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The results for the second quarter of this year shows gross sales for the Puerto Vallarta/Riviera Nayarit region real estate market was up by 14% over the first quarter of this year, marking three straight quarters of gains. Sales volume is now more in line with the historical trend line, as shown in blue below.

Interestingly, however, that gain was obtained with roughly the same number of sales as the previous quarter, meaning the average price per sale has increased significantly. In the first quarter the average sales price was $420,000 while in the second quarter it was $481,000, more than a 12% increase and posting the highest average sales price recorded to date.

What’s this all mean? That the market continues to be very tight with more demand for housing than there is supply. Another marker of a tight market is the difference between the list price and the sales price, which is traditionally between 8-10%. This difference has been steadily shrinking over the past year, showing a 4.5% list-to-sold price ratio for this current quarter. A review of sold prices shows that many are selling for what the property is listed for, and in some cases, for more.

In terms of which regions are the most popular according to number of sales, Nuevo Vallarta and Bucerias in Riviera Nayarit once again, as in the first quarter, took top honors. They were followed by Central Vallarta and the South Shore (between Vallarta and Boca de Tomatlán). The most economical region to purchase (lowest average sales price) continues to be behind the Hotel Zone, in areas such as Versalles, Fluvial and Las Gaviotas that have becoming increasingly more popular with buyers.

An interesting trend currently taking place is with regards to the strong value of the Mexican peso against the US dollar. At the end of March in 2020 the rate reached a high of nearly 25 pesos to the US dollar. Since then, for more than two years now, the peso has continued to appreciate in value, so that as of July of this year the exchange rate was under 17 pesos to the dollar, meaning the peso has appreciated more than 40% over the last 28 months.

This has had a profound affect on national buyers who bought into the Puerto Vallarta market primarily because real estate was priced in USD, as a way to hedge their pesos. With restrictions on USD accounts in Mexico, and increased difficulty of holding one in the US for Mexican Nationals, Vallarta’s real estate became a safe haven for them. For years this worked very well for national buyers. As an example, for someone who bought a property in Vallarta in pesos in 2010 would have seen the value of their property double in ten years, just because of the change rate, and the fact that real estate in Vallarta is sold in USD. However, for someone who may have bought a property in 2020 for US$100,000 but paid in pesos ($2.5 million pesos), if they sold it today for the same price in US dollars, they would receive back only $1.7 million pesos – a considerable drop in value. Fortunately, however, prices have appreciated over this time period, hopefully enough so that national buyers could recoup their original investment.

For American sellers, since the Mexican land registry registers properties in pesos, this has recently been an unforeseen gain for them. If they’d bought a property in 2020 for US$100,000, it would have been registered at $2.5 million pesos. But if they sold it today for US$150,000, realizing a US$50,000 gain, the sale would be registered in pesos at today’s exchange rate, which would be $2.55 million pesos, meaning it would show a gain of only $50,000 pesos. Long story short, they’d walk away with a US$50,000 gain and have paid little-to-nothing in capital gains taxes.

For many years this worked against American buyers. In some cases, they could end up having to pay capital gains taxes when they actually didn’t see a gain in USD terms. But today, at least over the past couple of years, the table has been turned around.

The US dollar is viewed internationally as a safe haven as it can protect asset values in times of recessions and market downturns. In the chart above you can see two times when the Mexican peso lost value quickly over the past 20 years; once during the 2007-2008 financial crisis and again during the Covid pandemic, which resulted in a recession, in 2020. So in times of trouble the Mexican peso has traditionally lost value extremely quickly. Since 2020 the markets have been relatively calm with stock markets seeing a slow rise in value. It will be interesting to see how the peso will react when there is the next (inevitible) market downturn.

The Puerto Vallarta/Riviera Nayarit region reported gross sales volume of $141 million for the first quarter of 2023, just slightly above the fourth quarter of ’22, but still more than 30% below the all-time high reached in the second quarter of last year with $205 million in sales. That increase in sales, though, was most likely the result of pent-up demand when buyers pulled back during covid. Although volume for the 1st quarter of this year is lower, it’s still above what was reported pre-covid, as the chart below shows.

The Vallarta/Nayarit continues to suffer from a lack of inventory, but  should return to a more balanced portfolio of properties as developers continue to build new products to add to existing inventory. 

The price of a two-bedroom condominium continues to rise, as the chart below reflects. This is a nearly 20% increase over the average price in 2022 and a 66% increase since 2017.

