Activity dropped significantly in third quarter of this year for the Puerto Vallarta and Riviera Nayarit real estate markets. Sales volume was down 30% compared to the previous quarter and down 20% compared to the third quarter of 2021. Although Realtors report that activity has slowed down, much of this drop they say can be attributed to the fact that inventory levels are at historically low levels – there’s demand but not enough supply of properties on the market. They report having lists of clients interested in buying, when the right property comes on the market. Some of this needed inventory will be provided by the many real estate developments that are currently under construction.
But going forward, there is also concern about the real estate slowdown currently taking place both in the United States and Canada. Equity in primary homes in these markets is what has traditionally provided the funds needed to buy a second home in Mexico where mortgage rates can be quite high. Many properties are bought in Vallarta, at least in the low-to-middle price range, with cash from refinanced properties back home. But with rates now rising north of the border, many markets are experiencing a slowdown in activity and falling prices.
Grupo Aeroportuario del Pacífico (GAP), recently announced that construction of a new terminal building at the Puerto Vallarta International Airport would soon begin. The terminal would be more than 68,000 square meters in size, take two years to build, and would increase the overall airport size by 150 percent. 11 to 19 new boarding bridges would be added, as well as 9 to 16 remote boarding gates, and would be able to handle 4.5 million passengers per year.
It will also be the first Zero Energy airport terminal in Latin America. This will be achieved over 7.5 years and would include the use of solar panels on the roof of the building, (which would lower energy consumption by 40 percent compared to other airports with the same characteristics), and the efficient use of water through the reuse of 100 percent of the gray, black and blue water generated inside and outside the terminal, reducing water consumption by 35 percent.
In other airport news, as of August 1 of this year, as part of the strategies implemented by the National Migration Institute (INM), the airport no longer will require the Multiple Migratory Format (FMM) form. Visitors from the United States and Canada will only have to show their passports, and customs officers will stamp them and automatically grant permission to stay in the country (for how long has not yet been clarified). This will reduce the time of entry, preventing a procedure that took up considerable time for visitors in the past. Currently, the Puerto Vallarta International Airport has around 20 migration agents and 14 filters, which speeds up the process with this new format implemented in the air terminal. Puerto Vallarta has received over 1 million passengers from international markets so far this year.
Real estate sales in Puerto Vallarta and Riviera Nayarit continue to be strong with the second quarter posting a record number of sales (over 500) with volume exceeding $215 million. Halfway through the year sales numbers are currently up 40% over the same period last year. Volume is more than four times what it was just three years ago. Is this sustainable?
This biggest indicator of a cooling down in a real estate market is a rise in inventory. More properties are remaining on the market because of a lack of demand, as additional properties are added from people who want/need to sell. For at least the last year the Vallarta/Riviera Nayarit region has suffered from the opposite – a lack of properties. Real estate agents express that they have a list of prospective buyers who want to buy but can’t find what they want in the current inventory. In other words, the market is lacking sufficient inventory.
Inventory levels remain low with little change reported. Some realtors have expressed that the markets seems to have cooled off somewhat. Interest in real estate in the region peaked in the month of January of this year at its highest level ever, according to MLSVallarta. The number of people visiting the real estate site has since then dropped off. This is something that usually happens during the summer months, less interest is shown, but the drop has been more dramatic this year compared to previous years. This will be another trend to follow carefully.
Another trend to follow is what’s going on in the USA and Canadian real estate markets. What happens north of the border usually follows in Mexico. And over the past few months there’s been increasing talk of a recession on the horizon. The National Association of Realtors reports that the national inventory level is up 18.7% over last year, with the largest increase in the data’s history happening in June. As well its housing-affordability index fell to 102.5, prompting more buyers to give up and pressuring sellers to cut asking prices. Zillow reports that nationwide inventory levels rose 10% between March 26 and May 7. Canada is experiencing inventory increases with CREA reporting the number of newly listed properties was up 4.5% in May while home sales fell by 8.6% on a month-over-month basis. And the MLS Home Price Index edged down 0.8% month-over-month. This comes, however, after a few years where inventory levels have been substantially down, driven so during the pandemic which saw a surge in home buying. So this may just be a correction providing a more balanced market. Or it may not.
