As the US continues to plunge into uncertain times, Mexico's housing market is coming out on top. Joan Gill reports

『『Housing options in Loreto Bay range from US$350,000 one-bed condos to US$1.5 million homes. You can pick up a three-bedroom, two-bathroom adobe on a sizeable plot of land for US$400,000』』

Experts are saying the only real estate worth investing in at the moment is in emerging markets, and Mexico is high up on that list. Clearly one can find a benefit or two in investing in a non-developed nation, particularly one like Mexico which is going from strength to strength economically.

The beginnings of a boom were first felt in 2000, when the election of President Vicente Fox marked an end to the 71-year rule of the Institutional Revolutionary Party. While the Mexican per capita income is only one-fourth that of the US and the infrastructure still needs work, the economy is certainly looking up – for the years 2003-2007, Mexico's real GDP growth was an impressive 3.3 percent and in 2007 its GDP was US$893.4 billion.

Mexico's housing sector is currently leading growth in all of Latin America, further contributing to all-around economic stability in the nation. This is being boosted by falling interest rates, and the fact that only 6 percent of Mexican homes are financed with mortgages. Pretty impressive, especially when you compare this to the 67 percent of US homes that are mortgaged to the hilt.

While owning a holiday home in Mexico has always been a popular choice for US citizens, who are turned on by low housing costs and an even lower cost of living, Europeans are now getting in on the act. Sales in beachfront resorts have increased 60 percent in the last few years. Not surprising when you consider that homes sell for US$87 (HK$678.91) per square foot on average, which puts pricing on a par with Indonesia.

Around one million Americans currently own property in Mexico, a number that is expected to increase rapidly as the US baby boom generation approaches retirement age in 2011. Long-term investment prospects are therefore looking good and many expats in Mexico have seen the value of their homes double in just a few years.

Buyers in Puerto Vallarta, on the Pacific Coast, are sitting particularly pretty, as prices for condos and villas have risen by around 10 percent each year for the past 10 years.

Sandwiched between the Pacific Ocean and the Gulf of Mexico with access to the Caribbean, Mexico has much to offer potential investors. It is rich in cultural heritage and has a wonderful climate ranging from sunny beachfront to cool mountains. What's more, the government has ensured that buying property in Mexico is not the risky business it used to be.

Rather than having to buy through a bank trust which technically holds title, overseas buyers can now deal directly with the developer. Discounts of up to 30 percent are not uncommon if you are a cash buyer willing to purchase a condo on a pre-construction basis.

Bargains are scarce in prime retirement and resort areas, like Cancun or Ixtapa, but there are plenty of other options.

Previously a fishing village with only 14,000 residents, Loreto Bay in Baja California Sur is being transformed (by Mexico's National Fund for tourism development, FONATUR) into the new hotspot for tourists. The development is eerily similar to Hong Kong's own Discovery Bay, since residents will travel around the resort by foot, bicycle or golf cart. There is an international airport, marina, two hotels and a golf course.

Housing options in Loreto Bay range from US$350,000 one-bed condos to US$1.5 million homes. You can pick up a three-bedroom, two-bathroom adobe on a sizeable plot of land for US$400,000.

If you're looking for a beachfront property in Yucatan and can forgo the Caribbean-blue waters of the peninsula (think Riviera Maya), Merida (situated along the gulf) is a likely bet. The area is on the up thanks to existing tourist and recreational attractions, and a plentiful supply of cheap, undeveloped land. Here you can buy a 25-metre tract of beachfront land (or a colonial-style home downtown) for around US$100,000.

Guadlajara, Jalisco, Mexico's second most populous city is also worth a look. Known as the Mexican Silicon Valley, it's home to IBM, General Electric and Intel, and the strong local economy is likely to promote reliable growth in property prices. Construction of luxury high-rises is ongoing and while supply is limited, there is a wide variety of unit types available. For a new-built home options range from US$200,000 to US$3 million.

Potential investors should also note that compared to the growing demand from tourists and retirees, Mexico's supply of good quality rental units is severely limited. Gross rental yields for luxury beachfront properties can therefore reach around 15 percent, while they level off at 7.7 percent in Mexico City and Guadlajara.

If you are buying to rent and looking to project what the future market will hold, it's worth noting that FONATUR is putting a lot of money into Mexico's tourist industry. And while the number of tourists is increasing annually, the country is becoming more and more accessible. In addition to the main Mexican airlines Aeromexico and Mexicana, major European (and US) airlines frequently fly to Mexico City and notably, Cathay Pacific now offers regular flights from Hong Kong.

If you're interested in Mexico, the time to act is now – the tourists and baby boomers are not the only ones who'll soon be fighting over your property. As the US economy worsens and conditions in Mexico improve, many migrants are returning home; this means up to a possible 11 million Mexicans living in the US may be looking to rent (or buy) in Mexico in the near future.