“The dollar’s relative strength against the peso made the country good value for US tourists,” says the Mexican Secretary for tourism, Rodolfo Elizondo. And many analysts believe that the perception of Mexico as a safe destination also helped the country attract US tourists.
However, we shouldn’t write off the country’s commitment to developing tourism when attributing this success. In 1989, regulations were passed to “promote Mexican Investment and Regulate Foreign Investment”. Just recently, those regulations became law – bringing significant and beneficial changes to tourists and overseas property buyers alike.
The most advantageous of these changes relates to the use of a bank trust. Prior to 1973, foreigners were not allowed to hold legal title or to exercise direct titles to real estate in an area located within 64 miles of Mexico’s borders and 32 miles of its coastlines. But laws passed in 1973 and 1993 have made it possible for foreigners, foreign firms and Mexican companies with foreign participation to acquire interests in coastal real estate through a bank trust – known as a Fideicomiso.
Three parties are involved in this Fideicomiso: the seller (who is known as the Trustor); the bank (Fiduciario) and; the buyer (the Fideicomisario). Operation of this trust is relatively simple – the title of the property is transferred to a Mexican bank, which essentially acts as a trustee. The trust agreement is then formalised by a permit from the Mexican Ministry of Foreign Affairs. Finally, the buyer is designated as a Beneficiary in the Trust, and the Beneficiary rights are recorded in the public record by a notary public.
According to the Foreign Investment Law passed in 1993, trusts can be renewed for an indefinite number of successive 50 years periods, so in effect they last for the lifetime of your property. Once the trust is established you have the right to use, lease, improve or sell your property without restriction. You may also transfer your rights to a third party, or pass it on to named heirs.
If you wish to sell the property to a foreigner, you simply assign your beneficial interest. They will automatically receive their own renewable 50-year permit, and your trust will become redundant. If the new buyer is a Mexican national, you can instruct the bank to endorse the title in favour of the buyer.
If you employ an agent when selling, expect charges of around three to six percent of the value of the sale as a fee, although you may be able to negotiate on this beforehand. You will also need to pay VAT on agent fees. Most estate agents can sell each others’ properties providing that they are members of the AMPI (the Mexican Board of Estate Agents). They are not however licensed or regulated, so be careful making any deposits up front. As in any foreign country, the same rules apply when buying property in Mexico; always get independent legal advice from an English speaking lawyer before you proceed with any transaction. A notary, however, will oversee the buying process – executing searches, preparing the deed, carrying out the property transfer and recording the deed with the public property registry.
The local mortgage market is currently somewhat limited, and so acquiring a loan in the UK is probably a more viable option. The costs of buying work out at around six per cent of the purchase price. Administration of the trust for the property costs about £300 per year. Mexico’s annual property taxes are 0.25 per cent of the assessed value for tax purposes.
The good news is that no VAT is payable on residential property, however, when you come to sell, capital gains tax is charged at 33 per cent of the rise in value of the property. Foreigners may be exempt from paying this in certain areas, but it is best to budget for it all the same.
“Buying property in Mexico can offer good value for money in comparison to prices in both the USA and Europe,” explains David Cox of Property Frontiers. “However, in some parts of the country prices have risen dramatically in recent years. Traditionally, the Mexican property market has been relatively stable, seeing moderate annual inflation without the dramatic peaks and troughs seen in markets such as the UK.”
Nevertheless, in recent years, with more a rapid pace of development and the evolution of the holiday and retirement home markets, this has changed. Now in the key areas – such as Cancun and Cozumel on the Yucatan peninsula – prices have risen significantly.
Rental returns can be extremely good if you have the right property in the right area, as many Americans and Canadians retire here during the winter months and seek long-term lets. The vast majority (around 90 per cent) of foreign buyers in Mexico are American or Canadian. Britons do make up a reasonable proportion of the remainder, but no statistics on the number of British buyers in Mexico are currently available.
Property values in Mexico do tend to increase steadily year-on-year. In the popular cities and coastal areas – such as Cancun and Acapulco on the Pacific coast – prices have risen significantly. The key is in choosing the right location. Mexico is a vast country and not all of it presents a viable opportunity for property investment.
Prices therefore vary tremendously across the country, but as a guide a good two-bedroom apartment in a popular area should cost between £80,000 and £140,000 depending on size, location and facilities. Three-bedroom homes are typically upwards of £180,000.
While Cancun is near the top of the Mexican property ladder, Puerto Vallarta is on the up. This resort has something to offer everyone, with all of the amenities of any classic beach resort as well as plenty of entertainment including fishing, golf, whale watching, diving, surfing and artistic pursuits. Compared to other resorts in Mexico, Puerto Vallarta is geographically diverse and boasts mountains, jungles, rivers and waterfalls.
From: http://www.buyassociation.co.uk
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