Home mortgage rates have nearly doubled in the US and Canada since December, now at nearly 6%. As the Fed continues to raise rates, so too will mortgage rates go up. Traditionally Vallarta’s real estate sales are paid for in cash with little mortgage financing available in Mexico and that which is available can be expensive. People have found it easier to refinance their primary property back home and use the funds to buy a second home south of the border, especially with the appreciation their homes have seen over the past few ears. With rates rising, however, and potentially a softening the market, refinancing will become more difficult as will the amount homeowners will be able to refinance.
Another source of funding for prospective Vallarta homebuyers has been from gains accumulated from the stock market. But markets are currently down substantially, meaning less profits to take out and leaving people more hesitant to do so.
A continuing positive trend is that the national market continues to be a strong player in Puerto Vallarta & Riviera Nayarit. Mexicans, primarily from Guadalajara and Guanajuato, are investing not only in the second home market, but also investing in order to hold assets in US dollars. This region is one of the few in Mexico where real estate is priced in dollars. There has also been an increase in workers moving to the region to work remotely, leaving the cities to live a life at the beach while still working for their same companies.
Two other trends are worth noting.
50-60% of the local market demand has traditionally been for two-bedroom condominiums. And as the chart show below prices having been rising, from $255,000 just 18 months ago to $355,000 in this past quarter . This has taken place even though there has been a fresh supply of lower-priced units available in now popular areas such as Versalles, Diaz Ordaz, Fluvial and Pitillal – or the zone behind the Hotel Zone.
Last year the most popular neighborhoods were Central South, (downtown and south of the Rio Cuale), followed by the Nuevo Vallarta and the Hotel Zone. This year is similar with Central South leading, but barely, with the area situation behind the Hotel Zone (known as Rio Pitillal Sur or Francisco Villa West) showing nearly as many sales as Central South. This area, in between Highway #200 that runs by the Hotel Zone, and Francisco Villa that meets up with #200 and runs through to the Pitillal River, is becoming increasingly popular. Moderately-priced condominium towers are going up, attracting restaurants and boutique shops to service the new homeowners.
The statistics featured here are for sales that have taken place in the Puerto Vallarta and Riviera Nayarit region. This region stretches from El Tuito near the southern end of the Bay of Banderas but inland, including all the communities along the Bay of Banderas and the small coastal towns situated on the northern coast of Riviera Nayarit such as Sayulita, San Pancho and others. The only except is Punta Mita, which is a market of its own and most sales are not included in the regional MLS services. It consists of high-end, upscale properties and is somewhat isolated from the rest of the local real estate market. Its sales numbers are not reflected in these results.
Real estate sales in Puerto Vallarta and Riviera Nayarit were off to a strong start in the first quarter of this year, with $180 million reported in sales. That is up over 60% over the first quarter of last year, 2021. And it comes very close to matching the region’s best quarter ever in the third quarter of last year. Sales dropped off by 10% in the last quarter of last year, but this quarter shows the market is still going strong.
There may be some headwinds coming up, however. Not because of a lack of demand but because of supply. There simply aren’t enough properties currently on the market for the number of people looking, especially for existing properties. MLS inventories are down over 30% from their highs just a few years ago. There’s plenty of new units currently under construction, but that involves a waiting period for when the property will finally be available to move in. So realtors are building lists of buyers waiting for something new to come on the market for them while many developments currently under construction are selling out before they are even finished.
Last year the most popular neighborhoods were Central South, (downtown and south of the Rio Cuale), followed by the Hotel Zone, Nuevo Vallarta/Flamingos, the South Shore and Bucerias. This year is similar with Central South leading, but with Nuevo Vallarta moving up a notch, the Hotel Zone down one, and both Bucerias and Marina Vallarta up in the top five.
Point 2 recently released their analysis for the top destinations for Americans looking to buy abroad, and Mexico came out on top. A big move as back in 2015 it wasn’t even in the top three most-desirable locations. They came to this conclusion by analyzing what countries and destinations had the most searches on their website.
