Playa del Carmen is a small beach city on the Riviera Maya, close to Cancun. It is popular with digital nomads and is known for being fun and charming. Some people say it is too late to make an investment here. I don’t think that’s true, let’s dive into my in-depth case study on the Playa Del Carmen real estate market in detail!
This comprehensive real estate market analysis covers Mexico’s demographics and economy, which, despite growing at a modest pace, holds potential in key areas. We study the real estate market in Playa del Carmen, including the popular 5th Avenue and nearby areas. Our analysis includes long-term rentals and Airbnb properties, catering to various investor types—from those seeking a semi-permanent residence in Mexico to Westerners in search of a secure, geopolitically stable place to invest.
Personally, I like Playa del Carmen a lot and even obtained residency in the Riviera Maya 🙂
Mexico’s Economy: Macro Overview
Mexico’s Growing Demographics
Mexico has attractive demographics, with a fertility rate a bit above two children per woman, Mexico ranks higher than any Western country. It is quite visible when traveling around the country.
People tend to forget that Mexico is an absolute ogre population-wise with its 128 million inhabitants. It is the second most populous Latin American country after Brazil, with 210 million people, and well ahead of the third, Colombia with 50 million people.
Mexico’s Large but Slow-Growing Economy
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 taking into consideration the (mostly) free trade agreement with the US and Canada. A massive country with such a surplus of affordable labour, should objectively be doing better.
A slightly disappointing current account for such a large manufacturer
The 2022 and 2023 current account deficits are projected to be between -0.5% and -2% of GDP.
This is in spite of booming remittances
Remittances from Mexicans working in the US represent 4% of the Mexican GDP, and are a lifeboat for many families. Uncle Juan in Oakland is more of a safety net than the Mexican government. It also demonstrates the hard 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.
However, Mexico is a country with very decent government finances
In a world of government debt to GDPs in the Western world of mostly 100%+, Mexico’s figures are quite sobering.
Two Overlooked Trends Impacting Mexico’s Future
There are two massive trends that forecasters are not yet taking into account for Mexico. 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 this drama is that re-shoring will become a top priority for Western companies and governments. After having outsourced most of its production of goods to China over the past 20 years, the US finds itself in a situation where it must re-shore production and reduce its exposure to China.
The collective West installed a new sanctions regime – “If we don’t agree with you, we sanction you and seize your assets overseas,” which it did to Russia and its foreign reserves. China now knows how the collective West behaves and will seek to damage Western supply chains in case of increased tensions.
Whether they like it or not, Western companies 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 benefit from this de-globalization and re-shoring trend massively. It is a huge catalyst that is not being considered by mainstream forecasters.
In a world of natural resources supply shortages, Mexico is a prime producer
This should greatly bolster Mexico’s current account deficit thanks to exports, and render Mexican industry more competitive.
Mexico is flush with natural resources. It is the world’s biggest silver producer and a top 10 miner of gold and copper, as well as lead and zinc. It is also trying to develop its energy-transition Lithium deposits.
Importantly, in spite of government efforts to increase environmental and regulatory checks & balances on mining operations, Mexico is the 4th biggest recipient of mining foreign direct investment (FDI) in the world.
Mexico’s energy policy is a mixed bag. It is a net crude oil exporter, but net importer of refined petroleum products, and a net importer of natural gas, though it has substantial reserves. It is the world’s 13th largest oil producer and has the world’s sixth-largest technically recoverable shale gas resources.
For many years the oil & gas industry was not prioritized, was nor incentivized to explore, and the large state-owned company PEMEX was used for political gain.
The government is now trying to heavily encourage oil & gas exploration. This is undoubtedly the right decision, but it will take time for results to be visible. The current energy crisis will absolutely be a catalyst for faster action.
Mexico has an economy that will muddle along, but with pockets of excellence
I believe that Playa del Carmen and Tulum are two such areas of excellence. But before digging into the driving forces, I must say a few words on the mortgage market.
The mortgage market in Mexico is primarily for homeowners who live in their homes, rather than investment properties as the rates are really high (almost 9%).
