Pacific Coast Decline in Prices?








I have received a number of calls since the release of HSC Financial Inc's position on the end of the speculative boom in Puerto Vallarta.


In this post, I am addressing some of the questions I was asked via telephone.


Our data does not indicate that prices are down year-over-year. Prices are down at the end of November, 2007 from January, 2007 when prices in Puerto Vallarta peaked .


We do not include the impact on inflation on price changes. As a result, the price decline, IN REAL TERMS, is greater than the 5-20% range we reported. For instance if house prices stayed the same from one year to the next, when inflation is 3%, that is a 3% decline in price in real terms.


There are some projects which may appear to show slight increases in prices over the past 10-11 months, only because recent marketing material does not disclose that parking, or appliances are now included in the price, which they were not 10 months ago. In addition, two developers raised their list prices by about 3%, then immediately added discount sweetners to their sales agreements from 5-8%


We do not follow all markets along the Pacific Coast however we are seeing anecdotel evidence of price declines in other markets. In certain cases it is near impossible to determine statistically how prices are changing because of the absence of disclosure.


Both ICON VallartaTower 1 in Puerto Vallarta and Trump Tower 1 in Ensenada claim the record for the highest value of $ sales for a Mexican real estate pre-sell in one day. Neither project will provide any further disclosure. Although both projects claim that their initial towers sold out in one day, both projects have had second towers available for as long as 3 months, and the second towers are not yet sold out. This in spite of the fact that both projects claim their first Towers were oversubscribed by 100%. ICON Vallarta has replaced its entire marketing and sales staff.


The third tower in the Peninsula project is actually called Peninsula 1.


Prices at Horizon in Amapas are clearly down in November, 2007 from earlier in the year. Units of about 200 sq. meters, that were selling for about $550,000 last winter, are now listing for sale at $535,000 and remaining on the market unsold. A much larger than average 230 sq. meter condo did list for $620,000 and sell for less than the list price. On a $ per square meter basis the sale represents decline in prices since last winter.


The price history for a typical Bayview Grand 1-bedroom condo is as follows:

1. Presale in year 2000 = condo + furnishings = $135,000

2. Resold in 2006 = $200,000

3. Listed for resale November, 2007 = $197,500 (typicaly a condo of this nature will sell for about 94% of its list price, in this case = $186,000)


Grand Venetian marketing material listed the delivery date for Tower 1 as May, 2007. As of December 5, 2007, no units have yet been delivered.


We do not have sales volume for 2007 yet.


We cannot provide a general recommendation on whether to buy now or wait because individual investors have different objectives and portfolios. We can say that the market is very liquid presently, and there is no risk in waiting to make a purchase.