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17th August 2007

Bag a hot property in Mexico

For Caribbean style on the cheap, head to sizzling Central America

Think of Mexico and tequila-toting bandits or Mel Gibson’s gory Mayan epic Apocalypto might spring to mind. Less well-known is that Brits are flocking there to buy a second home.

Why? It’s less speculative than Brazil, more exotic than Florida, and cheaper than the Caribbean. And as well as a sub-tropical climate and vibrant beaches, Mexico is rich in culture, and it’s a much more mainstream destination than it used to be.

‘For the past 25 years, the country’s been struggling, but things are changing and people are now willing to take a bet on it. The Mexican government is also encouraging non-residents to buy’, says Matt Glazier of UK agents Foxtons International, who have been selling there for six months.

‘And it’s not just investors who are moving in’, says Rebecca Jacques of Future Properties. ‘Many buyers go out with an investment in mind but like what they see so much that they decide to use the property themselves.’

But there are pitfalls. Non-Mexicans can’t own a coastal property directly – they must do so with a bank trust called fideicomiso – and direct flights from the UK are few and far between.

‘Getting a trust isn’t difficult, though, and the fact that such regulations exist gives investors added confidence,’ says Mr Glazier. Nor is property there particularly cheap. On the upside, however, British investors can count on Mexico’s popularity with American tourists for sizable rental returns. Some resorts have 85 percent occupancy, and property prices are going up by 20 percent a year in coastal areas.

So what should you look for? The more adventurous could buy a place ‘in need of renovation’ but being separated from your builders by an 11 hour flight is not ideal.

New beachfront developments bring the best rental returns, which is what persuaded Bella Dyson, a fifty-something head teacher from London, to buy a two-bedroom apartment for $380,000 (£190,000) in the Taheima Wellness Resort & Spa, near Puerto Vallarta.

This well-developed town on the Pacific coast gets 4.5 million tourists a year, and at peak times (December and January) you can expect to get £100-125 a day in rent from a two-bedroom beachfront apartment.

Apartments at 400-unit Taheima, which has a marina, beach club, spa and golf course, start at £104,000. ‘We weren’t looking to buy in Mexico but after visiting my daughter on her gap year, we thought it would be a great investment’, says Bella, who is married with four children aged between 19 and 32.

‘I didn’t have high expectations, fearing it would be spoilt by over development, but Mexico is such a vast, diverse country that we’ll definitely spend lots of time there when we retire. Plus, there’ll be lots of Americans whizzing down to rent the property and play golf – their wives will love the spa.’

Another project is Icon Vallarta, designed by Philippe Starck’s company. It consists of three 26-storey towers, and two-bedroom apartments are available from £200,000.

But if you don’t fancy the high-rise tourist, there’s the resort of Campeche, which is on a 400-mile stretch of largely unspoilt Gulf of Mexico coastline. On the other side of the Yucatan peninsula from well-developed Cancun (the only place you can fly to direct from the UK), Campeche wants to transform itself into a hub for high-end eco-tourism – 40 per cent of it is already protected.

The 760-acre site, near the UNESCO world heritage city of Campeche, will feature 2,500 properties, starting at £138,000. They will be completed by 2010 and, as it’s an eco resort, nesting turtles will even get their own beach.

‘It’s also more family oriented than Cancun and Acapulco,’ says Gary Fairbairn, a British buyer with three children who has bought there. ‘We wanted the climate of the Caribbean but were keen to invest in a newer market’.

But as with many new markets, you currently need to pay cash, remortgage in the UK or pay high local interests rates (14 percent in this case). But this may change in the future – major banks in Europe are looking into mortgage finance for Mexican property.

Buying costs are 4 to 6 percent on the property price, and acquisition of the fideicomiso – necessary for any property within 50km of the coast – costs £600 to £1000. On the plus side, the cost of living is 50 percent lower than the UK and you are guaranteed some sunshine.