, stopped… all leading to depreciation, investors are seeking opportunities nearshore to invest or diversify their portfolio.  With over 30 million people in California, the Baja Peninsula and specifically the La Paz, Todos Santos and Los Barriles area promises to be the next generation boom that the Los Cabos area was 15 years ago.

Cabo San Lucas is the fastest growing resort area on the planet.  Growing at 17% annually, (according to Inegi, Mexico’s Statistics Agency), but it has definitely hit the pricey button with a single lot on the beach in Palmilla recently selling for over $8 Million.  In Cabo, a Home Depot and Costco were just opened and the 4 lane highway from San Jose Del Cabo to Cabo San Lucas is being extended from Cabo to La Paz.  This 3 year project will cause real estate on the coast adjacent to the new 4 lane highway to at least double if not triple furthering the growth of the towns mentioned above.

The El Patron Properties team believes that we are in the right place at the right time and properly positioned to facilitate you in your decision to invest here.