Tulum real estate is making headlines for undergoing a serious crash in recent years. Despite this, there is still a lot of construction happening in town with appealing architecture. But, is Tulum real estate investing a good idea right now? We’ll explore in detail and see that there is substantial oversupply in the Tulum real estate market market.

I obtained permanent residency in Mexico, specifically in the Mexican state of Quintana Roo, and must admit that I quite like it here.

Mexico’s Economy: Macro Overview

Mexico has attractive demographics

People tend to forget that Mexico is an absolute behemoth population-wise, with its 131 million inhabitants. It is the second most populous Latin American country after Brazil, with 212 million people, and well ahead of the third, Colombia, with 53 million people.

A large economy that has been growing steadily, but somewhat sluggishly

The most objective way to look at the country’s growth is on a per capita PPP basis, to capture how much people are really gaining from GDP growth.

These numbers are decent, but in all honesty, they are a bit disappointing when considering the (mostly) free trade agreement with the US and Canada. A massive country with such a surplus of affordable labor, should objectively be doing better.

A slightly disappointing current account for such a large manufacturer

Again, with the free trade agreement with the US, Mexico should be doing better.

This is in spite of booming remittances

Remittances from Mexicans working in the US represent 4% of Mexican GDP, and are a lifeboat for many families. Uncle Juan in Oakland provides more of a safety net than the Mexican government does. It also demonstrates the industrious work of Mexicans in the US, considering the amount of Mexicans did not grow by such an amount proportionally over time.

Clearly, Mexicans in the US have been gradually moving up the food chain in terms of income.

Near-shoring in Mexico, a bedrock of the Mexican middle class

The world is bifurcating between East and West, with a third, more neutral block in-between just as during the Cold War (Mexico is in this latter block).

The inevitable result of all of this drama is that re-shoring will become a top priority for Western companies and governments. After outsourcing most of its production of goods to China over the past 20 years, the US finds itself in a situation where it is choosing to re-shore production and reduce its exposure to China.

Western companies, whether they like it or not, will have to diversify away from China. A lot of this production will go to the likes of Vietnam, etc. But an obvious candidate is just across the border. Mexico will be in a prime position to massively benefit from this de-globalization and re-shoring trend.

This is a net positive for the Mexican economy, and it will translate into more local tourism internally and investment in the local real estate sector.

Trump’s election is a negative for Mexico

Trump is clearly triggered by this here:

Trump is known for his Mexico bashing. The next four years will be tough for Mexico, especially with the current left-wing administration in place, though president Sheinbaum has for now managed the relationship with Trump quite well. Trump will most likely make life tough for Mexico, which will negatively impact the country’s economy and incoming foreign investment.

Mexico elected a government in favour of more regulation

In the presidential elections left candidate Claudia Sheinbaum was elected.

She ran on an anti-mining, higher tax and greater state involvement platform.

Having said this, Mexico is a complex country. Just as the government does not have the monopoly on violence (which it shares with cartels), it also does not completely control the economy.

However she has made some very expensive commitments such a massive scholarship program and government price fixing of basic goods.

The state owned oil company, which has been chronically mismanaged by all Mexican governments, is in real trouble. Its liabilities total $120 billion, which amount to over half of the country’s foreign exchange reserves of $200 billion.

Mexico used to be a net exporter of energy, but is now a net energy importer with no viable plan to change this.

Mexico is a country with decent government finances for now

In a world where Western government debt to GDPs ratios hover around 100%+, Mexico’s figures are quite sobering.

Mexico has an economy that will muddle through, but with pockets of excellence

I don’t expect explosive growth in Mexico, just the usual below potential, yet steady growth that Mexico is used to. The policies of the current government, and the election of Trump will just lower the growth of Mexico but are unlikely, unto themselves, to lead to any short-term recession, barring a worldwide slump.

The pockets of excellence driving the Mexican economy will undoubtedly be in the North close to the US border in wealthy cities such as Monterrey, which benefit in full force from the near-shoring trend.

However, I believe that Playa del Carmen, Tulum, and Puerto Vallarta will also be key beneficiaries as the rising middle- and upper-classes of Mexico seek lifestyle housing, investment properties, and themselves spend time in the nicest resort/beach towns of Mexico.

The Tulum real estate market crash

During the pandemic there was a massive boom in Tulum as the Riviera Maya was one of the few places in the world where things remained open with relatively limited restrictions. This led to landlords making a killing because the inventory of housing back then was quite limited.

Naturally, this led to many developers starting projects. Too many.

Fast forward a few years and while tourism in Tulum far exceeds pre-pandemic figures, it has not matched arrivals during the Covid-era peak. This combined with the increased supply of real estate means rental yields have absolutely crashed. In turn, investors are increasingly skeptical of Tulum real estate for rental returns, and are refraining from investing.