The advantage of investing in a market with a lot of leverage is that when times are good real estate values goes up a lot, but when times are bad, they descend with a vengeance.
This is a core advantage of making a real estate investment in Playa del Carmen these days – prices are less likely to go down than in Phoenix, Vancouver, or Paris. Both locals and foreigners who invest in this market are mostly cash investors.
Evaluating the High Prices in Playa del Carmen Real Estate Market
Are real estate prices in Playa Del Carmen already too high?
Playa del Carmen is not cheap if you want to buy an interesting apartment in one of the walkable areas. It’s more expensive than Mexico City, and together with Cancun and Tulum, is the second most expensive area in Latin America after Punta del Este in Uruguay.
But unlike these other Latin American cities, prices are much more heavily linked to the North American market, as this is the main target market, as well as Mexican industrialists who are themselves very tied to the American economy.
So yes, absolute prices are expensive relative to the region, but it’s a completely different market.
Overall, I don’t feel that Playa del Carmen is a market to seek substantial capital gains. I rather see it as great diversification, a potential lifestyle play, a residency play in some cases, and mostly a cash flow play. One can get decent rental yields.
I also believe that structurally, this market has a lot less downside than most Western markets due to its cash nature, and the many catalysts.
Top 4 Reasons to Invest in Playa del Carmen Real Estate
There are 4 key catalysts that make a real estate investment in Playa del Carmen interesting:
1. Rapid Infrastructure Development in Riviera Maya
The government has made it a key national priority to develop this region. I don’t need to elaborate too much on Cancun airport, Latin America’s 4th largest by passenger volume (after Mexico City, Bogota, and Sao Paulo). Almost 15 million (mostly tourists) flock through its terminals every year. Cancun Airport is even better connected to Europe than Mexico City.
Let’s not forget that, originally, Cancun was nothing. It was just a stretch of pretty coast. 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 pulls this one off as Cancun is now one of the world’s top beach destinations.
The Mexican government is now doubling down. It is building a whole railway system linking Cancun to the rest of the Southern coast and Yucatan. People call it the “Maya train” as it’ll cover all the main tourist attractions such as nice beach towns, airports, Maya ruins, and colonial cities such as Valladolid and Mérida.
It’s not just a far-fetched plan; it’s actually happening. I saw some of the construction and building myself. There are some hiccups due to environmentalists wanting to stop the economic development, but the first stations will be operational from late 2023.
Importantly, Playa del Carmen will be one of the key stops. As it stands, one must take a one-hour taxi or bad public transport to get from Cancun to Playa del Carmen, a turn-off for many people. In the future they will be able to easily zip between the two cities.
One of the drawbacks of Playa del Carmen is that is sometimes feels a little small, so once the train link is established, people will be able to get to Cancun very easily to do what they need to do there. This extra accessibility is a major catalyst.
The government has recently opened an international airport in Tulum.
The airport is already operational and is an hour’s drive from Playa del Carmen. There will be direct flights to Chicago, Dallas, Panama, Mexico City, Houston, Toronto etc.
Henceforth, Playa del Carmen will not just be an hour away from one major international airport, but two, and connected to both by rail.
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:
- They can work almost entirely remotely.
- They can work from abroad, thus leaving behind an increasingly toxic environment. This perception of toxicity applies to Americans of all political stripes.
- They can live a quality life for less money abroad and in many cases can save on taxes if structured properly (feel free to get in touch with my tax consultants here)
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
3. North American Politics & Cost-Of-Living
North American political and cost-of-living refugees. 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.
I have met a few types of such people:
Liberals who fear a right-wing dictatorship in America
I’ve met a few of those. They fear that they are gradually losing their rights in America (recent supreme court rulings) and that the country is just waiting for a radical turn to the right.
Conservatives who fear a left-wing dictatorship in America
They feel the federal government is after them, that the IRS will persecute people, and that their rights and freedom of speech are under attack.
Apolitical Americans who are sick of all the 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.
