Puerto Vallarta: A Real Estate Success Story
What we can establish as being “a success”? Well, in 2000 Puerto Vallarta had roughly $50 million in resort real estate sales (“resort real estate” is defined as real estate purchased primarily by retirees or second-home purchasers). There were rarely homes selling for more than $1 million and few large real estate developments. In 2007, there was more than $500 million in resort real estate sales, with condos selling for over $2 million and homes in excess of $5 million. There were more than 100 developments spread out around Banderas Bay, allowing Puerto Vallarta to lead in sales volume for resort real estate in Mexico, ahead of major markets such as Los Cabos, Acapulco and Cancun.
So what happened? How did Vallarta become so successful?
Actually, it wasn’t planned that way. Puerto Vallarta was more of an accidental success story. While Cancun and Los Cabos were planned as resort destinations from the beginning, with FONATUR, the tourism resort development arm of the Department of Tourism, actually building planned resort developments, FONATUR was not involved in Puerto Vallarta. There was no plan; it was more of a mosaic of different thoughts, ideas and inspirations of some unique individuals, people who came not just from Mexico but from all over the world for a little bit of paradise.
Real estate development in Puerto Vallarta began simply enough in the ‘50s and ‘60s, with small-time Mexican builders putting up homes for Americans on the hillside behind Vallarta. There were enough Americans living there that the area became known as “Gringo Gulch.” The most popular builders of this time were Freddy Romero and Guillermo Wulff. Romero was known for planning the layout of the homes with a stick, drawing out the rooms in the dirt of the property. The style they incorporated, including the introduction of the cupola, would become what is known today as Puerto Vallarta’s architectural style. At this time, there were a couple of three-star hotels but no condominiums. It was a simple market built on the desire of Gringos to have a home here.
In the ‘70s, as Puerto Vallarta became more popular, largely because of two of its most famous residents — Richard Burton and Elizabeth Taylor, demand was created for four- and five-star hotels, primarily in the Hotel Zone. Gringo Gulch was filling up, so builders such as Wulff, now joined by others such as Bernardo Applegate, started building farther south, on the hillside of Conchas Chinas. Homes became larger and more stylish as homeowners and Wulff tried to outdo one another with each home built. Small condominium projects were introduced, but they were just that — quite small, with less than 20 units.
As the demand for real estate in Vallarta increased and Vallarta entered the ‘80s, larger condominiums developments were built. Los Muertos beach became popular for both hotels and condominiums, Rosalinda Perez building one of the first large condo projects along this beach. Guillermo Wulff expanded his construction business by moving into hotel and condominium development. Because financing was difficult to obtain and Wulff always seemed to be short on cash, he built by granting units to those involved in the project. The electrician, plumber, window supplier, etc. would all end up with condominiums — an easy way for Wulff to finance his ever larger real estate developments.
It was in the ‘80s that the Martinez Guitron brothers came from Guadalajara and developed a piece of land between the Hotel Zone and the airport that, at the time, locals thought was too far from town to ever be popular, called Marina Vallarta. This was the beginning of Grupo Situr, which would have similar developments and hotels throughout Mexico by the mid ‘90s. One of the first to build in Marina Vallarta, really helping get the development going, was Guillermo Wulff. This time, he got old friend Liz Taylor to help with the marketing of his latest and largest development to date, Club de Tenis, Puesta del Sol. He had built homes for both Burton and Taylor over the years and informed her if she bought one of the units, he’d give her a second one free. Liz arrived in town with George Hamilton, and a picture was taken with Liz, George and Guillermo. It was a brilliant marketing move, and after that, everyone wanted a condo in the same place as Liz Taylor. Marina Vallarta offered larger sites for developers along the oceanfront and inside the marina. Soon, five-star and Gran Turismo hotels were built, moving Vallarta in a new direction. Nuevo Vallarta, a similar development in the neighboring state of Nayarit, was also developed around this time, but it was having difficulty getting going; it was just too far out of town. Vallarta’s first gated community, Sierra del Mar, also was introduced at this time by the Osuna family, situated just south of Vallarta on the hillside of the Sierra Madre foothills.
As Vallarta moved into the ‘90s, development continued in Marina Vallarta and Nuevo Vallarta, primarily condominiums and large hotels. As Vallarta continued to grow, people started looking at smaller communities to the north, such as Bucerias, La Cruz de Huanacaxtle, Sayulita and San Pancho, to build their homes. Oceanfront property in Vallarta was becoming expensive and limited, so they moved farther north.
In 1994, however, Mexico began to run into problems. Interest rates shot up, credit was impossible to come by, and many large developers, such as Grupo Situr, did not survive. These were tough years for real estate development in both Mexico and Puerto Vallarta. Development slowed down and did not really recover until the beginning of the next century, in the 2000s.
And did it ever recover! The existing mega-developments of Nuevo and Marina Vallarta finally began to fill up, with sub-developers picking up whatever remaining lots were still available. In Nuevo Vallarta, where Canadian Graciano Sovernigo had moved to develop Paradise Village, this sleeping development was now in hot demand for home, condo and hotel development. Two golf courses were added, as well as a marina. To the north, another major mega-development, Puerto Vallarta, was created, along with Flamingos next to Nuevo Vallarta. These projects were in development at the end of the ‘90s or beginning of the 2000s, but were having difficulty finding investors. However, what they did do was offer choice development properties with all the infrastructure in place, so when the market really kicked off in 2003, they were ready.
So, what happened to start the incredible growth the region saw begin at this time? It was a combination of the 9/11 disaster in the United States and its economic recession after the tech bubble burst. Hardworking Americans had a wake-up call and started rethinking their lives, how much they were working and if they were really enjoying themselves with their families, as they should be. They had been burned by the stock market and thought that real estate would be a good place to have their money this time. And it was when Baby Boomers were just starting to retire. Mexico was temperately warm, friendly and very close by. The Mexican economy was doing well, and the country and government were stable. But most importantly, with mega-developments already offering prime real estate ready for building, the region was ready.
Condominium projects and expensive home developments took off around the bay. Today, there are five mega-developments, with more than 100 projects under construction. There are seven golf courses, with three more in the planning or development stage. There are three marinas, with more boat slips than anywhere else in Mexico. And Vallarta, or Costa Vallarta as the region is now known, continues to offer myriad real estate options and price points. Although there are now million-dollar homes and condos available up and down the coast, there are still properties available for around $100,000 USD — you just won’t be on the beach.
Puerto Vallarta has a number of advantages over other resort destinations in Mexico. An important advantage is the hills of the Sierra Madres that surround the bay. This has allowed for homes on the hillside to be nearly as valuable as beachfront because of the spectacular views they can offer. This is something that Cancun, and Los Cabos to a certain extent, can’t provide. Puerto Vallarta also has the downtown central area, which has retained its charm and character. There is the Malecon boardwalk, unique to the town, along with a river running through the middle of town, creating the Cuale island — the town’s “Central Park.” To the south, it is rich in tropical foliage, whereas to the north it becomes semi-arid. There are numerous rivers flowing into beautiful Banderas Bay, a bay perfect for boating, offering wind for sailors nearly every day of the year. Vallarta is close to major markets in the USA and has excellent airlift from major airlines servicing the region. Although there was no major plan established for the destination, all the pieces necessary to create a successful resort real estate destination were in place when the demand built up in 2003.
When you lay it all out like that, it’s actually quite easy to see how Puerto Vallarta became a successful resort real estate destination.