The construction industry in Tulum

Even though one can see a lot of construction in Tulum, the reality is that sales are not keeping up with the amount of units developers have put on the market in pre-sales . Therefore:

• quite a few developers have gone bankrupt
• many are in arrears, are late with construction, and could very well go bakrupt in the next year or two
• a few developers are still doing ok because of good, unique projects and a track record

But it doesn’t change the fact that there is oversupply

There is a clear case of oversupply in the Tulum rental market. Supply is still increasing faster than tourism. This glut of supply could very well last for a few years.

The result is that rental yields have absolutely crashed. Condos are hard to let both on the long-term and short-term markets due to an ongoing price war and supply glut. Only in some segments, very high-end villas, can one get net rental yields of about 8%. Otherwise, expect your rental income to just cover your expenses.

Luxury villas in Tulum are performing decently on the rental market as there is limited supply. Tulum airport is attracting a high-end clientele that formerly did not want to hassle with a two-hour drive from Cancún airport.

The resale real estate market in Tulum

Buying condos on the resale market is now a nice opportunity. Investors who had bought Tulum real estate being promised very high returns by developers are now disappointed. Many are looking to sell.

The problem is that developers offer high commissions to agents, and selling off-plan is easier than dealing with a resale market transaction, so agents rarely orient their clients to the resale market, especially because the commissions are much smaller.

But if you work with a Tulum realtor such as Luigi who is willing to find resale market listings, there are great deals to be made as the buyers are few, and the sellers keen.

The play here is for two types of investors:

1. If you are a lifestyle investor, you can find great deals on the secondary market without having to wait for the construction of a new condo.
2. If you are a long-term investor, you can buy cheap, rent out to cover expenses, and wait long term for the market to improve thanks to multiple catalysts in place. It won’t happen overnight. Objectively though, if you are a pure investor Playa del Carmen real estate is a better option.

5 Long-Term Catalysts for the Tulum Real Estate Market

Again, this real estate crash could last a few years. I am not trying to make the case that things are about to pick up anytime soon. The following are just long-term catalysts that will help Tulum recover in the long run after it has solves its current issues.

1. Staggering development in the Riviera Maya

The government has made it a key national priority to develop this whole region. I don’t need to elaborate too much on Cancún airport, which is Latin America’s 4th largest by passenger volume (after Mexico City, Bogotá, and São Paulo). Almost 15 million (mostly tourists) flock through its terminals every year. Cancún Airport is even better connected to Europe than Mexico City for example.

Let’s not forget that originally, Cancún was nothing. It was just a stretch of picturesque coastline. In the 1970s the Mexican government decided to create a resort city there and national funds were used to develop infrastructure and hotels.

So yes, the Mexican government can be rather inefficient in many regards, but it pulled this one-off as Cancún is now one of the world’s top beach destinations.

The Mexican government is doubling down. It has built an extensive railway system linking Cancún to the rest of the Southern coast and Yucatán. People call it the “Maya train” as it covers all the main tourist attractions such as nice beach towns, airports, Maya ruins, and colonial cities such as Valladolid and Mérida.

Importantly, Tulum will be one of the key stops.

One of the drawbacks of Tulum is that it sometimes feels a little small, so once the train link is established, people can easily get to Cancun to do what they need to do there. This extra accessibility is a catalyst.

Additionally, the government has recently opened a second international airport in the region, in Tulum.

The airport is already operational and is a 40 minute drive from Tulum. There are flights to Chicago, Dallas, Panama, Mexico City, Houston, Toronto, Frankfurt etc. and is a good catalyst for the Tulum real estate market.

Overall for now these projects are bigger than Tulum needs, which is visible as they are partially empty. But the key point is that the government has planned for scale and growth.

2. Digital Nomads

The reality is that a few hour’s flight away from Playa del Carmen is a massive market of high-earning Americans who simultaneously realized a few things:

1. They can work almost entirely remotely.
2. They can work from abroad, thus leaving behind an increasingly toxic environment. This perception of toxicity applies to Americans of all political stripes.
3. They can live a quality life for less money abroad and in many cases can save on taxes if structured properly.

Millions of Americans have either reached these conclusions, or soon will. Europeans too, but the main market in Playa del Carmen will be North Americans as they are closer, the time zones are the same, and they earn more than Europeans so are inherently more interesting target customers.

First-time American digital nomads will stick to the name brands in terms of travel destinations, which is bullish for making a real estate investment in Playa del Carmen

Tulum is one of the world’s top digital nomad destinations, along with places like Chiang Mai, Playa del Carmen, Bali, Budapest and Medellín.

3. Refugees of North American toxic politics

The influx has already started, and is bound to grow. I am not referring to digital nomads who move here for a few months or a year before bouncing off somewhere else. I am referring to people, of all political stripes and ages, who move down to Mexico full-time. They sometimes have online businesses, but often they still have businesses back home which someone manages for them. They are retired, they live off passive income, or start actual businesses in Mexico.

