Los Cabos real estate is the most expensive, most American, and most water-constrained market in this entire Mexico series. It is also the one where Canadians currently have the most negotiating leverage they have had in years. Those two facts are related, and understanding why is the whole point of this post.
I have spent the last several months working through Mexico real estate market by market — the Riviera Maya, Playa del Carmen, Tulum, Puerto Vallarta. Each one has its own pathology. Tulum has an oversupply problem. Playa has a management problem. Puerto Vallarta has a seasonality problem. Los Cabos has a cost problem and a water problem, wrapped inside the strongest luxury brand in the country. If you are earlier in the decision than a specific country, the foreign real estate investing pillar is the map that sits above all of these.
So let’s do what we always do here. No brochure language, no “paradise awaits,” no developer pro formas. Just the numbers, the mechanics, and the parts nobody selling you a condo is going to volunteer.
What “Los Cabos” Actually Means
First, terminology. People use “Cabo” loosely, and it costs them money when they start comparing listings.
Los Cabos is the municipality at the southern tip of the Baja California peninsula, in the state of Baja California Sur (BCS). It contains two very different towns joined by a 33 km stretch of highway.
Cabo San Lucas
The party end. Marina, nightlife, cruise ship arrivals, the Arch, sportfishing fleet. This is where the density is, where most of the condo inventory sits, and where short-term rental competition is fiercest. It is also where the water problems bite hardest, which we will get to.
San José del Cabo
The colonial end. Walkable historic centre, art district, Thursday night art walk, actual town square, and the airport (SJD) about 15 minutes north. Quieter, more residential, disproportionately favoured by long-stay and retiree buyers. Families consistently prefer it.
The Tourist Corridor
The 33 km between the two towns. This is where the luxury sits — Palmilla, Querencia, Chileno Bay, Cabo del Sol, Club Campestre, Cabo Real. Gated, golf-anchored, largely USD-denominated, and priced accordingly. Average home prices in the San José Corridor reportedly moved from roughly USD $4.2M in 2024 to USD $5.88M in 2025. That is not a typo, and it is not a market most readers of this blog are shopping in.
The Pacific Side
Quivira, Diamante, Rancho San Lucas, north of Cabo San Lucas. Bigger lots, dramatic ocean, rougher surf you generally cannot swim in. Strong appreciation, weaker beach utility.
The East Cape and Todos Santos
The frontier. Los Barriles, La Ribera, Cabo Pulmo to the northeast; Todos Santos an hour up the Pacific coast toward La Paz. Cheaper, less liquid, more infrastructure risk, and a much smaller buyer pool when you want out. Todos Santos in particular has developed a genuine boutique identity, but resale depth is thin.
Practical takeaway: these five sub-markets do not move together. A “Los Cabos is up 7%” headline is nearly useless without knowing which one.
The Los Cabos Real Estate Market in 2026: A Buyer’s Market Wearing a Seller’s Suit
Here is where it gets interesting, and where the Los Cabos real estate story diverges sharply from the frothy 2021–2023 period.
The market has normalized, and inventory has piled up.
Reported Q1 2026 figures showed roughly USD $391M under contract across about 350 units — a sizeable jump over Q4 2025, but simultaneously the weakest first quarter since 2020. Read that twice. Seasonal momentum is intact. Structural demand has flexed.
More telling are the inventory metrics:
| Metric | Condos | Houses |
|---|---|---|
| Months of inventory (MOI) | ~25 months | ~19 months |
| Sales-to-new-listing ratio (SNLR) | ~75% | ~41% |
| Average days on market | Long | ~190 days |
Twenty-five months of condo inventory is a deep buyer’s market by any Canadian standard. In Toronto, six months is considered balanced. And roughly 70% of Cabo San Lucas short-term rental listings are one- and two-bedroom units, which tells you exactly where the competition is concentrated — the same segment most Canadian first-time Mexico buyers shop.