People who don’t want to get vaccinated and who feel they have more medical freedom in Mexico. Of all political stripes. Conservatives, health practitioners and hippies. Lots of Canadians.
Europeans who flee conflict
Playa del Carmen 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 in WW1 and WW2.
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.
Granted, Playa del Carmen is not the cheapest destination in Mexico, let alone in Latin America. But it is conveniently located, English is relatively widely spoken, and it is nevertheless affordable and comfortable. We can expect tens of millions of such Westerners to leave the West in the coming decades. Playa del Carmen will attract quite a few of them, especially as obtaining residency in Mexico is easy.
Investors must understand that not all such people are “cheap”. If you earn $70,000 in Illinois you can live a decent enough life, but in Mexico you will live extremely well.
Same thing with Europeans, €30,000 per year in Belgium will afford you an average existence, but in Mexico life will be more than comfortable.
4. Walkability is a true competitive advantage
This is one of the key selling points of the Play del Carmen real estate investment market compared to Tulum and especially Cancun.
If you live in the center or near the center, Playa del Carmen is very walkable. You can lead a bit of a village life without having to buy or rent a car. In an age of inflation and high petrol prices, this makes a difference. Also, for people who just want to stay a few months, or plan to stay for a week on holidays, walkability is a key factor to avoid hassling with taxis. Playa del Carmen is also bicycle-friendly.
Why did I not mention tourism?
Tourism is obviously the number one target market for your real estate investment in Playa del Carmen with the millions of travelers landing at Cancun airport and that will land at Tulum airport in the future.
However, we must not ignore the macro environment. The reality is that we are entering a world of expensive energy, which will mean much more expensive flights and of squeezed real incomes due to surging inflation all over the Western world.
This will not be without consequences. People that could once afford to go on vacation might not next year, or might go on vacation to Mexico for one week instead of two weeks. Such a macro environment is inevitably a net negative for tourism in most places in the world. I believe that European tourists, especially, will see their numbers drop as inflation in Europe and a low Euro take their toll on people’s wallets.
This being said, domestic Mexican tourism is gradually waking up to the Riviera Maya, and there are these other catalysts that should help make up for a loss of organic tourism growth. The new infrastructure will attract people who would not have come, and all these digital nomads and refugees of various types will help fill the properties of real estate investors in Playa del Carmen.
In many cases tourism is a zero-sum game. A tourist has only X number of days to spend every year. You must remain attractive to stay ahead of the competing destinations.
Neighborhood Insights: Where to Invest and Avoid
This is crucial to understand. As much as I love Playa del Carmen, there are only a few areas that I would view as a good investment. There are many great neighborhoods for lifestyle options, but few are also good as a pure real estate investment.
“Core Hot Spot” – 5th Avenue
The first thing to know is that everything revolves around 5th avenue in Playa del Carmen. It’s a long stretch close to the beach, where all the tourist shops, restaurants, bars, cafes, and clubs are located. It’s, in many ways, the heart of Playa del Carmen’s life. People generally want to stay close to 5th avenue, but not directly on it due to noise.
“Gated Community” – Playacar
Playacar: A formerly high-end gated community that is within walking distance of the town center, making it unique among gated communities that are farther away. There is golf, a mall, and a variety of dining options. When walking around the community, one can tell that it is past its prime. However, overall, it is a very decent option for people looking to live somewhere long-term. It’s very pleasant.
As an investment I find the prices a little too high for a gated community that is fully developed and getting a little old. I don’t see much upside, and the yields won’t be as good as in the center of town.
“Core Center” – Centro
This is the area with the most restaurants, bars, clubs, shops, etc, and where first-timers will typically look to book an Airbnb. If you buy in this area, your occupancy rate will be very high. Bear in mind that, unlike Europeans, Americans have 2-3 weeks of vacation per year, so when they go overseas, they splurge. They want to be in a nice building in the best area and can afford it.
Europeans on the other hand have much more time, and less money, so they tend to spend less on accommodation. For Europeans and future growth, you should rather invest in this upcoming area.
