Are Homes Cheaper in Mexico?

It's not surprising that many Canadians who have been on a vacation to Mexico would think about how wonderful it would be to have a home or property here. Just imagine being able to escape to a tropical paradise when winters in Canada get unbearably cold then not having to scramble for accommodations because you have your own vacation home waiting for you and your family. But let’s admit it, the question that’s on everyone’s mind is: Are homes cheaper in Mexico? Surely you'd be able to offset the costs of buying a second home there as long as you take enough vacations, right?

So, Are Homes Cheaper in Mexico?

Homes in Mexico are not exactly cheap unless they are made of substandard materials. And it is important to understand first that the housing market in Mexico is one of the country's most stable and essential markets. In fact, as of the first quarter of 2022, the housing market contributed around 6% of the country's gross domestic product. Moreover, Mexico's market is predominantly considered an owner's market since nearly 69% of the homes here have been fully paid off by their owners. And only 15% of the homes are rented.

However, it is safe to say that real estate property in Mexico is generally cheaper compared to the average real estate property in Canada. For one, construction prices per square foot here are relatively lower. Another factor that makes real estate prices in Mexico seem a lot cheaper is the exchange rate. Because of the higher value of the Canadian dollar compared to the Mexican peso, each unit of your money is worth more in Mexico than in Canada. That means you have greater purchasing power in Mexico where goods and services are concerned. Your $500,000 can buy a much better home in Mexico than it can in Canada.

Factors that Affect Home Prices in Mexico

You should also take note that there are still a lot of other factors that affect real estate prices in Mexico. So the answer to the question of whether homes in the country are cheap is never just a simple yes or no. In fact, the best answer would be: it depends, or it is relative.

Real estate prices in Mexico still mainly depend on what kind of home or property it is, how big or small the usable space is, whether it is new or old, and, more importantly, its location.

Location. A house's location affects pricing because it determines employment and economic opportunities, schools, entertainment and shopping options, convenience, and accessibility to amenities and infrastructure such as transportation and health facilities. 

Moreover, some cities or areas in Mexico are considered prime spots, and real property here is relatively more expensive than property in other areas. Prime spots are those areas on the coast and on beachfront locations or that are popular with expats and tourists. Simply put, property listings in these areas tend to be way more expensive than listings further inland. 

Neighborhood comps. Neighborhood comps also influence pricing. The price of a house is determined by demand, or the sale price of the same type of property in the same neighborhood. So look at the value of comparable properties in a given neighborhood and you will be able to estimate how much a house would be. If you are eyeing a specific home, you can get a simple home appraisal or an evaluation from a real estate agent to get a better picture of a home's value. This evaluation and appraisal would already factor in the distance and location of a house, the age of the house, and its similar features with other houses in the area. 

Size and space. The bigger the house, the more expensive it is. Home valuations would calculate the price of a house per square footage, and this means that the more square feet, the higher the price is going to be. Beyond the available space, the amount of livable space is also important. So, the more bedrooms and the more bathrooms the house has, the higher its value.

House’s age and condition. The age of the house helps determine its sale price. Generally, the older the house, the cheaper it is because there is a higher chance that it would require certain repairs and upkeep. But a house's condition is even more important than its age. After all, there are old houses that are well-maintained and are in tip-top shape, while there are relatively new houses that are in much worse state. So get an inspector to check the house's condition, including its roof, its plumbing, its electrical connections, and make sure there are no termite infestations on its wooden fixtures.

Safety metric. While Mexico is generally safe, you should know that there are high-crime areas in the country and you would normally want to avoid these. House prices in such areas are usually lower compared to prices in safer areas. That's because of the lower demand for properties in these unsafe places. So if you see a property with an attractive selling price, make sure it's not because of this.

You also need to consider the fact that more and more foreigners are investing in Mexican real estate property. And this rising demand and popularity of homes in Mexico, thanks also to the country’s thriving economy, have driven prices to go up in the last few years. This means that compared to home prices a few years ago, home prices now are significantly higher.

