Mexico’s peso has been dealt a significant punch to the chest by the 2016 US presidential election, but could the country’s weak currency prove a trump card for property investors?
The vote for Donald Trump to be the next President of the United States saw the Mexican peso fall to an all-time low against the dollar. Since then, it continued to slide, amid fears that Trump would deliver upon his campaign calls for a wall to be built along the US/Mexico border, and for the North American Free Trade Agreement to be scrapped.
The peso’s performance has already been uneven during a turbulent year, with the currency also notably dipping in the wake of the UK’s Brexit vote. However, one country’s weak currency is another country’s strong spending power. Indeed, when the pound fell against the dollar and the euro, following June’s EU referendum, overseas investors snapped up UK real estate opportunities, with international interest still strong, drawn by the relative affordability.
For Mexico, the immediate silver lining can be seen in the tourism industry. Earlier this year, Post Office Travel Money found that the Mexican peso was one of the world’s weakest performers – and holidaymakers continued to take advantage of the resulting exchange rates.
Andrew Brown of Post Office Travel Money comments: “Some canny travellers are choosing resorts where sterling has fallen in value least. Sales of the Mexican peso are continuing to rise as they have done for the past decade, while Costa Rica looks to be one of the year’s big successes as new flights bring the destination within easy reach.”
Brown highlights “resorts like Cancun and the Riviera Maya” as “a good deal for bargain-hunters”.
The Riviera Maya, certainly, is one of the country’s most popular tourist hotspots, thanks to its diverse offerings, which range from beaches and the world’s second largest barrier reef to ancient Mayan ruins. Hotels, both bargain and luxury, are present and correct, alongside all-inclusive resorts.
“The Mayan Riviera has become an important destination for Europeans, Americans, Canadians and, of course, Mexicans searching for a place to relax and have fun,” J. Carolina Serrano Maury of Mexican agent Novus Realty Yucatan tells TheMoveChannel.com.
“The Mayan Riviera offers to all their visitors a widespread of different water sports, diving in exotic places such as underground rivers and sinkholes and of course sports such as golf, while you enjoy the sun and the most beautiful beaches.”
The agency highlights The Quinta Avenida (Fifth Avenue) in Playa del Carmen as a hub for a wide range of restaurants, with food varying from regional to international cuisine. Appetite is certainly strong: in 2015, Cancun International received almost 9 million tourists from the USA, Canada and Europe alone, of which Playa Del Carmen received around 4 million visitors.
“Acanto Boutique Hotel is located in the heart of Playa del Carmen which offers to all their residents a great deal of outdoors events, shopping, dining to a very short walking distance,” they add. “The white sandy beaches are located a few steps away.”
The hotel is currently offering rooms for international buyers, with 1, 2 and 3 bedroom units from $238,500 with rental yield of up to 9 per cent net and personal usage options. 50 per cent finance for international buyers reinforces the affordability of the country’s currency.
On TheMoveChannel.com, some investors are showing signs of taking advantage. Enquiries jumped in August for Mexican property on the site, following the currency’s post-Brexit dip, before falling 12 per cent in September and October. In November, enquiries doubled, as the peso plummeted to its record low against the dollar.
The outlook is uncertain, with the Bank of Mexico expected to raise interest rates this week. Preliminary data, though, suggests that Mexico’s Q3 2016 GDP grew 1 per cent, which, if confirmed later this month, would prove the country’s fastest growth in over two years.
The peso may not be out for the count, meanwhile: today, it rallied for the second day in a row, notes Reuters, amid signs that Trump is softening the rhetoric that typified his campaign. On Tuesday, it rose by more than 2 per cent against the greenback, following a 0.8 per cent gain on Monday.
Political upheavel in countries such as Spain, Brazil and the UK have joined the USA’s election in defining an often unpredictable year. But in the case of Mexico, could the surprise result prove a trump card for property investors in the long-run?