USD-MXN Parity – Part II: Impact on Vallarta · Nayarit Real Estate

The first part of this special article addressed the general factors that are behind the appreciation of the Mexican peso against the US dollar, which has been in a strong position against some other currencies.

In this second part, the Vallarta Real Estate Guide editorial team had the opportunity to talk with three real estate professionals in Puerto Vallarta and Riviera Nayarit to explore how this parity is impacting their activities and strategies.

The voices of José Luis Niño, developer partner at Playa Lifestyle, Claudia Rodríguez, master broker of the V Bucerias Beachfront Condominiums project, and Alexis Silva, director of SB Realtors, shed light on the changing dynamics of the local market.

ADAPTATION AND MITIGATION STRATEGIES

With six years of experience in the sector, José Luis Niño, partner at the development firm Playa Lifestyle, shared his observations on the effect of parity on his real estate projects. This Vallarta company, known for having developed, completed, and delivered Urban I and Urban II, is currently in the last phases of construction of Las Verandas de Amapas and Esquina Versalles.

The appreciation of the Mexican peso in relation to the dollar has left its mark on the market. José Luis Niño pointed out that the transition to the listing of units in Mexican pesos is evident in current price lists. However, for Playa Lifestyle, parity has presented challenges. “We sold in dollars, and we are receiving payments in that currency, however, the expenses that we need to cover the development of our projects are in pesos, which is resulting in a decreased average of 10 percent in ongoing revenue.”

Given this scenario, Playa Lifestyle has adopted strategies to mitigate the impact, one of which involves the investment of dollars to generate returns. “Taking advantage of the fact that the current financial instruments exist to do it, we are trying to take advantage of this. On the other hand, we are optimizing the management and efficiency of work as much as possible.”

José Luis Niño highlighted that this affectation varies according to the stage of development in which each project is found, since the units that were pre-sold before the peso began to appreciate still maintain their original prices values.

PROFESSIONALIZATION AND CHANGE OF PREFERENCES

With eight years of experience in the real estate market of Puerto Vallarta and Riviera Nayarit, Claudia Rodríguez, master broker at V Bucerias Beachfront Condominiums project, highlights the growing need for professionalization in the sector. The demand for more innovation in selling strategies are evident to both agents and developers.

Claudia Rodríguez emphasizes that parity has caused a change in the preferences of buyers. “I have noticed prudent behavior on the part of foreigners, who used to see prices in US dollars, whereas now they see that many properties are listed in Mexican pesos. This automatically makes them need more dollars to buy pesos. By contrast, Mexicans have a different motivation because they still see properties listed in dollars and this gives them a great advantage—being able to buy a unit in dollars and pay their monthly payments at the exchange rate published in the Official Journal of the Federation. On the other hand, if you buy a unit listed in pesos, even when the dollar is fluctuating, your monthly payment will be fixed in pesos.”

Claudia Rodríguez comments that both Puerto Vallarta and Riviera Nayarit are enjoying a real estate boom that is attracting buyers from countries such as Switzerland, Brazil, Taiwan and the Netherlands. “This reflects the growing internationalization of our destination, where the interest of investors from all parts of the world is increasing. At the same time, the national market continues to come from cities like Guadalajara, Monterrey, CDMX, the area of El Bajío and San Luis Potosí.”

In response to the impact that this currency parity has had on real estate in our destination, AMPI Vallarta · Nayarit’s Flex MLS system has recently added the option to include the prices of a property in US dollars and/or Mexican pesos.

ADAPTATION AND POSITIVE PERSPECTIVES

Alexis Silva, director of SB Realtors, brings his view on how parity affects foreign investors and the market in general. “The appreciation of the peso has generated doubts in US investors, somewhat reducing the attractiveness of buying a property in Mexico. The increase in the price of properties, driven by a 14 percent currency fluctuation in the last year, has created an atmosphere of great reflection in buyers.”

Alexis Silva highlights that the oversupply of inventory in areas such as the Romantic Zone, Versalles and Bucerías, together with the interaction of factors such as inflation and mortgage interest, has generated a deeper evaluation process from US buyers. To mitigate the impact, SB Realtors has promoted innovative payment strategies in the developments with which he collaborates. “The first has been to activate Mexican mortgage loans for Mexicans. The second has been to promote the financing offered by developers so that foreigners have payment terms that are longer than the delivery times of the unit, with an interest rate equal to that of the United States, and the third has been to offer a low-down payment—compared to a mortgage loan—in projects that are payable during the construction phase.”

“If a Mexican buyer is thinking of investing in a property on the beach, this is a great opportunity, because even if they get a discount on pre-construction, if the price is listed in dollars, they will get an additional monetary discount caused by the fluctuation.”

PREDICTIONS AND PROJECTIONS

The perspectives of José Luis Niño, Claudia Rodríguez and Alexis Silva reflect the complexity of the dollar parity in the real estate markets of Puerto Vallarta and Riviera Nayarit. While developers seek strategies to maintain profitability and real estate agents observe changes in the preferences of foreign and domestic buyers, it is clear that adaptation and innovation are essential in this changing environment.

“Historically, the people who have opted to invest in our destination have cared about the community and sought to enrich it, and I think this will continue for another five to seven years. Lots of improvements are coming such as the expansion of the airport, the upcoming completion of the highway between Guadalajara and Puerto Vallarta, and the implementation of all the investment that Grupo Vidanta is making. All this is not only attractive for visitors, but also for those who are looking to invest in the bay, which is one of the safest areas in all of Mexico”, concludes Alexis Silva.

“In relation to this, I would like to mention a couple of factors that are influencing the final decision of a buyer. A lot has to do with the lifestyle they have or aspires to have. On the other hand, if it is solely based on money, then they may look for a project facing the ocean and/or with a very good location because it is a safe option that will generate capital gains in the short term”, concludes Claudia Rodríguez.

“What I see is that this currency parity situation is somewhat fictitious and is not going to endure in the long run—really, I don’t think Mexico’s economy is doing so well for us to be like this. That said, one of my predictions for the following months is that the dollar will close the year with an upward trend and will be between 18 and 20 pesos, because I feel that this is its real value”, concludes José Luis Niño.