How Cheap Are Homes in Mexico?

Do you want to buy a home in Mexico and would want to have an idea of how much it would cost you? 

The typical home value in Mexico as of February 2022 is USD128,009. You can expect this number to go up every year.

You can find a house in the Pacific coast or down south in Mexico for $100,000 or more. For $100,000, you can get a small house or villa outside of popular coastal towns and outside of tourist hotspots. You may also find a small condo for this amount. The options you get won’t be ideal for a family, but it will be good enough if you are going to live solo or with one other person.

Meanwhile, if you are looking for a much larger house that’s conducive for a family and one with multiple bedrooms and a beautiful ocean view, you'll need to have over $1 million ready.

Of course, residential properties in the Mexican capital of Mexico City are still considered the priciest because of the accessibility to all modern amenities. Other cities known for their expensive housing markets are Morelos, Queretaro, Baja California Sur, and Jalisco.

In coastal towns like Playa del Carmen, real estate properties are pricey. For example, you can get an average-sized property with a view of the ocean for $600,000 to $800,000 on average. These prices may be negotiable, especially if it's an older house with much-needed updates or repairs.

In the fast-growing beach town of Tulum, a new house can cost over $150,000 on pre-sale.

What If I Have Less Than $100K?

If you want to buy a home in Mexico but you have a budget of less than $100,000, you don't have to settle for a shack in a remote area. You have a few other options so you could get a nice property in a nice location.

You can finance with a developer. There are real estate developers who offer developer financing, which is an in-house financing scheme, while the project is still on presale stage. Since they typically do not extend a mortgage covering the total cost of a property in advance, they offer installment payment plans to buyers. You can make a significant down payment on a property within a specific amount of time and pay the rest of the amount upon the completion or the delivery of the property, or within a specific time period. Usually, you will be required to make at least a 50% down payment when you buy a home and pay the rest over five to 10 years.

Partner with a friend or family. Another option worth considering is to partner with a friend or family member and buy a home or property in Mexico together. You can pool your funds and share or split the costs of a nice new home and co-own it. This way, you will be able to afford a good home in a good location. This is better than making do with whatever little money you have and getting a small property in a not-so-nice location. The good thing about this plan is that you also have the option to rent out the house while neither of you is using it and you can share the income.

You will have to be careful about this kind of arrangement as it could get tricky. However, if your partner is someone you trust and is absolutely credible, there won’t be a problem. You can go on vacations to Mexico together and have twice the fun, or you could alternate so you don’t overlap as far as using the house goes.

Buy ejido land.  Ejido land is a parcel of communal land that is maintained or used collectively by a group of people. Many parcels of land near the beach are actually ejido land. Originally, ejidos are not private property and they cannot be owned by one particular individual, especially not a foreigner. According to the law, ejidos can only be purchased by a Mexican citizen, and the whole community "owning" the land will have to come to an agreement about selling it.

However, many ejido lands are now privatized or converted to private property. These parcels can now be legally sold to interested buyers, including non-Mexican citizens or foreigners. In other words, it's no longer impossible for foreigners like you to buy ejido land, and they are usually cheaper. 

So how can a foreigner purchase an attractive ejido land by the beach? Through a long and tedious process. As such, you need to talk to a real estate agent regarding how to go about buying an ejido land. There are also developers that specialize in converting ejido lands into private property.

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All in all, homes or real estate property in Mexico are cheaper than similar or equivalent properties in Canada. But that’s not to say they are cheap per se. Because the housing market in Mexico is thriving and demand continues to rise. As such, the value of Mexican homes is steadily increasing, too. 

Needless to say, now is a good time to invest in a new home in Mexico before real estate in beachside and tourist-heavy areas become unaffordable and before good deals and good slots run out due to the law of supply and demand. Take advantage of financing options so you could get a home in Mexico and even start earning from it.

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