And the oversupply has a very specific shape. Los Cabos MLS data showed inventory hitting an all-time high of 2,306 houses and condos in late 2025, with condos representing 61% of units. Two-bedroom condo inventory alone stood at 732 units, while two-bedroom condo sales fell to their lowest level in five years. That is the direct hangover from the 2021 pre-construction boom, when developers responded to a record year of two-bedroom sales by building more of them — units that have been delivering through 2024, 2025 and into 2026.
If you are shopping for a two-bedroom condo in Los Cabos, you are shopping in the single most oversupplied segment of the market. That is a gift if you are buying and a problem if you ever want to sell.
Q2 2026 brought some improvement. BCS-wide MLS data showed 479 closings, up from 362 in Q1, with absorption climbing from 24.3% to 34.9% — roughly one in three new listings closing within the quarter, up from one in four. Discounting has been modest: sale-to-list ratios have run around 93–95%, so realistic sellers are not capitulating. Days on market above USD $500,000 run to roughly 267 days.
Meanwhile, the luxury tier holds up. The $2M–$5M band reportedly moved 38 units against about 300 active listings in Q1 2026 — a 13% conversion rate, healthy absorption despite long marketing times.
What This Means for You
Rough price bands circulating for 2026, which you should treat as orientation rather than gospel:
- Condos: USD $300,000–$600,000 for the practical mid-market
- Single-family homes: USD $600,000–$1.5M
- Luxury estates: USD $1.5M and up
Note the awkward statistic: median condo prices in Cabo San Lucas reportedly sit above median house prices, because the condo pool skews toward branded resort inventory with ocean views. That inversion is a data artifact, not a bargain signal. Do not let anyone use it to tell you houses are underpriced.
The negotiating implication is simple. With two years of condo inventory sitting on market and days-on-market stretched past six months, list price is a starting position. Sellers who bought in 2021 and 2022 are increasingly the motivated ones. This is the first genuinely favourable entry window for Los Cabos real estate since before the pandemic.
The Thing Nobody Mentions First: Cabo Is a USD Market
This deserves its own section because it is the single biggest structural difference between Los Cabos real estate and everywhere else in this series.
In Playa del Carmen or Mérida, you will find meaningful peso-denominated inventory. In the Los Cabos corridor, the luxury and resort market is effectively priced, listed, marketed, and transacted in US dollars. The peso is the local operating currency, but the asset is a USD asset.
For a Canadian, that stacks two currency exposures:
- CAD → USD on the purchase price, the deposit, and every future contribution.
- Peso operating costs for utilities, property tax, staff, and maintenance, against USD revenue.
The peso has been notably strong and resilient — around 17 to the US dollar through the first half of 2026, versus the 20+ many buyers still have anchored in their heads. That strength directly compresses your operating margin, because your peso-denominated costs translate into more dollars.
Meanwhile the loonie has been weak. As of late July 2026, one Canadian dollar buys roughly 12.3 pesos, which puts the CAD somewhere around US $0.72. Run that through a purchase: a USD $650,000 condo costs a Canadian buyer roughly CAD $900,000 before a single closing cost. That is the real price of entry, and it is the number your spouse should see — not the USD sticker.
And the CAD leg is the one Canadians consistently underestimate. If you buy a USD $650,000 condo and the loonie weakens 8% against the greenback over your hold period, you have manufactured a Canadian-dollar gain that has nothing to do with real estate — and, as we will cover below, the CRA will tax it.
How Canadians Actually Own Property Here: The Fideicomiso
Los Cabos sits entirely inside Mexico’s zona restringida — the restricted zone, defined as within 50 km of any coastline and 100 km of any international border. Article 27 of the Mexican Constitution prohibits direct foreign ownership of land there.
The workaround is the fideicomiso, a bank trust. It has been in continuous use since the 1970s.
How it works:
- A Mexican bank (Scotiabank, Banorte, CIBanco, Monex, Actinver, Multiva and others act as trustees) holds legal title as fiduciario.
- You are the beneficiary, holding all beneficial and economic rights: use it, renovate it, rent it, sell it, mortgage it, will it to your kids.
- Term is 50 years, renewable indefinitely. Functionally perpetual.
