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Everything you need to know is included in our Mexico Property Pack
Are you thinking of investing in property in the land of Mariachi? Are you thinking about whether you should buy now or postpone until next year?
Market timing is a subject where everyone has their own take. The Mexican real estate agent you consulted might advise you to buy property now, whereas your relative who actually resides in Mexico City may suggest waiting for more favorable market conditions.
At TheLatinvestor, when we create articles or update our pack of documents related to the real estate market in Mexico, we believe that facts and data are more important than opinions and rumors, so we prioritize them.
We have carefully studied official reports and statistics from government websites, and we now have a trustworthy database with important information. Here's what we discovered, which can help you decide if it's a good idea to purchase real estate in Mexico.
Have a nice read!
How is the property market in Mexico these days?
Mexico is, today, a relatively stable country
Neutral
Stability should be the first thing you look at when you want to invest in real estate because it minimizes legal, regulatory, and political risks. It is an information you need as a foreigner who might buy a property in Mexico.
These days, Mexico is experiencing a notable degree of stability. The last Fragile State Index reported for this country is 70.3, which is an acceptable number.
Mexico has implemented economic reforms that have helped to increase its economic stability and has worked to decrease crime and violence in the country. Additionally, Mexico has strong diplomatic ties with other countries, which has helped to promote a more stable environment.
Let's examine other data now to see if it's the right moment to purchase property in this country.
Mexico will keep growing
Positive
Before buying a property, consider the state of the country's economy.
According to the IMF's estimations, Mexico will end 2023 with a growth rate of 1.8%, which is encouraging. Concerning 2024, we're talking 1.6%.
This steady growth might keep going since Mexico's economy is expected to increase by 8.3% during the next 5 years, resulting in an average GDP growth rate of 1.7%.
Projected moderate growth in Mexico is good for investors because it provides stability and predictability, making it easier to plan investments and manage risks. Additionally, moderate growth indicates a healthy and sustainable economy, which can lead to an increase in property values over time.
Nevertheless, there are other indicators to watch.
Mexican business owners have a more favorable view of the economy
Positive
How does the Mexican entrepreneurs perceive their economy? Relying solely on the GDP forecast is not enough. Luckily, in Mexico there is an official metric that is regularly reported. We're lucky because this isn't true for every country.
The Business Consumer Index (BCI) is a measure of business leaders' confidence in the current and future economic conditions. It's calculated through surveys and assessments.
According to the Instituto Nacional de Estadística y Geografía's data, the latest Business Confidence Index value is 7 for Mexico. It can be interpreted as a rather neutral score.
That's really encouraging and the trend is upward: the BCI score, 12 months ago, was at 5.
The current score of business confidence in Mexico alone doesn't provide enough information to determine whether it's the right time to invest in property in the country. Before making a decision, we need to consider additional data and factors.
Mexico's population is growing but getting poorer
Negative
When you buy real estate, it's crucial to think about population growth and GDP per capita, since:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Mexico, the average GDP per capita has changed by -3.6% over the last 5 years. It's not a good number. However, the Mexican population is growing (+4% in 5 years).
You'll get really good rental yields in Mexico
Positive
To determine if a property investment can generate profits, analyze the expected rental yields.
It's the annual rental income of a property divided by its price. For example, if a property in Mexico is purchased for 2,000,000 MXN and generates 100,000 MXN in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in Mexico offer gross rental yields ranging from 6.3% and 9.0%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Mexico.
Comparatively, the yields here surpass many other places.
Everything you need to know is included in our Mexico Property Pack
In Mexico, inflation is projected to increase
Positive
Inflation is when the prices of goods and services keep getting higher.
It's when your customary taco al pastor costs 25 Mexican pesos instead of 20 Mexican pesos a couple of years ago.
If you're contemplating investing in a property, high inflation can bring you several benefits:
- Property values tend to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby boosting cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
As per the IMF's forecasts, over the next 5 years, Mexico will have an inflation rate of 16.7%, which gives us an average yearly increase of 3.3%.
This data is telling us that Mexico is expected to experience inflation. If we look just at this signal, then it may be a good time to consider buying property. This could allow you to sell it later for a higher price and make a profit.
If you're a foreign investor, this criterion can be interesting.
over the past five years.
As a foreign investor, purchasing property in Mexico can be a good investment option as the high currency rate means the investor will get more value for their money. However, it is important to consider the potential risk of the currency rate dropping and the property losing value. It is also important to consider the long-term stability of the Mexican economy and the potential for the currency to appreciate over time.
Is it a good time to buy real estate in Mexico then?
Time to conclude !
Undoubtedly, 2024 presents a compelling opportunity for property investment in Mexico, supported by a series of favorable signals that point to a promising real estate market. With Mexico's projected sustained economic growth, property investment stands to benefit from the overall upward trajectory of the country's development. A growing economy typically generates increased demand for housing and real estate, contributing to potential appreciation of property values.
The optimism displayed by Mexican business owners toward the economy adds to the attractiveness of property investment. A more favorable business outlook often signifies a conducive environment for investments, suggesting that the real estate market could experience positive growth and increased demand in the near future.
Mexico offers the advantage of really good rental yields, making it an enticing prospect for property investors seeking consistent income streams. High rental yields indicate a strong potential for generating substantial returns from rental properties, enhancing the overall appeal of real estate investment in Mexico.
While inflation can sometimes raise concerns, the projection of increasing inflation in Mexico can be beneficial for property investors. Real estate is often seen as a hedge against inflation, as property values can appreciate in response to rising prices, potentially resulting in capital gains for investors.
Although there are some neutral and negative signals, such as relatively stable country conditions and concerns about the population's financial well-being, the combination of Mexico's growth potential, positive business sentiment, attractive rental yields, and the potential benefits of inflation make 2024 a strong year to consider property investment in Mexico.
We sincerely hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Mexico.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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