Baja California Development and Real Estate trends 2008
Here is a list of trends we perceive to be taking place in the Baja California Sur real estate market. Information is gathered through interviews with real estate agents and developers, then compiled and reviewed for trends. Each year, interestingly enough, brings new trends, which perhaps shouldn’t be surprising considering the activity Baja California Sur has experienced since 2002. What follows are the trends we consider to be the most prominent and important for 2008 - 2009.
US Real Estate Turn down – How Does This Affect Baja California Sur? What seems to be on the mind of everyone I’ve talked to is how the slow down north of the border will influence our local market. Many areas of the United States have been affected by a fall-out in key real estate markets, triggered by the abuse of sub-prime and other adjustable-rate mortgages. Borrowers either bought or refinanced homes with sub-prime loans that offered artificially low introductory rates. Now facing re-pricing, borrowers are experiencing their payments doubling or are having to pay off large balloon payments, just as their home’s value is declining.
So how is that affecting Baja California Sur’s market? First, Baja California Sur’s real estate market has been driven primarily as “cash-only” – mortgage financing has yet to become really popular or necessary for many purchasers. Most realtors we spoke to said that less than 10% of their sales involve financing, except for new product developments, which may offer short-term financing. So, Baja California Sur doesn’t have to worry about a sub-prime meltdown; it doesn’t exist here.
Also, the people caught up in this sub-prime meltdown got there because they couldn’t afford the terms of a regular mortgage or even the down payment. This has never been, nor will it be any time soon, the profile of the typical Baja California Sur home buyer. Americans who have the money to buy a second home still have that money – this turn in the market has not affected them to any great extent.
When asked if the market has slowed down, most realtors expressed that it is slower than last year, but then last year’s market was exceptional. Some stated it has been busier, but mostly for new real estate development. Some said they actually welcomed a slowdown so they could have some time for themselves instead of working until midnight most nights. The market has normalized. Condo projects aren’t selling out before the developer even breaks ground as we saw last year, but they are definitely selling and selling well. Overall, it makes for a healthier real estate market.
High-end Luxury Boutique Condominiums Very Popular. Although high-end homes still remain popular, it is the luxury condominium market that has really seen exceptional growth. Sale prices have been reported over $2.5 million USD, something just unheard of in the past. Several of these developments can be found around the La Paz area, most outstanding the La Concha Pearl Luxury Condominiums, La Paz’s first “green built” development in it’s final stages. Purchasers are people who can afford to own a house, but prefer the “lock up and leave” aspect of owning a condominium. Overall sizes have increased so that condos, with 3,000-plus to 6,000-plus sq. ft., offer nearly everything a home can. Also, because condo developments are usually four to seven floors high, they can offer superior views.
Certainly sweetening the deal for potential buyers are those who can best offer the style of life, the “lifestyle,” that prospective purchasers are looking for. People want more than a condo or home, they want special services to go with it, services that you traditionally would find only at a luxury hotel. In-project concierges are becoming popular and very appealing for homeowners who are only using their properties for short periods of time. The concierge can arrange restaurant recommendations and reservations, as well as tours and activities. Personalized service is becoming more and more important; it’s not just about the home or condo anymore; much more is taken into consideration. Some projects have taken to offering this type of service in-house or contracting it out.
Two trends in US travel will certainly prove to be positive for Baja California Sur and other destinations in Mexico. The first has to do with the new rule that Americans must have a passport to travel abroad. In the past, this was the case to enter many countries, but not Mexico, Canada or the Caribbean. The US government has received such a strong demand from people trying to obtain passports that they had to delay this requirement until the end of the year – they have not been able to process the large number of applications so far received. This indicates that there are a lot of people out there interested in visiting these countries, with Baja California Sur most certainly included in some of their plans.
Another trend is that Americans are taking shorter vacations. They are working hard – so hard, in fact, that many don’t have time for extended periods away from the office. Long weekend trips, on average four a year, are now the most popular type of leisure travel. This is fine for trips to Mexico, but it certainly wouldn’t be to Europe or Asia.
So, shorter vacations and the strong demand for passports will prove positive for Baja California Sur’s real estate market. People won’t be buying real estate that involves traveling for more than six hours if they only have three days of vacation. They’ll be looking for a place that is a maximum of three to four hours from home, has good airline connections and offers competitively priced real estate. Baja California Sur fits the bill.
Transfer of Wealth. The trend that will have the biggest impact on Baja California Sur’s real estate market is the transfer of wealth now taking place in America. The economic boom of the 1990s created an unprecedented amount of personal wealth in the USA — currently estimated at more than $33 trillion USD. At the same time, today’s retirees constitute one of the wealthiest segments of the US population, with more personal wealth than any previous generation.
This wealth will significantly boost the resources of the 76 million Baby Boomers. Every seven seconds, another Baby Boomer turns 50, bringing them that much closer to the time when they will be thinking about retirement and what they want to do with the rest of their lives. Second-home ownership in a warm location with convenient access back to family is high on their list. And as wealthy as they may be, the cost of living here is also important to them. It’s worth mentioning that for what property taxes may be back home, Baja California Sur homeowners can often pay not only their taxes but also their house employees and part of their utilities.
In Conclusion: Although the market is not as “sizzling” hot as it was last year, it is still very strong and there does not seem to be any reason it will not continue to be so. Baja California Sur has much to offer prospective purchasers, with a wide range of pricing, a great variety of types of real estate and locations, proximity to key markets in the USA, a low cost of living, and a warm, temperate climate. In short, Baja California Sur offers an excellent “lifestyle,” and that’s exactly what many second-home buyers are looking for.
