It’s no secret that Playa Del Carmen has a healthy number of foreign residents making up it’s demographic. With a population of approximately 186,000 people, around 7% are foreigners. However Canadians in particular have a special relationship with this slice of paradise, making up one of the largest expat groups. And it seems that we can expect more Canadians to fly south for the winter in the near future. Canadians are currently being encouraged to invest in Mexico, in assets such as Playa Del Carmen real estate.
Canadian Mortgage Restrictions
As mentioned, Canadians have made a habit of flying south in order to escape the harsh Canadian winters. However this new push for overseas investment in Mexico has come about for a different reason. In February of this year, the Canadian federal government implemented tighter restrictions on mortgages. The restrictions imposed are numerous, however two in particular will affect property investors.
The first restriction requires any potential buyer to prove their ability to handle a 5 year fixed mortgage rate. This is an increase from the previous 3 year fixed rate.
The Second restriction specifically targets property investors who do not intend to live in their property. They are now required to make a 20% down payment. This is a 15% increase from the previous 5% down payment.
These restrictions, both separately and alone, make it much harder for buyers to invest in a property as a means of income.
Canadians Flock to Mexico
As a result of these new requirements, Canadian investors are flocking to Mexico in order to buy property. Mexico real estate is a fantastic option for investors who are focused on gaining a high return on investment. Compared to Canada, Mexican properties in high-profile locations, for example Playa Del Carmen real estate, offer a level of luxury at a much more affordable price. This price difference is even more apparent when you consider the strong value of the Canadian dollar in comparison to the Mexican peso. As most real estate in Mexico is sold in U.S. dollars, Canadians were previously at a disadvantage due to a weaker currency. However, the Canadian dollar is currently at 0.75 US. This increase in value has made it much more feasible for Canadians to buy Mexico real estate.
As well as massive potential for increased property value (up to 10% annually), many investors use their Playa Del Carmen real estate as a vacation rental. This provides a steady income on top of any yearly property appreciation.
Investing in Playa Del Carmen Real Estate
Non-Mexicans can currently buy property anywhere in Mexico. However, some restrictions do apply for real estate located within 100km of a national border and 50km of the coast. Despite this, buying properties in beachfront locations such as Playa Del Carmen is now a much easier process. Non-residents can purchase properties within 50km of the coast as long as the purchase goes through a trust. The trust is held by a Mexican bank, of which the owners become the beneficiaries.
Mortgages are also now becoming much more of a feasible option in parts of Mexico. In the past, investors who did not have cash upfront had to mortgage a property in Canada in order to pay cash for their purchase in Mexico. Now, Canadians have the opportunity to use their new property as collateral for a mortgage loan instead. Institutional financing for Canadians in Mexico can reach a maximum of 75% of the property value. This is only 5% less than the 80% offered in Canada itself.
As a whole, Canadians have never had a better opportunity to invest in their Mexican future. While investing in a property in Canada is only getting harder, purchasing Mexican real estate is becoming easier. Moreover, a strong currency equates to more bricks and mortar for your money while running costs are kept low and potential for ROI with Playa Del Carmen real estate is high via appreciation and property rental.