One of the side-effects of the peso devaluation over the past few months has been felt in the real estate market nationwide. Trade advertising portals Propiedades and Lamudi say that the number of dollar denominated properties in 2016 skyrocketed by 97 percent over the 2015 figure.
Traditionally advertising in dollars only came in certain areas of the nation such as Baja California, and specific cities like San Miguel de Allende and Ajijic, but it seems that a new paradigm is to protect the value of properties and keep them in tune to the value of the dollar, not the peso.
In the Propiedades portal, the figure went from 3,300 properties that advertised in dollar denomination in 2015, up to 6,500 in 2016, marking a nearly 100 percent hike.
For many in the real estate business, the change came due to the “Trump scare,” but the reality it that the peso devalued badly during the Enrique Peña Nieto administration, given what many consider “economic uncertainties,” whatever that may mean to each of us.
But the very fact that during 2016 the peso lost 19 percent of its value is a good enough omen to property owners that even if the peso has stabilized at 20 to 21 pesos per dollar, the currency depreciation is bound to continue next year even if government economists claim a stability at current rates for the entire duration of 2017. But as you may have already figured out, government economists are always wrong.
El Financiero-Bloomberg daily newspaper published an interview Wednesday with Jaume Molet, director general of Lamudi Mexico, one of the top two real estate advertising portals in the web.
“The biggest fear now in the real estate sector is focused on the way in which Trump and the fall of the peso may affect construction, because in the long run this may provoke a backlog in new offerings which, in turn would translate into more expensive properties,” Molet says.
In fact, the backlog already exists, as for the first half of 2016 the Federal Mortgage Society reported that property prices rose over 8 percent, which is a sign that construction is not up to the demand.
But it is Leonardo González, analyst for Propiedades who outright says that the best way to protect a property from “financial uncertainty” (a new name for devaluation) is doing price fixing in dollars as a protection mechanism against the volatility of the peso.
The place where pricing properties in dollars has increased exponentially is Mexico City, particularly in the neighborhoods of Polanco and Chapultepec Heights — where properties are not cheap to begin with. The number of dollar-denominated property ads went up by as much as 22 percent in both portals. In the case of nearby neighborhood Bosques de Las Lomas the increase was by 32 percent.
Likewise the dollar is affecting nearby communities, such as Huixquilucan where now, according to the sources, close to 60 percent of all real estate transactions are carried out in dollars.
Demand for dollar-denominated properties is not general but aimed, says Lamudi’s Molet, “to a segment of buyers who have enough capital to demand housing that is up to their need and who look forward to real estate investments” for currency value security.
In both portals, the states with the largest number of properties sold in dollars are Guanajuato, which heads the list, followed by Baja California Sur, Baja California, Quintana Roo and Jalisco.
The devaluation has forced the price in dollars also to go up accordingly to the depreciation rate, which has pumped the price of houses and apartments by as much as 40 percent in a 19 percent devaluation environment. Add speculation to devaluation and it will give you a grand total in dollars.
The “dollarization” of the real estate industry is bound to continue as in terms of construction, all materials are bound to suffer yet another price hike come January. which in turn will be another blow against the Mexican peso.
Still, buying in dollars in Mexico is growingly a great bargain.
