The Lake Chapala real estate market

articles Living, Working, Retiring

J. Brad Grieve

The majority of my work involves inspections of homes, however there is a large amount of consulting regarding Mexico real estate where clients need help to promote or sell their property. The rumor mill has produced some odd information lately that really needs to be addressed.

One rumor is that the overall real estate market in Lake Chapala, Mexico, has plummeted and sales volumes have started to drop. According to information gathered over the last couple of years, 2007 has been on average, the same as the last four years, which produced approximately 30 to 32 sales per month.

Another, rumor has been that there are growing inventory of houses; hence the market has slowed down. According to the listing service of the local real estate board, which includes many developers/constructors, there are just over 500 residential properties and approximately 350 lots or land parcels for sale. When I left the local real estate business over three years ago, there were approximately 750 properties (approximately 50% residential and 50% lots) for sale. Yes, inventories have increased slightly (approximately 33%). The inventory described here represents approximately 15 months of residential inventory. However back in 2004, the total inventory represented just over 18 months of inventory. What we are seeing is a natural reaction to the economics of supply and demand and inventories are decreasing in terms of sales volume demand. There were times in the mid to late 1990s when the number of houses for sale represented almost 30 months of inventory.

A significant change in the last few years has been the local real estate industry. In real terms, the number offices, brokers and agents has increased from approximately 130 agent/brokers to more than 160 agent/brokers (23% increase). This means, in real terms, that more offices and agents hence are now sharing the same amount of sales; the feeling for some agents is that their personal sales volume has decreased. Also like real estate boards north of the border, a small proportion of the agents/brokers produce a large share of the overall sales volume.

In terms of prices, of course what we have seen is an inflation of prices. The average sale price between 2003 and 2006 increased by approximately 69% whereas the inflation rate in all of Mexico was reported to be 18% during the same period, well below the average real estate sale price increase here at Lake Chapala. The average sale price increase indicates some incrementing in prices but also a movement to larger properties versus smaller properties. The price increase has been rapid and there should be some natural softening of price increases or price stability over the next few years as the market continues to be steady in sales volume.

But what is the future outlook? Actually, it is bright. The biggest factor that I have always advocated is the Baby Boomer factor. In North America, Baby Boomers make up almost one third of the population, that is, approximately 100 million people. Over the last few years, foreign buyers (primarily Canadians and Americans) made up over 80% of the buyers in the Lake Chapala region. Compared to other areas of Mexico, the Lake Chapala region continues to be a popular choice.

What has been observed in the local market is that the average age of a new buyer has reduced slightly into the high 50s rather than the traditional 60s. This is interesting, since this means some of the Boomers are deciding to either cash-in early and retire or use the relatively inexpensive credit available in North America to invest in a home for their future retirement and buy into the dream of having a home in Mexico. The interesting aspect of these Boomers is that they presents the group that was born in post-war period up to the beginning of the 1950s. This means there will be potentially more and more buyers for the next ten to twenty years as the Boomers approach or enter into their retirement years. Increasing demand and increasing supply show a bright future for real estate in the Lake Chapala area.

Published or Updated on: February 14, 2008 by J. Brad Grieve © 2008
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