Luigi made a video case study of an Airbnb investment unit with all the numbers. You can find it below in the article.
“Future Development” – Centro North
I like this area from an investment perspective. It’s certainly not the prettiest, with some low-income housing and bars around, but it has the advantage of being a mere ten-minute walk away from the beach, and is still mostly underdeveloped. But clearly, development will happen here.
Also, people who want to stay for a few months in Playa del Carmen don’t mind staying in this area as it is close enough to the entertainment area and the beach, and right around the corner from all the malls, Walmart, etc which are important for daily life.
One can find older apartments between 10-20 years old for about $1400 per m2 ($130 per ft2) and renovate them. These would do well on the mid-term market as they are much more spacious than new units and have a lower rental price point. Gross yields of 9%-10% can be reached with such investments.
“Growing Fast” – Gonzalo Guerrero, Zazil-ha
This area is just as expensive as the “core center”, yet there is less rental demand as it is not yet known. This leads to lower rental returns, however, it is a much nicer area than the “core center”. I firmly believe that over time people will gradually prefer to stay here than in the traditional core center. Urban planning is better, prettier, and feels more premium. I’d say this is a good area for people who want a mix of lavish lifestyles without compromising location and quality.
Personally, this is my preferred area to hang out.
“Speculation” – Luis Donaldo Colosio
Fifth avenue can only go North. For now this area is still a bit rough but new luxury buildings have started popping up, and more will come for sure. 5th avenue is the beating heart of the city, so expansion in this direction is all but inevitable.
However, the further away you go from 5th avenue and CTM, the rougher this area becomes. It’s really important to calibrate your investment. Here, the play is not Airbnb as there isn’t much demand, but rather long-term and mid-term rentals to people who either live there or spend part of the year in Playa del Carmen.
Additionally, as a kicker, the play is to sell later on for capital gains seeing that development is coming this way. For pure investors, without any lifestyle component whatsoever, who want to make the bet that Playa del Carmen will continue to grow, this is an interesting speculation.
Luigi and I also did a video case study of a multifamily unit in this area.
“Don’t Invest” – Colonia Ejidal
Forget about investing anywhere past the highway. It is vast, there is literally endless land for further development. If you buy something here, four years later there will be a new development that will be much nicer for the same price. It’s not a bad place to rent especially if you have a car, as it’ll be cheap, but don’t expect to make your capital work hard for you there.
Case Study: Long-Term Rental Market in Playa del Carmen
This real estate investment case study features a 2-bedroom, 2-bathroom condo in an older building in the core center of Playa Del Carmen, a three-minute walk from the beach. It is currently being sold with long-term tenants that are paying $1,500 per month. Here is a breakdown of the numbers.
The Numbers: Playa Del Carmen Real Estate Investment
|Closing costs (+-6% notary + $2,600 for local trust)
|Total purchase price
|Yearly rental income ($1,500 per month @ 90% occupancy)
|Administration / Property management ($200 per month)
|Yearly HOA / Common charges ($100 per month)
|Yearly property tax
|Yearly trust renewal costs
|Total yearly costs for a long term let
|Net pre-tax income
|Net rental yield ($11,200 / $278,000)
Case Study Results: Are higher returns possible?
Yes. At about $2,000 per m2 ($180 per ft2) it is much cheaper than new developments due to the age of the building and lack of amenities such as a pool. However, the location trumps it all. On Airbnb such a unit would do well, and you’d probably end up with about 6% net yield after all deductions.
If you want to get higher yields for long term rentals, it is possible to earn 5%-6% net if you aim for renovating older units in the area that I tagged as “Future Development”. I heard of condos going for $1,500 – $1,700 per m2 (+-$150 per ft2). Such units invariably need a renovation job done, but then do well on the long-term market as the price points are affordable, the condos are spacious, and the location is close to all the shops and stores. Foreigners on slightly lower budgets prefer renting in this area due to the good value and short ten-minute walk to the beach and 5th avenue.