The region with the most activity with 19% of all sales was Nuevo Vallarta/Flamingos, followed by Bucerias, which accounted for a surprising 17% of sales (usually it is around 10%). The loser was the downtown region, Centro South, which dropped from a high of 23% of all sales in 2017, to just 11% in the first quarter of this year. Why’s that? There’s a few reasons. First, starting about 10 years ago, the first market area to recover from the 2008 real estate crash was the downtown, more specifically Central South. Developers could build condominiums off the beach but in the center of town for a reasonable price and offer very popular amenities such as rooftop pools and lounge areas that for many offered panoramic views. They helped lead the recovery in the marketplace. Secondly, in a downturn or recovering market, at least for the Vallarta/Nayarit region, people tend to want something close to the downtown core. As the market improves prices go up because of demand (The average sales price in Central South downtown last year was $452,000 whereas it was only $252,000 in Francisco Villa). Prospective buyers tend to then gravitate to outside areas where property prices aren’t as expensive. That’s what’s happening now, with increased demand outside of Vallarta into Nayarit, and especially behind Vallarta in the region referred to as Francisco Villa, which includes the neighborhoods of Versalles, Fluvial, and Las Gaviotas. This is reflected in the two graphs below:

Overall sales volume has dropped not so much because of demand, but because of supply. There isn’t enough good quality properties on the market for the number of people looking. So there’s good reason to think that prices will continue to go up until that demand can be met. 

2022 turned out to be another exceptional year for the local real estate industry performing slighting ahead of 2021 in terms of both dollar volume and number of sales. And there’s no better way to review how they year went than with charts, which always speak louder than words, and certainly can be more fun to explore.

After losing ground in 2020 to covid, sales rebounded robustly in 2021 and managed to keep it up into 2022.

On closer inspection, however, by reviewing sales volume by quarter we see the market has dropped considerably since mid’ year, as shown in the chart below.

And it doesn’t seem to be for lack of demand, but rather it’s a supply problem – there just aren’t as many people interested in selling as there are people wanting to buy, and new product development is having a hard time keeping up. Whenever inventory becomes scarce, it usually leads to a considerable difference between the listing or asking price, and the eventual agreed-upon sales price. Back in 2017, the spread was nearly ten percent. In 2022 it was less than five percent.

And although the average condominium sales price remained the same as in 2021, when we look at just two-bedroom units, we see they are continuing to get increasingly more expensive. Which, again, we’d expect when demand is greater than supply.

The two-bedroom condominium is by far the most popular type of condo preferred by buyers, holding 55% market share and has done so long as we’ve been providing statistics on the region. And the split has remained this way quite consistently over the years for all bedroom-unit types.

When considering the inventories of condominiums by price range, as shown below, the perceived trend is that real estate prices are getting more expensive. In 2022 there will only five condo reported sold for under $100,000 (in blue below). 

The most drastic changes we seen in price ranges lies between $100-$249,000 and $250-$500,000. The former used to make up nearly 45% of the market whereas the latter made up only 30%. In 2022 they reversed one another with condos between $250-$500,000 now making up 45% of the overall condo market. 

There’s been some interesting shifts in market regions as well. The downtown region, south of the Rio Cuale known ans Central South, has been dominating sales for years, but it has been dropping, from taking 23% of all condo sales in 2018 to just 16% in 2022. Where’s the growth to make up for this? Coming from a resurgent Marina Vallarta and Francisco Villa, the region between the Hotel Zone and Avenida Francisco Villa, also commonly known as Versalles, Gaviotas, Fluvial or Diaz Ordáz.

This increased demand for Francisco Villa is probably because of the average price per condo in this area, which is substantially below that of over popular regions, as shown below. 

Another trend, although a slower one, is the transition from a dominant Puerto Vallarta market to a much stronger Riviera Nayarit market. This has been going on for years and probably won’t be changing anytime soon as that’s where the land is – there just isn’t as much, especially beachfront, in Puerto Vallarta. And the South Shore is limited by the coastal mountains and the fact that most of it isn’t accessible by road. Riviera Nayarit is also much closer by road to primary national markets such as Guadalajara and the Bajio region.

Overall a very interesting year, setting up for what will most likely continue to be quite interesting moving into 2023 where there are rumors of recessions to the north, higher interest rates and slowing American and Canadian real estate markets – how will these conditions, if they continue to play out, affect the local market?

The following graphs are generated from information provided by members of MLSVallarta and FLEXMLS, two MLS systems operating and servicing the Puerto Vallarta – Riviera Nayarit regions. Missing from these numbers is Punta de Mita which is an upscale, market-unto-itself. Real Estate here is sold by a few agencies that tend to specialize in just this area, and report few of their sales. It is estimated, however, to generate sales volume somewhere around $200 million, or about 25-30% the size of the overall Vallarta/Nayarit market.