In the last few years, Mexico’s reputation has taken a downward turn as stories of drug cartels, a corrupt police force and sky-high homicide rates are splashed across the media. However, discarding Mexico as an unsafe, crime-ridden destination because of these reports would be like writing-off the entire United States because of high crime rates in Detroit or New Orleans. Yes, some parts of Mexico are unsafe for foreigners and should be avoided, but most of the country is still perfectly safe for visitors and expats and definitely worth considering in terms of long-term real estate investment.
I recently spoke to Javier Noguera (www.alegranza.com.mx; www.alegranzavacations.com), a property develeloper in Los Cabos, who shared his expert knowledge about the Cabos real estate market, the Mexico safety situation and the overall economic picture in Baja California Sur.
Everyone knows that the real estate market in the U.S took a serious beating over the last two years. How is Cabo’s market faring? Cabo’s market has not avoided what happened in the world, but has some particularities that has protected it from major danger. First of all, Cabo never had an over offer of product. It’s not like some parts of Florida, Nevada or California where you have millions of dollars in inventory pending to be sold. Less competition has kept the market a bit away from massive price reduction. Secondly, there are no foreclosures. Only 2 % of the real estate market is leveraged or has a mortgage. Therefore, there are not as many desperate owners trying to sell and as many foreclosures, which brings the market down. Cabos’ properties have reduced an average of 7-10% and the market touched its bottom several months ago. If you are thinking on buying property in Los Cabos, this will would probably be the best time in decades.
How would you describe the overall economic situation in Cabo? Cabo suffered last year from bad U.S Media because of reports of swine flu, which reduced tourism enormously despite the fact that there were zero cases in town. Security on the border also affects Cabo, even though we are 1,000 miles away and we have the lowest crime rate in all the Americas. Then there is the overall economic situation. Cabo has taken a year to recover and has overcome its major challenges as restaurants and tourist services reopen, and roads, bridges and hotel infrastructure improves. Fifty percent of the room bookings at any hotel in Los Cabos was coming from “incentive groups,” most of them paid by U.S corporations for tax deduction purposes, bonuses to employees and motivational trips. U.S corporations hardly made any profits in 2009 so they did not have to spend their money to reduce tax payments. That eliminated half of the market in room bookings. The positive news is that U.S corporations did get profits again in 2010 so this 50% of the market is coming back
What do you see as the long-term real estate and economic repercussions on the Mexican market and economy, if any, as a result of the U.S. crisis? Forty-five percent of the tourist real estate purchases above U.S$150.000 used to come from the U.S, with 45% from Canada and the remaining 10% from the Mexican mainland. So there is a clear dependence. The important thing that I see is that there are thousands of semi-retirees willing to change their lives and move to Mexico, where the cost of living is much lower and property taxes and monthly fees are 20 times lower, along with better service and better weather
Are most foreigners in Cabo “snowbirds” or year round residents? What kind of resources, activities and benefits does Cabo offer a foreigner? We receive both, with more full-time residents every year: Lawyers, doctors, architects, financial people, consultants, entrepreneurs are the people that moved for a while and ended up staying full time. They can participate in any outdoor activity they want, such as surfing, sailing, fishing, diving –we do have the second largest reef in the Paficic after Hawaii—as well as golfing, mountain biking, hiking, shopping, fine dining or just lying on the beach! There are about 60 direct flights a day from any major US city, Canada or mainland Mexico
Why do you think that Americans, Canadians, and Europeans would want to move to Cabo? As of today 100.000 foreigners own property in Los Cabos and the reason has been a mix of things:
- The best weather in the world: Dry, no humidity, never rains
- Security: 100% safe
- Cost of living (less than in their home towns), really low property taxes, food and service
- Great beaches, golfing, infrastructure and nice people
- Distance from home: from 2 flight from San Diego, 3 from Dallas, 4:30 from Ny, Calgary, Vancouver
Many individuals thinking about visiting or moving to Mexico are scared off by the country’s safety reputation. What can you tell me about the safety situation in Cabo? Does Cabo take any special precautions to protect expats and foreign visitors? Cabo is surrounded by twp oceans, the Sea of Cortez and the Pacific and we belong to the Baja California Sur State, which is almost as big as Italy but with less than one million people. As a high end tourist destination, our San Jose del Cabo airport receives the largest percentage of private planes vs. commercial planes in Latin America. We have three hotels in less than 20 miles distance whose average rate is US$800 a night. We have multimillionaire houses and resorts. Those who know Cabo and its past are not afraid since they have experienced it and they know there is no crime. The problem is those who have never been in Los Cabos, but once they fly in, they find out and don’t have a problem. There is no need for special protection because there is no risk or danger. You can walk outside at 5am in the morning and nothing will happen. Can you do that in LA or NY? San Jose Costa Rica? Panama City? There is a U.S and Canadian consulate in town and people can even live here without speaking Spanish
As Mexico gets more negative press in the media, are you finding it harder to “sell” Cabo? How do you deal with these challenges? What are some of the common stereotypes you have to deal with? Certainly, media is a key part in the name and reputation for Los Cabos, and Mexico as a country needs to change this. It is very unfair to be living in this paradise, with extremely low (or nonexistent) crime and full security, great beaches, two marinas, eleven top 100 golf courses, the best fishing in the world , nice hotels and resorts providing great service and suffer from Mexico’s poor safety reputation. We are very isolated from the mainland and anything happening in Mexico. We receive pop stars and VIPs staying in our beautiful hotels and enjoying our great weather every week.
I remember a couple from San Francisco calling me when all this swine flu happened telling me that they were praying for me and my family while I was holding a beer in my terrace overlooking the whole San Jose Bay and observing the boats coming in an out of the marina. I told them, “You better pray for you since you have swine flu cases there.” And there was a guy from Houston that saw that 40 people were killed in Tamaulipas on TV. I told him that this was less than 100 miles from his home town in Houston and 3,000 miles from Cabo! It’s all about education. Every single person working in this industry must contribute a bit, from the federal Government to the smallest entities working for tourists. U.S Media is a way to protect some private US interests that try to avoid money going to Mexico. People must know that Mexico is almost as big as the U.S; if there is a hurricane warning in Florida, people from California don’t have to be affected by tourism. Only a few people geographically understand the different parts of Mexico and most just treat it as a whole.
Can you tell me a little bit about your projects and what you do exactly? What market do you cater to? How long have you been doing what you do? In 2006 we decided to develop a nice property in San Jose del Cabo and we completed a nice gated community resort called Alegranza (www.alegranza.com.mx). The resort has 95 units and 90% of the project is sold. There are three heated saline water pools, Jacuzzis, fire pits, saunas, fully equipped gym, nice restaurant with room service, putting green lighted tennis court, concierge, BBQ areas, Sky TV ,wireless internet and preferred rates on many activities in town. Our prices range from $500,000 to $900, 000 U.S dollars and our units are from 2,000 sq.ft to 3,200 sq.ft. People remember us for our views, probably the best ocean views in town, our location, walking distance from everywhere, quality finishes, privacy and the right amenities. We also manage the rentals, so our owners actually get some revenue from rentals while they don’t make use of their units. So we also operate as if we were a hotel, but with the feeling of a home. Forty-five percent of my owners are from Alberta or British Columbia and the other 45% are from the U.S, mostly Colorado, California, Texas, and Montana. The remaining 10% are either from Mexico or Europe. This is the first project we’ve completed in Mexico but my family has been developing in my home country of Spain since the 1950’s.