Video: Airbnb Investment Case Study in Playa Del Carmen
My real estate buyer’s agent Luigi and I did a full case study of an investment in an Airbnb studio in core Playa del Carmen. We broke down all the numbers in detail, including occupancy rates, monthly income, costs, etc.
Video: Speculative Real Estate Investment in Playa del Carmen targeting the long term market
This video is a detailed case study investing in local multifamily real estate to rent to locals. In some cases the numbers can be surprisingly good. My #1 realtor in Playa del Carmen, Luigi took me to such a property and we ran the exact numbers together.
Who should make a real estate investment in Playa del Carmen?
People who want to spend part of the year in Mexico would do very well making a real estate investment in Playa Del Carmen
People who want to mix lifestyle and a place they can rent out. Playa del Carmen is an amazing beach 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 end April, which is the peak season.
A real estate investment of a minimum of $300,000 using the right structure qualifies the investor for residency in Mexico, and there are many other ways to qualify.
Westerners who want to diversify without taking on too much geopolitical risk, in a very established destination
People who want to diversify away from Western countries, without taking geopolitical risk. Mexico is unlikely to get involved in any war, and investments are welcome from all over the world. In many ways it is a bit of a safe haven. Granted, Playa del Carmen is not the cheapest of destinations, but it is very established, and importantly comes with minimal currency risk on rental income as rents are set in USD, not in Mexican Pesos. The yields are lower than in Medellin for example, but the risk is much lower.
The fact that it is mostly a cash market also offers downside protection compared to Western markets and their rapidly rising interest rates.
Conclusion: Playa del Carmen Real Estate Market
Overall I view the real estate investment in Playa del Carmen as a relatively safe diversification with decent cash flow and a great lifestyle component. Investors should not expect massive capital gains, as the city is already well-established and it is priced in.
I particularly like older properties, and off-plan/pre-construction real estate. I believe that this is where the best value is to be found. I would tend to avoid properties that were completed in the past 5 years, as they are fully priced; the upside is gone, and they offer less value compared to the older properties.
Contact Luigi to Invest in Playa del Carmen
Luigi, originally from Montreal, has been living in Mexico for many years and even obtained Mexican citizenship. What I like about him is that he is extremely numbers and investment focused, which is very valuable. Most realtors in Playa del Carmen think only lifestyle, but Luigi is more interested in finding good investments for his clients.
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.
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
- Full Guide to Investing in Tulum Real Estate
- 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
If you want to discuss your internationalization and diversification plans, book a consulting session or send me an email.
What is the economic outlook for Mexico?
Mexico has a growing population and a steadily growing economy, though its growth is somewhat slow.
Is Playa del Carmen real estate a good investment?
Its increasing popularity among digital nomads and significant governmental investment in infrastructure development make it notable. Key catalysts include infrastructure developments such as the Maya Train, the influx of North American digital nomads and political “refugees”, walkability, and changing tourism trends.
Can foreigners buy real estate in Mexico
Yes, foreigners can buy real estate in Mexico, but with certain restrictions. In areas near the border and coast, they must purchase through a “fideicomiso” (bank trust), while in other regions they can own directly. It’s essential for buyers to follow legal procedures and consider hiring a real estate expert for guidance.
How does Playa del Carmen real estate prices compare to other areas?
Playa del Carmen is relatively expensive compared to other Latin American locations but offers unique advantages linked to the North American market.
Which neighborhoods offer the best real estate investment opportunities in Playa del Carmen?
It absolutely depends on your precise objectives. You want to discuss this with Luigi in details.
What rental yields are expected in Playa del Carmen?
Our case study showed a 3-4% net rental yield for long-term rentals, with higher yields possible through Airbnb or renovating older units.
Who should consider investing in Playa del Carmen’s real estate market?
Those who wish to combine lifestyle benefits with investment opportunities, particularly individuals looking to spend part of the year in Mexico.
How does global tourism impact Playa del Carmen’s real estate?
Despite challenges in global tourism, the region’s appeal to a diverse group of visitors and residents could offset potential declines in international tourism.