- You name successor beneficiaries directly in the trust, which is a genuine estate-planning advantage — it sidesteps Mexican probate.
What it costs, roughly:
| Item | Typical range (USD) |
|---|---|
| Trust setup (one-time) | $2,000–$3,000 |
| SRE federal permit | $1,200–$1,700 |
| Annual trustee fee | $500–$1,000 |
| Total closing costs (all-in) | 4–7% of purchase price |
The fideicomiso itself is a rounding error. The acquisition tax (ISAI) and notary fees are the real closing cost drivers.
The honest risk assessment: the trust structure is not where Canadians lose money in Mexico. Losses cluster around three things — ejido land (communally-held land with defective title), inadequate title verification, and HOA or building-level short-term rental restrictions discovered after closing. All three are knowable before you sign. None of them are the bank’s problem.
Hire your own notario and your own bilingual real estate lawyer. Not the developer’s. Not the listing agent’s referral. Yours.
Short-Term Rentals in Los Cabos: The Regulatory Picture Is Good, the Math Is Harder
Start with the good news, because there genuinely is some.
As of 2026, there is no municipality-wide short-term rental ban, no citywide cap on rental nights, and no primary-residence requirement in Los Cabos. Compared to what has happened in Barcelona, Amsterdam, or increasingly parts of B.C. and Quebec, that is a permissive regime — and it is one reason Los Cabos became one of Mexico’s largest vacation rental markets.
Restrictions exist at the building and development level, not the district level. Which means your due diligence question is not “is Airbnb legal in Cabo?” It is “what do this specific HOA’s bylaws say, and can they be amended by simple majority?”
What You Owe
- State lodging tax: 4% on the total reservation cost, remitted to BCS.
- IVA (VAT): 16% on short-term accommodation.
- Environmental Sanitation Tax: calculated at 70% of the daily UMA — roughly 82 pesos (about USD $4.50) per room per night at 2026 values, regardless of occupancy. In force in Los Cabos since 2025, and applied more broadly there than in other BCS municipalities.
- Federal income tax (ISR): covered in the next section.
- Visitor “Embrace It” fee: launched July 2025 at 470 pesos, raised within six months to 488 pesos (~USD $28) per international visitor staying over 24 hours. Sources differ on the minimum age — some say over 12, others over 15.
- Cruise passenger levy: rose from USD $5 to $10 in July 2026, with scheduled increases to $15 in 2027 and $21 in 2028.
That last one is not your cost, but it is your problem. Los Cabos is layering visitor taxes aggressively, and it is showing up in the all-in price your guest sees at checkout. Mexican tourism press has begun openly asking whether the destination is over-taxing visitors. When you are already the most expensive destination in Mexico, elasticity matters.
The Occupancy Numbers — And Why They Disagree
Here is where I want you to be careful, because published Los Cabos short-term rental data is a mess. Depending on which provider you consult for roughly the same period, you will find Cabo San Lucas occupancy reported at 38%, 42%, 44%, or 53%, with ADRs ranging from USD $86 to over $1,000.
Those are not all measuring the same thing. Some samples are 221 listings, some are 8,000+. Some include entire-home luxury villas at $1,600/night in Pedregal; some are weighted toward Centro apartments under $300. The average is meaningless. The distribution is everything.
A defensible planning assumption for a well-managed, well-located two-bedroom condo is roughly 40–50% annual occupancy, with heavy December–April concentration and a genuinely soft September–October. Break-even occupancy for a typical listing has been estimated at 25–35% — about 8 to 11 booked nights a month just to cover operating costs.
If a developer’s pro forma hands you 70% occupancy, ask which dataset produced it and what the sample size was. Then discount it.
The Tax Section: Where Canadians Get Quietly Destroyed
This is the part I would read twice. The Mexican side is manageable. The interaction with the Canadian side is where returns evaporate.
The Mexican Side — Rental Income
As a non-resident of Mexico, the default treatment of your rental income is 25% withholding on gross rents, with no deductions.
Not net. Gross.
