A 2015 Best Places in the World to Retire study, Expats: Expectations & Reality, found that nearly nine in 10 expats cited the lower cost of living as the reason for their moving. Of course, most people don’t move solely because of a lower cost of living. They consider such things as the weather, safety and the availability and quality of healthcare.
But this may be a particularly compelling time to consider a move for those who receive their income in U.S. dollars. That’s because of the improving exchange rate between the U.S. dollar and Mexican peso. It’s becoming cheaper to buy and rent products and services in Mexico.
Let’s say that you want to rent a home for 10,000 Mexican pesos a month. On Jan. 1, 2015, you would have had to exchange $674 for your rent. One year later, you would have had to exchange just $579. That’s a more than 14% rent reduction solely due to the increasing strength of the U.S. dollar.
If you’re in Mexico now, this is the time for that big purchase: certain new cars, plastic surgery, hip replacement, new crowns. All these items were a bargain before. Now they are a steal, “said Mitchell Keenan, an American who used to fly for Continental Airlines and moved to Mexico over a decade ago.
Thomas Hellyer, formerly from Washington and now a resident of the Lake Chapala, another area popular with expats said that “Americans living here can easily afford to have maids and gardeners, eat out often, travel within Mexico, remodel their home, purchase a new car, etc.”
Hellyer said that high-quality health care, which was already low, has become more affordable. “In our village,” he said, “a porcelain crown costs less than $200 and can be fit almost immediately since it is made by a 3D printing machine. A 30- to 60-minute doctor’s visit paid in cash costs less than $30. It’s easy to say that it is a very good time to live in Mexico if you have savings or income is in U.S. dollars.”
The strength of the dollar is felt most strongly on items that are produced in Mexico. Businessman Alfonso Galindo who used to live in Santa Barbara, Calif. and now makes his home in Merida said that expats collecting a pension in dollars have seen a big increase “in purchasing power over the last few years when they buy Mexican products.”
To be sure, the peso price of Mexican American imports might rise.
Some economists would tell us that the peso price of American imports should rise and offset the exchange rates, thereby negating Americans’ advantage. However, Galindo and other survey respondents say that hasn’t happened, or that the impact has been minimal. For now, even American expats who are buying American products in Mexico with Mexican pesos are getting a better deal than they used to.
Thomas Hellyer said that the strong dollar had not had a strong impact in “in popular expat and tourist areas.” “Most of the real estate sale and rental prices are denominated in U.S. dollars, and while we have seen those U.S. dollar prices go down, in many cases, the decrease has not been as significant as the exchange rate difference,” Hellyer explained
The 10,000 pesos can buy a large, comfortable place, too. Armando Contreras, a Mexican national in the Puerto Vallarta area, said that a recent client is paying that amount for “a 3,500 square-foot, 5 bedroom, 4.5 bath villa in a secure community with a gardener and a view of the Pacific Ocean.”
The exchange rate works favorably for people purchasing properties, as well.
Wade Yarchan, a former Floridian who sells homes in the beach areas around Merida in the Yucatan Peninsula, said that the price of a home that’s been for sale for 1.4 million pesos has dropped from $100,000 to $79,000 because of the changing exchange rate.
Some expats believe such improved values will spur an influx of knowledgeable investors and retirees to the Yucatan. Among the observers is Gary De Spiegelaere, a Canadian businessman and property owner and developer who now lives and works in Celestún, a beach area in the Yucatan.
The favorable prices carry over to areas outside real estate.
De Spiegelaere said that peso prices might change over time to reflect the changed exchange rate. “Most of the smaller retirement places in the Yucatan still sell and provide services based on pesos, so the costs to retire here are as reasonable as they are ever going to be,” he said. “However, over time, the locals will catch on and raise prices for their goods and services.”
Living or moving to Mexico won’t create some price panacea. That’s especially true if you buy lots of goods imported from the U.S. and homes with prices denominated in U.S. dollars sold mainly to Americans. However, you will see a significant amount of savings, especially if you are savvy. As Wade Yarchan says, “I love the look on peoples’ faces from the USA when they hear the price for a home here translated to U.S. dollars. Always smiles!”
by Chuck Bolotin
Chuck Bolotin is the founder of BestPlacesInTheWorldToRetire.com, which has over 6,000 answers and more than 200 expat stories and interviews contributed by more than 400 experts about retiring, moving, and doing business overseas. In addition to TheStreet, Bolotin’s articles have appeared on Next Avenue, Daily Finance, Forbes and MSN.com. He is a frequent lecturer at Eller College of Management, MBA Program, University of Arizona, and Mentor, Arizona Center for Innovation.
Source: http://www.thestreet.com/