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Will there be an opportunity to laugh all the way to the bank?

By John Grasty

Real Estate Sales Representative with for real estate results in the Tri-Cities.

November 25, 2008 05:33 PM

As U.S. and Canadian real estate markets settle (slowly), resort destinations that offer wonderful new opportunities, including retirement living, are being explored.

Increasingly, "Boomers" who have more personal wealth than any previous generation are buying in Mexico. Because the demand comes mainly from these affluent buyers, the market doesn't seem to be affected by what is happening north of the border, at least based on what I observed and heard in another recent visit (my fourth this year) to Puerto Vallarta.

I don't have Canadian stats but according to an estimate by the U.S. State Department as many as one million U.S. citizens already live part-time or full-time in Mexico.

Tens of thousands of real estate purchases made each year in Mexico by Canadians and Americans are normally made in US$ dollars.

Due to the present economic situation and a U.S. government printing money at will, you may have heard a few speculations that that there will be a devaluation of the US$ in the next 18 to 24 months. One prediction for a currency crisis is that the US$ will lose between 60 & 90 percent of its value today.

I realize this is a hypothetical situation but in the case that something serious did happen what would the consequences be for someone purchasing property in Mexico using US$? How do you think the Mexican government would react? Would the US$ be dropped?

People who have just signed contracts (pre-sale) to purchase Mexican real estate in the future would have large US$ deposits being held in trust until the project is built.

What if the developer got cold feet and decided to refund your US$ deposit? If the dollar were to collapse before the building is complete how would the value of your US$ deposit be protected?

If the project is completed before a collapse and you have a US$ mortgage will an owner be laughing (all the way to the bank)?

I'd be interested in hearing other thoughts and economic theories...

John in Port Moody

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Asif Visram

Cowie and Fox - Vancouver, BC

Hi John,
Here is my twist !

You ask many good questions. Questions that even the most astute "In the Know" key people like the Sec treas.of the US Mr. Paulson does not have answers to at present.

However in the last few months we have seen a drastic major contraction in the economies throughout the world.

FACT: over the long term Real Estate outperforms all asset classes.

MEXICAN Vacation Real Estate is one of your best bets in this whipsaw market".

To address your currency Questions, it is more complicated to address in detail in this space.

The US $ has created all these problems and yet people are repatriating their currencies into the US $ which has caused such a rise in its value !

What is sure is that US sources indicate to date there is close to 3 Trillion us $ that have been printed (fiat dollars)

The intention is to clear the credit markets with these $$ which in turn is supposed to rebalance the Equity markets and create stabilization.

Regardless the 3 Trillion $$'s become a Huge inflationary factor, in the system which then brings into play your question on US $ devaluation. This will happen to what extent is anyone’s speculation at the moment.

As a Canadian $ currency, we do not have this scenario in our currency and our C$ has a strength in western Canada based on commodities and resources that at the moment are not in demand.

The speculation would be that the Canadian dollar will increase in value to the US$ in the next 12 mos.

Your hypothetical question which is a good one on purchasing US Mtg on Mexican RE, with Canadian currency .This will follow with very positive results making US $ mtg payments in Canadian dollars a pleasure with the devaluation scenario.

Because your contract is based in US$,if your developer decides to refund
your deposit (check the fine print in the contract) You will receive it in US $ whatever they may be worth at that time.

I hope this has been of some help trying to understand what is happening in this very unknown market we are all in.
Viva Mexico !

Asif Visram

DIRECTOR
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COWIE AND FOX INC.
#201, 1062 Homer St. Vancouver, BC Canada V6B 2W9

http://www.cowieandfox.com

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Nov 26, 2008 10:30 AM

John Grasty

for real estate results in the Tri-Cities. - Port Moody, BC

Your Tri-cities REALTOR, neighbour and volunteer.

Thanks Asif.

In the past 5 or 6 years I have seen a remarkable change in PV. Everyone seems to be employed and this last trip I saw no vagrancy or pan-handling.

I get the impression that Mexico is basically self-sufficient and can sustain relatively unaffected what is going on in the rest of the world.

With Starbucks, HSBC, Walmart, Home Depot, Costco, Scotiabank, Office Depot, and so much rapid growth, I suppose the writing is on the wall.

Do you have any thoughts or insights on how the Peso might fair?

Nov 27, 2008 05:35 PM

Will there be an opportunity to laugh all the way to the bank?

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John Grasty

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