The Puerto Vallarta real estate market is largely driven by tourist visits and expatriate purchases. According to census data, Puerto Vallarta’s population was 177,830 in 2005, a year notable for the city being voted by Conde Nast Travel Magazine as the friendliest city in the world. That makes Puerto Vallarta the fifth largest city in the state of Jalisco. It is situated on the west coastline just west of Guadalajara. However, tourism numbers can cause the population of the city to expand as much as 80,000-100,000 bodies during the high season. The municipality of Puerto Vallarta occupies 502.19 square miles and has a view of the Sierra Madre mountains [1]. It is estimated that over 5,000 expatriates live in Puerto Vallarta.
Compared to other tourist destinations in Mexico, Puerto Vallarta’s real estate market is fairly well developed. It was home to the first multiple listing service in Mexico, multi-list Vallarta. Despite an MLS service, real estate practices are not regulated by the government for licensing.
Puerto Vallarta is located in Banderas Bay on the Pacific coast of Mexico. As a result of all the property in Puerto Vallarta is inside the restricted zone. The restricted zone prohibits fee simple ownership, but similar control can be acheived through ownership through a Mexican trust known as a fideicomiso.
HISTORY
The first major hotel was not built in Puerto Vallarta until 1948. Since then it has grown rapidly as a tourist destination. Puerto Vallarta gained much of its notoriety in the 60’s and 70’s as a result of government investment in infrastructure, change in foreign ownership rights and the popular Elizabeth Taylor/Richard Burton film the Night of the Iguana. In 1973, the Mexican government instituted fidiecomiso ownership, giving foreigners the ability to have the equivalent of title to property within Mexico’s protected zone.
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In the late 1980s Puerto Vallarta saw major growth through the development of Marina Vallarta. This took the stress off the downtown area by providing a new type of residential product, the beachfront and/or golf course home. One of the benefits of this pressure relief was that the downtown area was able to preserve much of the colonial feel for which the Malecon is famous. Within six years the Marina was basically sold out, just as market demand was dwindling. By 1994, there were essentially no new developments or projects starting and the Mexican economy soon put a stop to whatever market there was. Transactions then consisted purely of re-sales, which ultimately took care of the excess supply. Prices reflected this down swing and began to moderate and in some markets show a loss. By 1997 there began to be more of a demand for product than what was available.
Added demand led to development sprawl to outerlying locations such as Nuevo Vallarta and Punta Mita. Growth in Puerto Vallarta may have also been aided by the North American Free Trade Agreement (NAFTA). According to Silvia Elias, of PV Realty and President of AMPI, Mexico’s association of professional realtors, the NAFTA agreement “was the major reason for the real estate boom in the coastal areas of Mexico. It gave security to buying real estate in Mexico. This, as well as the modernization of Mexican laws pertaining to the conversion of ejido-agrarian land to private status for investment, have increased real estate opportunities tremendously.”
TOURISM
Tourism makes up roughly 50% of all economic activity in Puerto Vallarta according to puertovallarta.net. The high season for international tourism in Puerto Vallarta extends from late November through March. The city is especially popular with US residents from the West Coast because of the number of convenient flights that exist between Puerto Vallarta and Los Angeles, San Francisco, Salt Lake and Seattle. The air routes between Puerto Vallarta and Los Angeles and Puerto Vallarta and San Francisco are by far the most heavily traveled of all air routes into the city.
Puerto Vallarta is also a popular destination for Mexican tourists. Guadalajara is less than 250 miles from Puerto Vallarta and has become a popular weekend destination for Guadalajara’s more affluent residents. Mexican tourism leads to particularly high volumes of tourists during Mexican holidays, such as Semana Santa (the week before Easter) and Christmas. Puerto Vallarta may also have benefited in recent years from a rise in drug related violence in Acapulco, a common destination for tourists from Mexico City.
INFRASTRUCTURE
Puerto Vallarta’s population has increased six-fold since the mid-1960’s. This has created a strain on local infrastructure at various times during growth. In 1993 BiWater was awarded the first sewage privatization project made by the Mexican government for revamping Puerto Vallarta’s sewage processing capabilities. The project became the first privately financed ‘greenfield’ site sewage treatment plant in the world through financing by the International Finance Corporation and the Mexican Bank of Public Works (Banobras).
Sources:
1. Kifle, Yemisrach. “Puerto Vallarta Real Estate Sailing On “. NuWireInvestor.
The Canadian Geographer, Volume 52, Number 1, Spring/Printemps 2008 , pp. 83-104(22)
BiWater Case Study on Puerto Vallarta
Vallarta Lifestyles, Summer 1999
