Interesting comments on property valuations

[Coyote11]

Recently speaking to a realtor it was suggested that all properties in Chapala/Ajijic/Joctopec are overpriced if stated in US dollars by 20/30%. This theory is purely based on the facts that the US Dollar and Canadian dollars are now 20/30% stronger than they were 6 months ago. I asked a Mexican property developer friend based in Guadalajara about this suggestion by a local realtor. His comments " that's crazy as our costs of raw materials are increasing rapidly, even labor is demanding higher increases because their cost of living is increasing.

It is only a few years ago that the Realtors were saying that real estate prices were going down on the shores of Lake Chapala because the US dollar was weak against the Peso.

Now when the Canadian Dollar was equal to the US dollar did property prices in Canada go down by 30% because Americans or even Mexicans couldn't afford them, I don't think so.

As an economist the relationship between the currencies has absolutely no relevance to assets that you are buying unless you have the weaker currency. I don't see US or Canadian Companies lowering the prices because the Euro is weak or are home values dropping accordingly.

I would be interested to read if other property owners are hearing a similar comment.

[bmh]

I can tell you that in CHiapas the people who are basing the value of their houses on the dollar or the conversion of the dollar are sitting on the market. The Mexicans who are the clients down there do not make 30% more now and people trying to recoup their dollars are out of luck. The houses here are overpriced.

The market here is different here because the market is in dollars but I wonder how that translate for the people from Guadalajara who have pesos..Yes it is true that a lot of imported material is going up but right now there is still a lag so I would think it would minimize the buyers in pesos.

[Coyote11]

Of course prices for Mexicans are higher based on current US dollar quoted listings. However an example of what is happening is the new price of gas up 20%. This is a direct correlation to the fact that gas is tied to the US dollar and there is a problem with lack of modern infrastructure in the Mexican oil industry. This is a perfect example of what I am highlighting. It is the complete opposite of what has been suggested on home pricing.  Just because the Peso is weak it doesn't mean gas prices should be reduced by 20/30%.

The majority of Mexican's unfortunately aren't or haven't been able to buy a home because of lack of home finance or ability to pay for a loan. Generally when they have that ability the buy in developments as produced by my friend.

[Intercasa]

Higher gas and materials costs will make for less profit on new construction and builders will have to either lose money, not build or raise prices, the US priced properties will not be attractive and the existing stock priced in pesos should be the best value. 

 

FYI they are looking to raise gasoline again in February, making the people poorer ever month

[Mainecoons]

And yet the people I know in local real estate all tell me they are selling homes at a fast clip.

 

[CHILLIN]

Seems to me the market is unique here in that there is a wholesale price (quick sale), a retail price (what the seller thinks the place is worth), then a discount price (up to 25% off the retail). Many people are waiting for the bargains - and they are finding them. Many sellers are satisfied to get out what they put in many years ago - life is too short, and worries are many. A great many of the newer arrivals are "upside down" - they cannot even get the price they paid a few years ago, they have to take a loss - but are of course reluctant to do so. They hope prices will rise - but until the wholesale market dries up, which is doubtful, then they will not rise.

[Al Berca]

As an American, right now I would not touch a house priced in USD. I would be looking at only peso priced homes where serious money can be saved with the current exchange rate. Houses are not selling at a fast clip and will slow down even more when  Mexicans who currently work and live in GDL and are the second major source for buyers here, are priced out of the market by the gas inflation this year.

[El Cartero]

If I bought a house in USD and sold it in USD for the same amount how is it overpriced?   If anything it is undervalued.   

[CHILLIN]

6 hours ago, Al Berca said:

Houses are not selling at a fast clip and will slow down even more when  Mexicans who currently work and live in GDL and are the second major source for buyers here, are priced out of the market by the gas inflation this year.

I don't get that one. If they worked in Guadalajara why would they spend more gas money on the commute? Unless they put in some sort of commuter train. There are plenty of nice areas to live just a little outside of Guadalajara - with good commuter access, good schools, and actual maintained highways (compared to the Chapala to Guadalajara route).