Within Mexico Puerto Vallarta came up as the most-searched destination, beating out second-place San Miguel de Allende with 50% more Google searches. Cabo San Lucas came in third place. They write Puerto Vallarta is a “superlative city (that) has all the lovely beaches, narrow streets, and colorful house fronts that anyone could wish for.”
Some other key takeaways:
Mexico and Canada remain the most popular destinations in which to buy a second home in the Americas.
Puerto Rico — the third-most sought-after location in 2018 — dropped to number four, switching places with Costa Rica.
Newcomer Honduras kicked Jamaica out of the top 10 most-desirable locations.
New countries to enter top 30 include: El Salvador, Grenada, Anguilla, and Peru.
There’s no question about it, Puerto Vallarta and Riviera Nayarit just finished up 2021 with a banner year, up more than 60% over the previous year. Sure, 2020 was hampered by covid, but it was still a pretty decent year. Whatever was lost in 2020 because of covid, as the chart below shows, was more than made up for in 2021, which outperformed even the trend line. This shows the gross volume of sales for the Puerto Vallarta/Riviera Nayarit region.
MLSVallarta, along with the assistance of a few FLEX MLS members, compiled the following data and charts regarding real estate sales for the Puerto Vallarta and Riviera Nayarit. The two regions, encompassing two different states and therefore with separate marketing and branding, are looked upon by the local real estate associations as one destination. Traditionally Puerto Vallarta has been the larger market with 70% of all sales in 2017. But that continued to drop to where it was responsible for just 63% of all sales in 2021.
With regards to sales volume, it has gone up by nearly 230%, from just under $400 million in 2017 to $615 million in 2021. Note: although the peso is the national currency of Mexico, the majority real estate here has been priced and sold in US dollars for quite some time. And as the market activity has increased, inventory levels have tried to keep up with numerous new projects in development, but currently demand is stronger than supply. Because of this the spread between listing price and selling price has narrowed. In 2017 the difference was 10%, but in 2021 in was down to 7%.
And as demand supersedes supply, prices go up. Today there are less properties available under $100,000 with the hottest range between $250-$500,000. But it is still a relatively inexpensive real estate tourism destination with 85% of sales under $500,000, and it has basically remained that way since 2017.
If we focus just on condominiums (which make up about 85% of the market), the average condo has gone up 25% over this period of time, as shown in the graph below.
And if we limit our analysis to just two-bedroom condominiums (which make up about 50% of the sold inventory), they have gone up just over 20%.
Two-bedroom units, as mentioned, account for half the condos sold, and that number has been pretty consistent over the past five years, as it has for other types of condominiums. Studios make up about 5% of the market, one-bedroom units – 25%, three-bedroom units – 17%, and units with four or more bedrooms account for just 3% of sold inventory.
What has changed is the sale prices. Studios have gone up 25% over this period of time, but one-bedroom units have gone up 40%, three-bedroom – 23% while the large 4-plus-bedroom units have gone up 33%.
Regarding condominiums sizes, about a third of all condominiums sold were under 100m2, and another third ranged from 101-150m2. Condos from 151-200 m2 and over 200m2 evenly split the remaining one-third.
The following chart shows condominium inventory by price over time. Here we can see at the top, in green, that condominiums priced between $100,000 – $249,000, fell from having 47% in 2017 of the sold market to just 39% in 2021. Inventory for condos that sold for under $100,000 also fell, whereas condominiums prices between $250,000 and $499,000 rose from having just a third (33%) of all sales in 2017, to 42% in 2021. The other two price ranges rose as well, but to a much lesser degree.
This makes sense as with all prices rising, there is going to be less lower-priced units available to sell. What’s interesting is that much of the growth is centered around the $250,000 – $500,000 price range. This is the sweet spot. Puerto Vallarta and Riviera Nayarit, as mentioned previously, remain a region with relatively inexpensive pricing compared to other tourist/retirement regions. But it is slowly creeping up.
