La Paz - North Americas Next Emerging Market
To understand why La Paz is poised to enjoy rapid growth in sales volume in the future, and become the next emerging market, it is first important to look at a number of dynamics, including a summary of market conditions throughout top resort area on the west coast of Mexico, access issues, labor markets and the influence of FONATUR.
Summary of Mexico’s Pacific Coast Market Conditions
Due primarily to strong demand from affluent U.S. second-home buyers, major resort and second-home destinations around the Sea of Cortez and along the Pacific Coast of Mexico have seen prices, sales volumes, and overall demand surge to record levels over the past several years.
When examining results of recent sales volume estimates from data compiled in Los Cabos, on the East Cape, in La Paz , in Loreto, in Puerto Peñasco, in San Carlos, in Mazatlan, in Puerto Vallarta, and in Manzanillo, it is estimated that total second-home sales (excluding time shares, but including re-sales and developer-owned product) in Mexican oceanfront resort areas on this stretch of the Pacific Coast and around the Sea of Cortez was approximately $2 billion over a 12 month period in 2006. The vast majority of this volume – likely more than 80 percent – comes from U.S. buyers, with Canadians and Mexicans accounting for the remainder. The chart below illustrates the approximate volume of second-home sales in this region over these periods.
Estimated Sales Volume of U.S. Second-Home Purchases on the West Coast of Mexico
Location Sales Volume Percentage of Total
Los Cabos $800 million 39%
East Cape $50 million 2%
La Paz $25 million 1%
Loreto $135 million 7%
San Felipe $110 million 6%
Puerto Peñasco$150 million 7%
San Carlos $80 million 4%
Mazatlan $85 million 4%
Manzanillo $40 million 1.5%
Puerto Vallarta $550 million 27%
TOTAL $2 Billion
Two factors should be noted from this data the first is that La Paz’s neighbor two hours to the south Los Cabos supports the highest prices on the west coast of Mexico, it also generates by far the largest sales volume and its share of the market has grown sharply over the past several years. Secondly La Paz with 1% of the regional market share has tremendous upside potential to grow in the future. La Paz appears particularly poised to enjoy rapid growth in sales volume in the future, as access shortcomings continue to be solved and as new resorts and communities are developed as proposed.
Unlike Los Cabos to the south, where due to the rapid escalation of land values and concerns over unconstrained growth fueled by speculative buyers, the Cabo market has begun to show signs of the market slowing, the market in La Paz continues to grow. You are now seeing the trend of both developers and investors are now moving 2 hours up the coast to the north to the more affordable capital city of Baja California Sur, La Paz, and rightfully so as land can be acquired for a fraction of the value.
Biggest limiting factor previously now the biggest opportunity
The biggest limiting factor on La Paz’s growth in the past has been accessibility issues, and now with the closing of Mexican airline Aero California in 2007, a new opportunity exists to open La Paz up to a wide new audience of tourists and investors. For years, the La Paz airport was monopolized by Aero California, while the Cabo San Lucas real estate boom was fueled by direct access international flights from a multitude of carriers. La Paz had extremely limited flights into the U.S. In fact, things became so challenged with U.S. Carriers, that for a time in 2006 and 2007, no direct flights into or out of La Paz to the US were available, which clearly limited any real estate growth in the market by American and Canadian buyers.
FONATUR and its influence on growth of Mexico's resort market
Coming soon.