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December 2010
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Real Estate Trends for 2011

A recent review of real estate trends as reported from around the world point to good news for those of us invested in or investing in Mexico.

Latin America is quickly becoming the darling of investors of all kinds, as they cast their eyes around the planet, looking for the next area of rapid growth. The Economist magazine reports that the region has 15% of the world’s oil reserves, some of the largest stocks of minerals, 25% of the world’s arable land, much of it untilled, and 30% of its fresh water (from this article on a hotel industry website).Door in Merida, Yucatan, Mexico

The article goes on to say that many Latin American countries are actively embracing globalization, led by Brazil and Mexico… those two countries alone account for 65% of Latin America’s GDP. The hotel industry article points out that Mexico alone has over 110 new large hotel projects breaking ground in 2011.

A trio of real estate investment researchers from Price Waterhouse Cooper (PwC) in New York and London also report that Brazil and Mexico are two emerging real estate markets with enormous potential. “Where the US has gone boom-bust and Canada offers only modest growth, Latin America’s story centres on the enormous potential of two emerging markets – Brazil and Mexico. Together they account for two-thirds of the region’s population and most of its growth dynamics.”

While acknowledging that investors have concerns about the violence associated with the Drug War in Mexico and the corruption associated with the politicians there as well, the triple benefits of a hard-working population, a growing middle class and an increasing demand for homes and consumer goods bodes well for the future of real estate in the country. Mexicans have not over-borrowed or over-built, like their American counterparts, so there is still a demand for capital and for development.

The violence issue is always painted with a large brush in the US and International media, but as we know and as has been acknowledged publicly, the Yucatan is one of the safest places to be in Mexico. Not only that, a recent article in USA Today states that the safety record of the Yucatan compares its 2009 murder rate with that of Wyoming and Montana:

“The state with the lowest murder rate is Yucatán, the Gulf of Mexico state known for its beaches and Mayan ruins. Its murder rate of 2 per 100,000 was comparable to Wyoming and Montana.”

The Price Waterhouse Cooper analysts quote a survey of more than 1,000 leading real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants.

“There’s a large hole to fill, especially for construction loans. New laws allow domestic pension funds to invest in real estate and infrastructure, which could increase property market liquidity and demand for product. We’re seeing the chequebook at the end of the tunnel.”

Even though the downturn in the US economy has definitely hurt Mexico, there are some ways that it has helped as well. More US manufacturers have relocated to Mexico recently, helped by the downturn in the Mexican peso. Retail is definitely on the rise here, as members of that growing middle class strive to live just like their American counterparts (the ecological impact of this phenomenon is another discussion…). There is a huge population of Mexicans with disposable income who don’t have a TV in every room or a car for every driver, so the potential is tremendous. And of course a growing economy also means a growing demand for real estate.

In a recent interview, Carlos Slim, the richest man in the world, told the reporter that he will be focusing on two aspects of his holdings in the year to come: mining and real estate. Mexico’s stock market hit an all time high early in December of this year. These signs and more point to a growing real estate market in the next year, even if the United States’ economy does not significantly improve.