Mexico is Looking to Ease Restrictions on Foreign Ownership

Last week, the lower house in Mexico’s congress voted 356-119 to approve a constitutional amendment that would make it legal for foreign citizens to own residential property in the so-called Restricted Zone.  While this measure still needs to pass the upper house of Congress as well as the majority of the State Senates in order to become law, last Tuesdays vote is a good solid step in that direction.

What does that mean to you?

If you are a non-Mexican looking to buy a residential property (a home, condo, land or other property zoned for residencial use) anywhere within 50 kilometers (31 miles) of the coast, or 100 kilometers (62 miles) of the national borders, you currently cannot own that property directly… you would purchase it through a mechanism called a Fideicomiso de Zona Restringida, or Restricted Zone Trust.  The trust gives actual title to a financial institution (the trustee) while granting you (the beneficiary) all of the benefits of ownership.  Have a look at my FAQ for more information on owning property in the restricted zone. If you would like more detailed information about the whole process, sign up for my free e-course to get the nitty gritty (plus you can download a free copy of my Early Payoff Mortgage Calculator!)

The fideicomiso system works well and has been functioning since the 1970’s, but it involves an annual fee, usually around 4 or 500 U.S. dollars, plus set up fees in the neighborhood of $1,500 USD.  This new legislation would mean an end of the fideicomiso/trust system for foreign owners and a resulting lowering of acquisition and holding costs for the property.  One of the great attractions to owning in Mexico are the low holding costs.  Property taxes are quite low, in most cases lower than the trust fee, so removing the trust fee payment represents a significant reduction in an already low cost.

We’ll be watching this issue with great interest… though it is far from a done deal. Some groups are opposed to it, citing fears of foreign colonization of Mexico, as well as speculation and the buying up of choice properties by foreign interests.  All non-issues IMHO, as these things are already happening with or without the new amendment (and without any challenges to Mexico’s sovereignty). Plus the government’s ability to monitor, communicate and enforce it’s boundaries (much greater than it was 96 years ago when the constitution of 1917 was ratified) mean that it would be very difficult indeed for any type of annexation to take place… but they aren’t asking me, so the debate will continue. And we will continue to watch!

Any opinion?  Leave a comment!