Mexico’s housing market is heading towards recovery, despite slower economic growth in the US, whose demand dominates the Mexican economy.
House prices in Mexico were up 4.48% during the year to Q3 2011 (1.07% in real terms), according to the Sociedad Hipotecaria Federal (SHF). Similarly, average house prices in the Affordable-Entry segment of Homex, a major developer, rose 1.9% q-o-q to Q3 2011. Prices in the Middle income segment were up by 0.6%.
Stronger demand was evident in the 8% rise of mortgage loans granter during the year to April 2011. It was intensified by a rebound in economic activity (2010 to 2011) and a 1.8% (seasonally-adjusted) consumer confidence boost in October 2011. Unemployment was down to 4.8% by October 2011.
An expected surge of public investments in relation to the 2012 elections is likely to boost construction again in late-2011 to 2012.
Mexico experienced 4.5% economic growth during the year to Q3 2011. However, both manufacturing and domestic demand have weakened recently.
Inflation was 3.5%, as the Mexican peso continued to weaken against the US dollar.
House prices in Mexico were up 4.48% during the year to Q3 2011 (1.07% in real terms), according to the Sociedad Hipotecaria Federal (SHF). Similarly, average house prices in the Affordable-Entry segment of Homex, a major developer, rose 1.9% q-o-q to Q3 2011. Prices in the Middle income segment were up by 0.6%.
Stronger demand was evident in the 8% rise of mortgage loans granter during the year to April 2011. It was intensified by a rebound in economic activity (2010 to 2011) and a 1.8% (seasonally-adjusted) consumer confidence boost in October 2011. Unemployment was down to 4.8% by October 2011.
An expected surge of public investments in relation to the 2012 elections is likely to boost construction again in late-2011 to 2012.Mexico experienced 4.5% economic growth during the year to Q3 2011. However, both manufacturing and domestic demand have weakened recently.
Inflation was 3.5%, as the Mexican peso continued to weaken against the US dollar.
Analysis of Mexico Residential Property Market »
RENTAL YIELDS
Last Updated: Nov 29, 2011
Gross rental yields in Mexico are moderately good, though they would appear to have declined during the year 2010.
The Global Property Guide’s house price figures, which in Mexico are based on asking prices primarily for coastal areas, are not really an adequate substitute for good-quality, fully-funded official statistics – but no such statistics exist for Mexico. The Mexican situation is also unusual in that we have concentrated on coastal properties, mostly houses, making it particularly hard to be sure we are getting an accurate picture.
The Global Property Guide’s house price figures, which in Mexico are based on asking prices primarily for coastal areas, are not really an adequate substitute for good-quality, fully-funded official statistics – but no such statistics exist for Mexico. The Mexican situation is also unusual in that we have concentrated on coastal properties, mostly houses, making it particularly hard to be sure we are getting an accurate picture.
TAXES AND COSTS
Last Updated: Feb 21, 2012
Rental Income: Nonresident individuals are generally liable to pay 25% withholding tax on their gross rental income. However, they can elect to have their rental income taxed as business income and through this option; they will be taxed on their net income at progressive rates.
Capital Gains: Nonresident individuals selling Mexican property are generally liable to pay 25% withholding tax on the sales price. However, non-resident individuals with appointed local representatives may be taxed on their net capital gains (sales price less acquisition costs and related costs) at 30%.
Inheritance: There are no inheritance taxes in Mexico.
Residents: Mexican residents must pay income tax on their worldwide income at progressive rates, from 1.92% to 28% for 2008.
Capital Gains: Nonresident individuals selling Mexican property are generally liable to pay 25% withholding tax on the sales price. However, non-resident individuals with appointed local representatives may be taxed on their net capital gains (sales price less acquisition costs and related costs) at 30%.
Inheritance: There are no inheritance taxes in Mexico.
Residents: Mexican residents must pay income tax on their worldwide income at progressive rates, from 1.92% to 28% for 2008.
BUYING GUIDE
Last Updated: Apr 20, 2007
The total roundtrip transaction costs are around 4.3% to 17.8% of the property value, depending upon the location, and value of the property. Property acquisition tax, notary public fees and registration fees vary in each state and/or city. Additional costs for the buyer include title insurance, legal fees for Spanish-speaking lawyer, bank fees for setting up a trust (fideicomiso), and permit from the foreign affairs office. Real estate agent’s fee is around 3% to 6% (plus 15% VAT) and typically paid by the seller.
LANDLORD AND TENANT
Last Updated: May 31, 2006
Mexico landlord & tenant law is pro-tenant.
Rent Control: The rent freeze imposed in Mexico City in 1948, and lifted only in 1992, have driven investors out of the rental sector or to the informal rental market. Rent increases are generally tied to the consumer price index.
Tenant Security: The law favors the tenant and it is difficult for the landlord to evict the tenant upon the termination of the contract.
Rent Control: The rent freeze imposed in Mexico City in 1948, and lifted only in 1992, have driven investors out of the rental sector or to the informal rental market. Rent increases are generally tied to the consumer price index.
Tenant Security: The law favors the tenant and it is difficult for the landlord to evict the tenant upon the termination of the contract.
ECONOMIC GROWTH
Last Updated: Dec 22, 2011
Economic slowdown
Mexico’s economy slowed this year (2011) because of the weak US economy. GDP expanded by 4.5% during the year to Q3 2011, down from 5.1% during the year to Q3 2010. Mexico recovered from a severe slump in 2010 with 5.4% GDP growth. 2009 saw -6.2% growth. However, the weakness of the US economy is worrying, as in 2010, 74% of Mexico’s exports went to the US. In 2010 remittances, Mexico’s second-largest source of foreign currency, were down to US$22.6 billion, from an average of US$25.6 billion from 2006 to 2008.
In 2012, GDP is expected to continue slowing, with 3.3% growth forecast by the OECD.
On the positive side, the forthcoming presidential election is expected to increase public investment, and lead to higher construction activity and employment in 2012.
In October 2011, the central bank decided to keep its benchmark rates at 4.5%. However, due to the continuous currency depreciation, inflation rose to 3.48% p.a. in November 2011.
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