Americans buy into luxury
By Adam Thomson
Published: June 21 2006 03:00 Last updated: June 21 2006 03:00
Ever thought of living in a hot, dry climate where the sea laps gently against the sand and the sun turns the distant hills various shades of gold and amber every afternoon?
For most of the rapidly retiring US “baby boomer” generation, buying a dream retirement home on the coast of California or Florida is no longer an option: properties are too expensive. But in Mexico they are discovering that they can still buy beach front homes at affordable prices.
According to the US-based National Law Center, a research institute inTucson, Arizona, US and Canadian property ownership in Mexico, which accounts for 90 per cent of foreign ownership, has more than doubled in the last decade in key areas, and is growing more than 10 per cent a year. Some estimates suggest that as many as 100,000 US citizens are retiring in Mexico every year.
In Loreto, a small fishing village on Baja California’s Sea of Cortés, theLoreto Bay Company is developing 8,000 acres of land situated along 3.5miles of beachfront to cater to the retired and second-home buyers.
Jim Grogan, a partner in the company, says the idea is to focus on single-family homes constructed around courtyards with fountains and pools, high ceilings and a traditional adobe finish.The company has made a commitment to generating more energy from renewable sources than the community will ever need, and to a reforestation programme that, among other things, will help recover levels of the underground aquifer.
Loreto Bay Company has already invested about $125m in the project and it has sold 640 homes in the past two years. At completion the development will consist of 6,000 houses built in nine phases, mostly in the range $300,000 to $700,000.
In Sonora, on the opposite side of the Sea of Cortés, Steve Barger, a US businessman who runs Arizona-based real estate developer Abigail Properties, has gone into partnership with the Mexican-owned Worldwide Group to develop 1,500 luxury condominiums in 16 buildings complete with an 18-hole golf course and about 200 single family homes.
The joint venture began construction in December 2003 and the first phase of the Las Palomas project, which involves 413 units, is nearing completion. Mr Barger says he has already sold 861 of the properties and expects togenerate $750m once all of the units have been sold. About 78 per cent ofthe buyers are from Arizona and have an average age hovering in the mid-40s.
Mark Raven, an Arizona-based lawyer who represents US citizens buying retirement and second homes in Mexico, says the advantages of looking south of the border are obvious.For a start, a luxury house on the beach in, say, Baja California or the state of Sonora could cost $500,000 to $750,000 compared with $2.5m and above in the case of California. Second, he says, the weather is much better than either California or Sonora.
In addition, many of the new destinations and projects opening upare just three hours’ drive from Phoenix, Arizona, and 23m US citizens live within a seven-hour drive of these states.The Mexican government has been quick to spot the potential, and over the past few decades has made it increasingly easy for foreigners to own beachfront property anywhere in Mexico, from Baja California to the coast around Cancún on the Gulf of Mexico.
That, together with the increasingly deep economic ties between the two countries since the introduction of the North American Free Trade Agreement (Nafta) in 1994, has made it far less risky to buy real estate.
Bruce Greenberg, an international real estate adviser in Tucson, Arizona, says: “People want properties that are easy to get to, where you see sea and vegetation and where you walk in and see familiar amenities such as sockets for computers and alarm systems,” he says.”If you bought that kind of property five years ago you can be fairly sure that it is now worth double.”
Peter Maxwell, of Mexico’s tourist development office, Fonatur, in Loreto,says the increase in property values in the US has has had a big effect.”US citizens are selling up,” he says. “They have paid off their mortgages, they have no more financial commitments back home and they are awash with money because house prices have rocketed.