Sit with that for a moment. You do not get to deduct your HOA fees, your property management, your utilities, your insurance, your maintenance, or your fideicomiso fee. Mexico taxes the top line.
Mexican tax residents with an RFC are treated completely differently — they can deduct actual expenses, or elect a blind deduction of 35% of gross rents plus property tax, and pay progressive rates from 1.92% to 35%. Effective rates for resident landlords typically land somewhere between 5% and 20% of net.
That gap — 25% of gross versus roughly 10–15% of net — is the largest single lever on your after-tax return in this entire market. It is worth more than negotiating 5% off the purchase price.
But here is the part most Canadian buyers never get told. You do not necessarily have to become a Mexican tax resident to escape the gross-basis regime.
A non-resident property owner can elect to be taxed on a net basis at 30%, provided they appoint a resident legal representative in Mexico and maintain proper documentation. That election allows deductions for property tax, maintenance, management, and depreciation. On a property with a 55–60% expense ratio, 30% of net is dramatically cheaper than 25% of gross.
Relatedly, a non-resident can obtain an RFC without holding a residency card — a Mexico-resident representative can appear at SAT on your behalf under a notarised power of attorney. Ongoing filings then run through your contador’s e-firma. Residency makes this easier and unlocks additional benefits, but the common claim that “you need residency to get an RFC” is not accurate.
Two caveats. The requirements are documentation-heavy, and you will need facturas for everything you deduct. And whether the election is available and advantageous in your specific facts is a question for a Mexican contador — not for a listing agent and not for this blog. Get that answer before you structure the purchase, not after your first tax bill.
Platform Withholding
If you rent through Airbnb, Vrbo or similar, the platform itself is registered with SAT and withholds at source. For non-residents, reported practice is roughly 20% ISR withheld from your payout, plus 16% IVA collected on top of the guest’s rate and remitted directly to SAT. Fail to supply an RFC and CURP and the platform withholds at a higher rate.
So the “25% on gross” headline is the statutory default. What actually hits your bank account depends on how you rent, whether you have an RFC, and whether you have made the net-basis election. These are not small differences — they are the difference between a viable and a non-viable investment.
The Mexican Side — Selling
On disposition, non-residents choose between:
- 25% of the gross sale price, no deductions; or
- 35% of the net gain, after inflation-adjusting your acquisition cost by the INPC index and deducting documented improvements, commissions, and notary fees.
For anyone who held for a meaningful period, the 35%-on-net option almost always produces a smaller bill. But — and this is the trap — to access it you need an RFC and valid facturas (official tax invoices) for every improvement you claim.
Practical translation: every time your contractor offers you a cash price with no factura, he is offering you a discount today in exchange for a much larger tax bill on exit. Keep every factura. Digitally. Forever.
The primary-residence exemption (roughly 700,000 UDIs, once every three years) is available to Mexican tax residents only. Assume it does not apply to you.
The Canadian Side — What the CRA Wants
You are a Canadian resident. Canada taxes your worldwide income. There is no version of this where the Mexican property is invisible.
Annual rental reporting. Your Cabo rental income goes on a T776, converted to Canadian dollars, on your T1. Deductible expenses follow Canadian rules — which, helpfully, are far more generous than Mexico’s non-resident regime. So you will often report a modest Canadian net rental profit while having paid Mexican tax on gross.
The foreign tax credit problem. You claim a foreign tax credit (T2209) for Mexican tax paid. But the credit is capped at the Canadian tax otherwise payable on that same foreign income. When Mexico taxes 25% of gross and Canada taxes roughly 50% of a much smaller net figure, you will very often generate foreign tax credits you cannot fully use. They are not refundable. This is the mechanism by which the headline “Mexico’s taxes are low” story quietly becomes false for Canadian non-resident landlords.
T1135 — and the nuance almost everyone gets wrong. Specified foreign property with a total cost above CAD $100,000 at any point in the year triggers T1135 filing. Note that it is cost, not market value.