Earlier last year they said that house prices had to be under $199,000 U.S. to move. We are seeing under $100,000 U.S. to move now. The wild card in Mexico has always been the "blue money" buyers. Maybe someone acquired some large amounts of money in less than totally legal ways. They do not want to leave this money in the U.S., Canada or Europe. They park their money in real estate, keep quiet about it, maybe visit once a year. Do you realize how many empty luxury properties there are in Lakeside, Puerto Vallarta and Manzanillo? This is what was happening in Vancouver too - mainland Chinese were parking their money in Vancouver and Toronto real estate to avoid financial witch hunts in China - again, many, many empty houses. I believe the government actually raised taxes on empty houses.

Edit: apologias to Al, my dyslectic, balance challenged brain played a trick on me. Hopefully reset next week. Then you will see me jogging on the Malecon and swimming the Lake in my Aquaman wet suit.

[Crazydog]

There are 713 properties on the MLS. 

132 reduced 

ONLY 59 under contract which means that 8.27% of properties have sold recently. 

The average Listing price was $177,880 and Median price $139,000.

The actual sales prices are probably much lower but this isn't public data. 

It's a buyers market! 

 

[Mainecoons]

That doesn't tell you much unless you compare to historic data.  I believe several years ago the number of houses for sale was several thousand.  Considering the MLS covers everything from Ixtlahuacan to Chapala, west to Joco and also some stuff around the lake 713 is a pretty small number.

Of course that doesn't include the houses and land people are trying to sell on their own.  There's a fair amount of these properties in Riberas, for example.

Also, just looking at under contract doesn't tell you what the total number of sales has been.

The people I know in the business are full time agents who do considerable volume.  they all tell me that they are doing much more business than they did prior to 2016 and the hottest sellers are around $200K.

FWIW.

 

[el bartman]

Coyote, don't think your realtor should switch to investment banking.

Maincoons, with whom I seldom agree, is correct.

Years ago we didn't have the number of houses here we have now.   Developers came in seeing a need for low cost, 200-300K, housing and built hundreds of homes.  Like La Reserva, Puerto Arroyo, Sabinos, Los Arroyos N and S, etc.   Our safety was in US dollars when it came to buying and selling.  Still is, peso valuation does not impact on this market.  It certainly is a buyers market but there are some who take it to a whole new insulting level.   I would call them bottom feeders.   Nothing wrong with that just not a category I'd respect.

Again, MC summed up quite well. 

[michael2595]

On 1/8/2017 at 6:01 PM, Crazydog said:

There are 713 properties on the MLS. 

132 reduced 

ONLY 59 under contract which means that 8.27% of properties have sold recently. 

The average Listing price was $177,880 and Median price $139,000.

The actual sales prices are probably much lower but this isn't public data. 

It's a buyers market! 

 

 

Do you have a link to the chapala MLS that contains all properties?

[GeorgiaPeach]

49 minutes ago, michael2595 said:

Do you have a link to the chapala MLS that contains all properties?

http://chapalamls.net/properties/residencial

[lcscats]

Houses are selling under a certain amount.  Hearing this from multiple agents.  Now expensive houses not discounted will still sit compared to the under 250K action going on. So the lower market is fine but the upper market is still very much a buyers market.  This kinda alters the data somewhat.  

[ComputerGuy]

There was a flurry of sales over the holiday season. Also, all Mexican Citizens are entitled by law to get a housing loan.

Concerning the comment about gas prices: the government here continued to raise prices, not complying with their own promises, and now this year having the audacity to raise the price of gas to new heights. No, we don't have the infrastructure to produce a lot of gasoline, but how exactly is Mexican gas tied to the U.S. dollar? Prices sank up north steadily over the last couple of years.

[El Saltos]

The MX government's argument to support the new higher price of petrol is BS.  There is no "World" price for petrol.  The price is largely determined by the taxes imposed.  Gasoline is cheap in the US, therefore the huge amount that Mexico is buying from the US is far below what's being charged at the PEMEX stations.

[ComputerGuy]

That's my take, too. So the comment from Coyote is misleading.

