Oaxaca, Mexico Real Estate Investment

Real estate in the city of Oaxaca, Mexico is not as heavily promoted as other markets, such as the coastal town of Puerto Escondido; however, investors might take …

Real estate in the city of Oaxaca, Mexico is not as heavily promoted as other markets, such as the coastal town of Puerto Escondido; however, investors might take an interest in this cultural metropolis, located in the Southern Mexico state of the same name, Oaxaca.

The city of Oaxaca’s property sector has remained intact in spite of the political unrest of 2006, and the Mexican government’s heavy investment in local infrastructure could indicate increasingly favorable investing conditions. Perhaps even more remarkably, local experts have observed that Oaxaca real estate values are appreciating and active construction of new homes has been taking place.

About Oaxaca

Oaxaca, the capital city of the state of Oaxaca, is located in the heart of the Valles Centrales, or Central Valleys, region of the state of Oaxaca. The climate in Oaxaca is relatively temperate, with monthly average high temperatures ranging from 77 to 88 degrees Fahrenheit, according to Weather.com.  Average lows range from 47 degrees in January to 60 degrees in June.

The population in Oaxaca has almost doubled in the last 25 years, and combined with formerly separate villages and towns it now forms a “conurbation of perhaps 450,000 people,” according to LonelyPlanet.com.

The new population appears to be mainly comprised of foreign expatriates, according to Alvin Starkman, who moved to Oaxaca from Toronto. Starkman and his wife Arlene have been permanent residents since 2004 and own and operate Casa Machaya Oaxaca Bed & Breakfast. They live within a 10-minute drive of the downtown area.

Oaxaca is characterized by the region’s natural beauty. Visitors often take hiking or mountain biking trips through its surrounding mountains and valleys.

Historical and cultural attractions in Oaxaca include pre-Hispanic ruins, 16th century Dominican churches and monasteries, weekly town marketplaces, craft villages, regional art, museums and some of the “finest Mexican cuisine,” Starkman said.

Starkman also described “the warmth of the people” as one of the most compelling features about Oaxaca.

Oaxaca real estate investing conditions

Oaxaca’s recent bout of political unrest is far from forgotten, and many political disputes remain unresolved. The roots of the conflict began in May 2006, when tens of thousands of teachers went on strike for better pay and conditions and commenced demonstrations in the zócalo, or main plaza, of the city. Disputes escalated in June when Oaxaca governor Ulises Ruiz Ortiz sent 1,700 police to dissolve the protests, according to reports from The New York Times.

The police incursion resulted in popular outrage. Community groups, Indian rights organizations, farmers’ cooperatives and revolutionary parties all joined in extended protests, demanding the governor’s immediate resignation. The conflict with authorities lasted for more than seven months and ended with at least 13 people killed, according to the Times.

The violence largely subsided after December 2006, and a report by the Associated Press issued last month described the residents of Oaxaca enjoying a return to a peaceful atmosphere. Oaxaca’s tourism and jobs, however, are still recovering.

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Surprisingly, the events of 2006 have not hindered recent growth in property values and local infrastructure, according to Starkman.

“Real estate values continue to climb at about 20 percent a year,” Starkman said in an e-mail interview. “Within four blocks of our home, there are seven or eight new homes under construction, all commenced in the aftermath of the 2006 conflict.”

In terms of infrastructure, “it seems like since the conclusion of the 2006 unrest, government is more intent upon fixing, remodeling, repairing and growing,” Starkman said. The improvement of sewers, parks, utilities, and street cleanliness has been among measures to reinvigorate the city.

Furthermore, the government has invested a large amount of money into road construction and improvements. Starkman said that the toll road between Puebla and Oaxaca that had been opened more than 10 years ago is now in the midst of a major repaving project.

The talk of the town, however, has been construction of the new highway stretching between the city of Oaxaca and coastal towns Huatulco and Puerto Escondido. The $420 million project is expected to reduce the travel time between Oaxaca and Huatulco from six hours to three and to reduce the travel time between Oaxaca and Puerto Escondido from eight hours to two, according to an article by Business News Americas last month.

The highway will benefit some one million residents and create 5,000 jobs, according to the article.


Investing in Oaxaca

“If 2006 didn’t put a damper on land and house values, nothing I can anticipate for the future will adversely impact [them],” Starkman said. He said his friends have been actively buying property, renewing leases and building.

But Starkman also said investors should “be cautious of real estate brokers and agents and consumer protection laws, because all is still in its infancy.”

“I [only] know of one real estate agent [who is] trustworthy and bilingual,” he said.

The “trustworthy and bilingual” agent Starkman referred to is Fernando Martinez-Lizardi, owner and operator of the real estate firm Real Estate Oaxaca. He, along with Lane Gilbert, a licensed general contractor and investor from California, are proponents of a sunny outlook for Oaxaca’s real estate market.

The real estate market…is booming,” Martinez-Lizardi and Gilbert said in a joint e-mail interview. “There are many opportunities for investment properties, or [for] simply finding a wonderful home.”

Opportunities to invest in Oaxaca real estate include colonial homes or hotel properties in the downtown area and homes and raw land available in surrounding areas, where investors can “renovate or build their dream home for a fraction of what it would cost in the United States,” according to Martinez-Lizardi and Gilbert. Investors can also purchase and subdivide a large parcel of land.

A building lot equipped with electricity, pavement, sewers, phone service and either cable or satellite in the area can be bought for 1,500 to 3,000 pesos ($142 to $284) per square meter, according to Starkman. Building costs run from 3,000 to 5,000 pesos ($284 to $474) per square meter.

Martinez-Lizardi and Gilbert said that investors should “act now,” as property prices in Oaxaca will eventually rise like those of San Miguel de Allende, a town in the state of Guanajato that has a prominent community of American and Canadian expatriates.

There are a number of considerations that should be taken into account upon speculating property in Oaxaca.

Investors should take measures to ensure that they are buying property with clear title ownership. First, investors should only consider purchasing privately owned property, which is becoming increasingly available as communal land holdings, or edijal, are converted, according to Starkman.

Completing proper paperwork is critical in making sure there are no liens or disputes in the property of interest, according to Martinez-Lizardi and Gilbert.

The process of performing a title search, however, may not be as straightforward as property in the U.S.

“You’ll need the assurances of a notario publico, a specially licensed attorney appointed by the governor charged with asserting that documents do not contain any legal inconsistencies, and in some cases, an additional advocate to research the title,” according to Mike (“Mexico Mike”) Nelson, author of a dozen books on living and travel in Mexico.

Perhaps the foremost risk in investing in Oaxaca real estate is the potential for violent political demonstrations, similar to those of 2006. Thus, investors who wish to reduce this type of exposure might wish to buy property in the suburbs of Oaxaca because it is “less susceptible to any conflict or unrest,” Starkman said.

An additional risk is posed by the fluctuations in Oaxaca’s economy, which is largely dependent on tourism, according to Starkman. Recent factors such as the weakening of the U.S. dollar and inaccurate media reporting about civil unrest have had a negative impact on the tourism sector.

“When tourism takes a hit, everyone in the state feels it,” he said.

Lastly, investors who are interested in buying Oaxaca real estate face the challenge of overcoming language barriers. The large indigenous population of Oaxaca is composed of a multitude of different tribes; many speak their indigenous tribal language and some do not speak Spanish at all.

However, a growing number of English-speaking realtors have emerged to assist investors with their needs.

“Several years ago there were no English speaking realtors in Oaxaca able to assist the flow of people investing here,” Martinez-Lizardi and Gilbert said. “We are now among a handful of realtors that speak English and are knowledgeable about the practices, rules and regulations in the local area.”


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