So where are all these condominiums situated that have been sold? We’ve been tracking the seven most popular regions over the past five years and they are: South Shore, Central South, Hotel Zone, Marina Vallarta, Nuevo Vallarta and Bucerias, along with the relatively new popular area Francisco Villa West, which includes Versalles and Fluvial, situated in between Francisco Villa and the Hotel Zone.
In 2017 these eight made up 85% of the sales of condos while in 2021 it was down to 72%. Some have dropped in number of sales, such as the South Shore that went from 14% down to 7%, and Central South which went from 22% of sales to just 14% (although it is still the most popular area). Marina Vallarta actually increased from 4% to 6% and we can see that from the number of condominium projects that have gone up here in the past few years.
If we limit our study to just four of the most popular regions (they have remained in the top four positions throughout the past five years), we find that in 2017 they accounted for 62% of all condominiums sales whereas in 2021 they accounted for only 42%.
So what’s happening? Well, a few things. First, the market is becoming more diversified, spreading out to the north into Riviera Nayarit but also behind Vallarta in areas such as Versalles and Pitillal. Three of the popular regions mentioned above are located within Puerto Vallarta while just one is in Riviera Nayarit. But Nayarit is becoming more and more popular, as previously mentioned, up 7% to now account for 30% of all sales in the PV/RN region. Nayarit has more beaches and accessible coastline, but most importantly, it has the room to grow – there’s more developable coastline in Riviera Nayarit than there is around Vallarta. Much of Vallarta’s south shore is not even accessible by road. And the portion that is, is mountainous, limiting development to some degree. In Puerto Vallarta developers are moving into neighborhoods such as Versalles and constructing condominium towers, something now seen before. But for developers who want to build on oceanfront land, more and more they are forced to go to Nayarit.
One final chart. This shows the average sales price for a condominium in the region since 2003. As you can see, prices climbed dramatically from 2003 to 2007. Prices then began to fall for the next ten years until 2017. To keep prices down developers that were building focuses on smaller units that were not oceanfront. But since then prices have been rising steadily once again.
Note: These numbers do not reflect the sales that have taken place in the Punta de Mita region, more specifically the development of Punta Mita. These sales for the most part are not reported in either MLS system, however, if they were, are estimated to be between $200-250 million. They have been purposely left out as numbers are not available for the past five years. As well, not all real estate developers are part of the MLS systems available so their numbers are not reflected here. For these reasons these graphs are intended more to show trends over time rather than actual volumes.
The seventh annual Travvy Awards recently took place at the Miami Beach Convention Center in Florida. The awards are voted on by travel advisors and recognize the best of the best in the travel industry. Receiving one of the Travvy statuettes is considered a top honor in the travel industry. This years’ winners included Puerto Vallarta and Riviera Nayarit in multiple categories:
People who come to Mexico for leisure or business visits and who are passport holders of one of the many countries which don’t require a visa to enter Mexico (such as the USA or Canada), can complete a Visitors permit, known as Forma Migratoria Multiple or FMM, at the port of entry, and stay in Mexico for up to 180 days.
The decision as to how many days are granted, however, remains at the discretion of the immigration official at the port of entry and the number of days granted (written) on the permit is the maximum time you are allowed to stay in Mexico: it will never exceed 180 days, but it may be less. You cannot have the number of days extended, and you cannot renew this permit. Visitor permits cannot be extended or renewed, so if your permit expires you’ll have to leave the country.
It seems that recently FMM is going after “perpetual visitors” – people who have been using the flexibility of the Visitor permit to continually return to Mexico and remain long-term and therefore avoiding having to apply for residency. Now some immigration officials have been checking the arrival records of people coming to Mexico and questioning their intentions.
If you’re just coming in for a short stay, this will not be a problem for you. But if you are staying longer make sure that the number of days written on the permit by the immigration official covers the full term of your stay. If you’re intending to be in Mexico long-term (more than 180 days), or doing so on a regular basis, it’s recommended you apply for residency in Mexico. If you are already in Mexico and have concerns or questions about an existing visitor permit, you should contact your local INM office for advice and guidance.