Foreign real estate held as personal-use property is excluded — but the test is not “exclusively.” The CRA applies a “primarily” standard, which it interprets as more than 50% personal use. So:
- Condo used mainly by your family, rented occasionally → generally not specified foreign property, and it does not even count toward the $100,000 threshold.
- Condo rented eight months a year with a reasonable expectation of profit, personal use the other four → specified foreign property, reportable.
That distinction decides the filing obligation for most Canadian Cabo owners, and it is genuinely fact-dependent. Penalties for failure to file start at $25/day and escalate sharply; the CRA’s Voluntary Disclosures Program is the standard remedy for prior-year misses caught before the CRA contacts you.
Foreign exchange is taxable. Your adjusted cost base is recorded in Canadian dollars at the exchange rate on the purchase date. Your proceeds are recorded in Canadian dollars at the rate on the sale date. Currency movement is part of your capital gain. You can sell the property for exactly what you paid in USD and still owe Canadian capital gains tax purely because the loonie weakened. The inclusion rate remains 50% — the proposed increase to two-thirds was cancelled in 2025.
Holding through a Mexican corporation? Stop and get advice. It is sometimes pitched as a tax-efficient structure. For a Canadian, a Mexican corporation is a foreign affiliate. Passive rental income inside it can be FAPI — taxed in your hands on an accrual basis whether or not you take a distribution — plus T1134 reporting obligations. The structure that works beautifully for an American may be actively harmful for you. This is genuinely specialist territory.
At death. The fideicomiso’s successor-beneficiary designation elegantly avoids Mexican probate. It does nothing about Canada’s deemed disposition on death. Your estate is taxed on the accrued gain regardless.
Running the Actual Numbers
Let’s model something concrete. A USD $650,000 two-bedroom condo in the Tourist Corridor, run as a short-term rental, owned by an Ontario couple as Mexican non-residents.
Revenue assumption: USD $52,000 gross annually. That reflects roughly 45% occupancy at a blended ADR in the $300s — deliberately conservative against the wilder published figures.
Operating costs:
| Line item | Annual (USD) |
|---|---|
| Property management (25% of gross) | $13,000 |
| HOA / condo fees ($600/mo) | $7,200 |
| Utilities, CFE electricity, internet | $3,600 |
| Maintenance and replacement reserve | $3,000 |
| Insurance | $1,800 |
| Predial (property tax) | $600 |
| Fideicomiso annual fee | $700 |
| Total operating costs | $29,900 |
Net operating income: $22,100.
Now apply Mexican non-resident tax: 25% of gross, not net. That is $13,000.
Net after Mexican tax: $9,100.
On a $650,000 asset, that is a 1.4% net yield — before you have paid a nickel of Canadian tax, before any financing cost, and before your own personal-use weeks reduce the revenue line.
Notice what happened. Mexican tax consumed 59% of your net operating income, because it was assessed on the top line of a business with a 57% expense ratio.
Now run it again with the net-basis election. Same property, same revenue, same costs — but you have appointed a Mexican legal representative, hold an RFC, and are taxed at 30% of net rather than 25% of gross:
| Gross-basis default | Net-basis election | |
|---|---|---|
| Gross revenue | $52,000 | $52,000 |
| Operating costs | $29,900 | $29,900 |
| Net operating income | $22,100 | $22,100 |
| Mexican tax | $13,000 | $6,630 |
| Net after Mexican tax | $9,100 | $15,470 |
| Net yield on $650K | 1.4% | 2.4% |
That is a 70% improvement in after-tax cash flow from a structuring decision, before you have negotiated a peso off the purchase price. This is why I keep saying the tax structure matters more than the price. And note the net-basis figure ignores depreciation, which the election also permits and which would improve it further.
Two observations.
First, the predial is remarkable — Mexican property tax is a genuine structural advantage, often a fraction of what the equivalent Ontario property would carry. That is real and it is permanent.
Second, and more importantly: this is not an income play. Anyone selling Los Cabos real estate on cash flow is either using gross yield, ignoring the non-resident tax treatment, or assuming occupancy numbers the data does not support. The case for Cabo is appreciation, personal use, and currency diversification. Underwrite it that way and you will not be disappointed. Underwrite it as cash flow and you will be.