[Aquaponicsman]

Competent Realtors are aware of what the market will bear, and that is typically based on comparable sales (comps) and experience. Not Keynesian Economics, Federal Reserve interest rates or international exchange rates (although they may allude to understanding these things to get your listing.) Fact of the matter is, your property is worth exactly what the market will bear regardless of outside influences.

This is not to say that other factors are not at play, they are. So, be prepared to get extremely disappointing offers. The flip side is that some people are still able to make offers. It is up to you to evaluate how it plays in your portfolio.

[El Saltos]

45 minutes ago, ComputerGuy said:

That's my take, too. So the comment from Coyote is misleading.

I just checked online and the wholesale price of petrol in the US today is $1.60, or 42.2 US cents per Liter which is 8.82 Pesos/Liter.  

[Mainecoons]

4 hours ago, ComputerGuy said:

There was a flurry of sales over the holiday season. Also, all Mexican Citizens are entitled by law to get a housing loan.

Concerning the comment about gas prices: the government here continued to raise prices, not complying with their own promises, and now this year having the audacity to raise the price of gas to new heights. No, we don't have the infrastructure to produce a lot of gasoline, but how exactly is Mexican gas tied to the U.S. dollar? Prices sank up north steadily over the last couple of years.

OK but the Peso is also sinking raising the price of gas.

I saw a figure somewhere that taxes of all kinds account for 42 percent of the price of gasoline here.  If so, that accounts for a lot.

Obviously, Pemex corruption/theft and cartel theft also inflates prices.  It would be interesting to see what the margin is at the retail level here.

As far as home sales go, I stand by my earlier comment but would add it applies to homes under $250K U.S.  I am told by several Realtor friends that anything under $200K in a decent location is a sure and fast sale right now.  That could change quick if things get really tense between the U.S. and Mexico.

[bigd]

20 minutes ago, Mainecoons said:

U.S.  I am told by several Realtor friends that anything under $200K in a decent location is a sure and fast sale right now.  That could change quick if things get really tense between the U.S. and Mexico.

Were you told where "the decent locations" are?  As newer more "up to date" home are built the older homes in this area will be worth much less than now.

[bmh]

The price of building is going up so the newer houses will not be as cheap as the older houses already buit..

[lakeside7]

On 1/6/2017 at 9:03 AM, Coyote11 said:

Recently speaking to a realtor it was suggested that all properties in Chapala/Ajijic/Joctopec are overpriced if stated in US dollars by 20/30%. This theory is purely based on the facts that the US Dollar and Canadian dollars are now 20/30% stronger than they were 6 months ago. I asked a Mexican property developer friend based in Guadalajara about this suggestion by a local realtor. His comments " that's crazy as our costs of raw materials are increasing rapidly, even labor is demanding higher increases because their cost of living is increasing.

It is only a few years ago that the Realtors were saying that real estate prices were going down on the shores of Lake Chapala because the US dollar was weak against the Peso.

Now when the Canadian Dollar was equal to the US dollar did property prices in Canada go down by 30% because Americans or even Mexicans couldn't afford them, I don't think so.

As an economist the relationship between the currencies has absolutely no relevance to assets that you are buying unless you have the weaker currency. I don't see US or Canadian Companies lowering the prices because the Euro is weak or are home values dropping accordingly.

I would be interested to read if other property owners are hearing a similar comment.

I would dump that realtor very quickly. He seems not to understand that the cost of labor and material in Mexico increase each year some times twice a year. Land prices, much owned by Mexicans continue to increase. Many of the homes on the market can not be duplicated for their original cost and many sellers are in that position. Sure there are some out there that over priced as there is in any market. Get a realtor ( Juan Jose Gonzales at C21)who knows the market and cost of current construction and judge for your self. Of course location will figure into any sale

 

[ComputerGuy]

1 hour ago, Mainecoons said:

OK but the Peso is also sinking raising the price of gas.

Only if they are buying imported gas and the peso is being used in a country where it is worth a lot less (yes, like the U.S.). As El Saltos pointed out, at today's rate a wholesale purchase is still under 9p/litre. That includes US taxes; no idea what kind of duties are imposed on either side of the border, then add Federale taxes, then profit for Pemex...

What I cannot find online is the actual percentage of Mexican refined gas vs. imported gas being sold in Mexico.