Liberals escaping Trump

Unhappy with the trajectory of the US, they are moving in droves to places such as Europe, Panama, and Mexico.

Conservatives

This is the previous batch of Americans and Canadians. Typically they left during Covid and settled in Mexico. Some went back after not managing to make things work for themselves in Mexico, but many have stayed and formed communities. This type of immigration has slowed down with Trump’s election but Canadians are still going strong.

Apolitical Americans who are sick of the divisive politics in America

They just want to live in peace away from all the nonsense. The beach in Mexico is a good destination for this.

Europeans who flee conflict

Tulum has a lot of Ukrainians who fled the conflict, and Russians who relocated to flee the sanctions. Increasingly, forward-thinking Western Europeans are preparing Plan Bs outside of Europe as they feel their governments are behaving too aggressively. They fear that their governments will draw them into yet another war as they did many times in the past.

Cost of Living refugees

As inflation eats away people’s savings in Western Europe and North America, and as the healthcare systems gradually fall into decay (Europe and Canada) or become too expensive (America), many people will move down South where the cost of living is lower.

Though many such people move to Mexico, they typically do not move to Tulum as it is objectively quite an expensive destination.

4. Walkability and cycle-ability

Cancún is all about driving a car and taking cabs. This is not what people want nowadays. They want to fly into their destination, and once they settle in they want to be able to walk and / or cycle around.

Playa del Carmen is known for its walkability. Tulum on the other hand, is know for both walkability and all its cycle paths.

Looking at Tulum’s geography, there are a few clusters where people can just walk around such as in the Centro and in the Aldea Zama and Selva Zama areas. However, going between areas, or heading down to the beach by foot is a bit much.

This being said, it’s close enough that you don’t really need to take a cab. This is why many scooters, ATVs and bicycles can be seen in Tulum. This gives the town nice holiday vibes.

Many cycle lanes are being built, which demonstrates the city’s commitment to such a vision.

5. Tulum as a health and spiritual destination

Tulum is quite unique in the world in terms of its positioning with regards to health and alternative spirituality.

Sure, we have all seen the pictures of wonderful beaches, cool beach clubs packed with “influencers”, and Mayan ruins, but Tulum is also widely known as a place where people go to recharge.

Health bars, vegan restaurants, yoga classes and secular spiritual experiences of all kinds await young Gen Zs and Millennials.

Whether you personally like this lifestyle or not is besides the point. As real estate investors we must recognize that these are huge growth sectors.

Which neighborhood is best to make a Tulum real estate investment?

As Tulum is developing fast, it’s important to have proper guidance to ensure you don’t buy in the “wrong” areas. Though Tulum doesn’t look very confusing on a map, in reality, it’s easy to get lost there due to the many circular roads and an ever-changing environment.

What is unique about Tulum is that the city is expanding in every single direction.

• To the north towards the Maya Train station
• To the east towards Playa del Carmen (major highway)
• To the West towards the airport and the new mall
• To the south towards the beach areas

Investing in the North of Tulum

This area is developing fast. It goes along the road from the Centro to the Train Maya. There are quite a few developments, a few of which seem to have gone bust, but not all. A large new supermarket has just opened, and there is a lot of infrastructure development.

It’s predominantly an area for locals and for people who work full time in Tulum seeking an affordable place with decent amenities. A car is absolutely needed to live here, and it’s far from the beach. The demand for housing from foreigners is weak in this area.

Investing in the Centro of Tulum

The Centro is where most locals live but also where you find longer-term ex-pats hanging out. It’s the main strip where you can find shops, restaurants, and bars that are not beach clubs. It’s much more affordable to eat, drink, and have fun there than on the beach.

For this reason, there is demand for rentals, particularly from backpackers, budget travelers, and long-term digital nomads.

I would be careful to not venture more than a block or two north of the highway, as this area will never become premium. It is destined to be mostly developments for locals, which are cheap to build and plentiful. I don’t see prospects for interesting capital gains north of there.

The core Centro is investable however, though hardly anything to write home about. Just make sure to check your target investment on weekends, as there is a number of loud bars in the area.

Hotel Zone

Absolutely lovely area; the reason people go to Tulum. But barely anything is for sale here. It’s all high-end boutique hotels, beach clubs, and cute shops.

People often wonder why it’s not possible to build anything on the third and fourth lines behind the beach. The reason is that most of the area cannot be built due to environmental restrictions and issues with aquifers. This is the core reason why the beach area is so far removed from the rest of Tulum.

Aldea Zama

This is my one of my preferred neighbourhoods for investment purposes. Why?

