PUERTO VALLARTA (PVDN) – Dollar Down, Peso Up! Unleash the Inside Scoop on How Mexico’s Real Estate Market is Set to Flip the Script on Property Pricing – Is the pricing of real estate in dollars finally coming to an end?
A Monterrey-based startup, Doorvel, has unveiled a comprehensive market analysis that predicts a possible slowdown in dollarizing home prices, contingent upon a sustained strength of the peso against the dollar throughout 2023. According to Doorvel, dollarization of the real estate sector is mainly seen in popular tourist hotspots like Los Cabos, Baja California; Puerto Vallarta, Jalisco; Cancun, Quintana Roo; and Merida, Yucatan. This phenomenon also extends to luxury real estate markets in cities like Guadalajara, Jalisco; Monterrey, Nuevo León, and Mexico City. So how does this impact the USD pricing trends on real estate in Mexico, according to Doorvel?
And what does it mean for buyers? The report further highlights that transactions involving cash payments are more likely to feature dollarization than those conducted with credit. It suggests that sellers often prefer to lower real estate costs and receive dollars instead of pesos in mortgage loans. However, with the dollar experiencing a decline of over 15% in recent months, selling properties in pesos could have its distinct advantages in the current economic landscape. The surge in the value of the peso could attract new local prospects who prefer to transact in the local currency. This does not necessarily imply that properties priced in dollars have depreciated by 15%, as the valuation is primarily determined by capital gains rather than the value of the currency. However, selling properties in a foreign currency can introduce a degree of price volatility.
According to the Doorvel study, owners are likely to face the downside when a property priced in dollars is settled in the local currency, subject to the prevailing exchange rate, as this could result in fewer pesos. Hence, offering the property in pesos could prove beneficial in the current context. The market analysis suggests that the trend of dollarized property pricing may pivot towards pesos, a shift that is expected to continue throughout the year. Although the peso has been performing well against the dollar, it is anticipated that the value of homes will likely increase as the US currency appreciates.
Quoting properties in dollars primarily caters to international markets, but this could sway the decision-making process for local buyers. Despite this, the study acknowledges that dollarization of properties has its advantages, including the potential to close transactions with foreign buyers boasting higher mortgage capacity, and better integration with the global real estate cycle. Amid global uncertainties and crises, investments in real estate, whether valued in dollars or pesos, can hedge against potential value losses in investment portfolios.
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Source: https://www.vallartadaily.com/peso-power-a-strong-peso-dollar-exchange-rate-could-shift-mexican-real-estate-pricing-trend/