This area has cute cafes, co-working spaces, cycle lanes, and cool buildings with amazing architecture. It is extremely livable and is halfway between the Centro and the beaches. There is a lot of construction going on, and many people are living mid to long-term in this area.

Probably the best areas for families as well.

La Veleta

Interesting growth area that is visually halfway between Centro and Aldea Zama. One can see a mix of old and new buildings. Many mid- to long-term visitors choose this neighborhood because it is pleasant and more affordable than Aldea Zama. In this area you’ll find a younger contingent of Digital Nomads.

Region 15 & 8

This is the epicenter of the real estate crash. Apart from one or two roads that are investable, I would completely avoid this area. Why?

One can find massive developments with hundreds of generic apartments in the middle of the jungle without paved roads and signal. These units are impossible to rent out. And if you want to live there, you might as well go to La Veleta for similar prices. A lot of the projects are in trouble here. Some buildings are nice, but the reality remains that there is practically 0 demand for such apartments at this stage.

I would really avoid it for many years to come.

Pino Suaréz

The whole area is a gated community, with further independent gated communities inside.

It’s a super early stage investment. Here the play is land. It is not very expensive for land that is very close to the beach and the hotel zone. Some villas have already been built, but it is still very early days. I see this as a land bank for very patient investors.

Selva Zama

I see this area as an early stage Aldea Zama, but with a long road to maturity. It will take years and years before a similar vibe can be achieved. The infrastructure, unlike in regions 15 & 8, is respectable, but there isn’t much development at all. Some projects seem to be failing. Although, a few of the projects are pretty crazy looking, and those typically do a bit better.

If I were to invest here I would invest either close to Aldea Zama or close to the beach. Not in-between.

Tulum 101

Beautiful project which is unique in the sense that it is the only masterplanned community in Tulum. The advantage is that you are guaranteed to know what you neighbor will look like. In other areas, if there is an empty lot next to your place you never know what could be built there.

Tulum 101 is definitely a very premium project and has a great location. The finished units are very nice. There is a still a lot of construction going on. It’s a huge project in its infancy.

Would I buy this for rental income? No. At the current valuation this is mostly a lifestyle play.

Who Should Invest in Tulum Real Estate?

People who want to spend part of the year in Mexico would do very well making a real estate investment in Tulum

It is great for those who want both a lifestyle option plus a place they can rent out. Tulum is an amazing destination, there is a lot to like about it, and it is absolutely possible to spend a few months of the year there as a tourist, or even obtain Mexican residency, and then rent out the apartment on Airbnb for the remainder of the year. If people want to maximize their ROI, I recommend they list the condo on Airbnb from mid-December until the end of April, which is the peak season.

A real estate investment of at minimum $300,000 using the right structure qualifies the investor for residency in Mexico, and there are many other ways to qualify.

People who like buying from desperate sellers

The Tulum real estate market is inefficient. Agents are incentivized to sell new developments as the commissions are higher and the transactions easier. If you are patient, and work with Luigi, one of the few realtors in Tulum working on the secondary market, you can find great deals.

Land banking is also a decent option for people with a very long term outlook. Sellers of land are quite flexible these days as few new projects are starting from scratch.

People who want rental yields should aim for very high-end Tulum villas

It’s a very niche market, but people are making good yields from very specific villas.

Conclusion: Real Estate Investment in Tulum Mexico

Overall I see the Tulum real estate investment market as a diversification and lifestyle play for people who know exactly what their objectives are and are realistic. Just be very careful with pre-construction as a lot of developers have cash flow issues and bankruptcies are set to increase.

Contact Luigi for to invest in Tulum Mexico

Luigi, originally from Montreal, has been living in Mexico for many years. What I like about him is that he also does the secondary market in addition to selling new developments. This offers investors the full spectrum of opportunities on the market.

Contact Luigi to Invest in Tulum

Frequently Asked Questions

Available services in Mexico:

• How to Obtain Residency in Mexico
• My Real Estate Buyer’s Agent in Tulum and Playa del Carmen
• Give Birth in Mexico for Citizenship
• My Favourite Realtor in Puerto Vallarta, Mexico

Articles on Mexico:

• 6 reasons against a Real Estate Investment in Cancun
• Making a Real Estate investment in Playa del Carmen – decent diversification in Mexico
• Investing in Multifamily Housing in Playa del Carmen
• Full Guide to Making a Real Estate Investment in Puerto Vallarta
• Puerto Vallarta Investment Case Study with Numbers
• What is a Lock Off Condo & Crazy Architecture in Tulum, Mexico
• Is a house in Puerto Vallarta a good investment? Case study with capitalization rates
• We bought a house in Playa del Carmen, Mexico!
• Giving birth in Mexico as a foreigner – the complete guide

If you want to read more such articles on other real estate markets in the world, go to the bottom of my International Real Estate Services page.

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