The Water Problem
I am giving this its own section because I think it is the most underweighted risk in the market, and because you will not hear about it on a sales tour.
Baja California Sur is Mexico’s driest state and its second-fastest-growing by population. Those two trends are on a collision course, and Los Cabos is where they meet.
The current situation, plainly:
- Cabo San Lucas depends primarily on Desalination Plant No. 1, reported in mid-2026 as producing roughly 130 litres per second, supplemented by an aqueduct carrying water from San José del Cabo. That serves a city of well over 200,000 people.
- The San Lázaro treatment plant in San José del Cabo was confirmed running at 50% of expected output.
- As of July 2026, residents in neighbourhoods including Lienzo Charro, Miramar, El Tezal, Mesa Colorada, Cangrejos and Jardines del Sol reported waiting at least 40 days between water deliveries under the rationing system. In higher-elevation northern neighbourhoods — Palmas, Gastélum, Cabo Fierro — conditions are worse. Bills continue to arrive on schedule regardless.
- In May 2026 the municipality added 20 cistern trucks (10,000 litres each) plus sanitation equipment under an 85-million-peso package, to deliver free potable water to public institutions and northern Cabo San Lucas.
- Also in May 2026, OOMSAPAS was evaluating rationing in San José del Cabo in order to divert supply to Cabo San Lucas. Nothing had been implemented at that point, but the fact it is under discussion tells you how tight the system is.
The fix is real but not here yet. A second desalination plant of about 250 litres per second has been under construction in northern Cabo San Lucas as a public-private partnership with OOMSAPAS. Reporting has pushed service entry into early 2027. Treat that date with scepticism — a Spanish-consortium desalination contract for Los Cabos was awarded back in 2021 and was reported as stalled two years later, so this project has a documented history of slipping.
Worth noting: Los Cabos has for some years required major new developments to build their own desalination and wastewater treatment capacity. That is why the answer to “does this building have water” varies so enormously between a 2006 downtown condo and a 2022 master-planned community.
Why This Matters to You Specifically
Resort developments, luxury HOAs, and the Corridor’s gated communities generally have private wells, private desalination, storage cisterns, or negotiated supply. Pedregal residents famously built their own desal plant decades ago after buying 5,000 truckloads of water in a single year.
So the risk is not evenly distributed. It is a due diligence question with a specific answer.
Before you buy anything in Los Cabos, ask in writing:
- What is the property’s water source — municipal (OOMSAPAS), private well, or private desalination?
- What is the on-site cistern capacity, in days of full-occupancy supply?
- Has this building experienced service interruptions in the last 24 months, and for how long?
- Is water cost inside the HOA fee or billed separately, and what has it done over three years?
- What is the backup plan — trucked delivery contract, or hope?
A building with independent water security in a market with chronic municipal shortages has a durable competitive advantage for guests and for resale. A building without it has a liability that does not appear on any listing sheet. This single question separates good Cabo assets from bad ones more reliably than location does.
The Demand Shift: Americans Down, Canadians Up (Probably)
Los Cabos is the most US-dependent major resort market in Mexico. So when American demand softens, Cabo feels it first and hardest.
And it has softened — more than the early-2026 coverage suggested. The destination closed 2025 with a record ~3.77 million visitors and roughly 133.3 billion pesos in economic impact. Then 2026 turned, and it has been getting worse through the year:
| Period (vs. prior year) | Los Cabos airport traffic |
|---|---|
| Q1 2026 | −2.5% to −3.7% |
| April 2026 | −8.1% (international −9.7%) |
| June 2026 | −9.7% |
Those June figures come from GAP, the airport operator, in its July 2026 release. For context, Puerto Vallarta was down 18.7% in the same month. This is a Mexican Pacific resort problem, not a Cabo-specific one — but Cabo is not escaping it.
Average hotel daily rates had already eased from about USD $458 in 2024 to $429 in 2025, still the highest in Mexico.
What is driving it. International arrivals were actually up in January (+2.6%) and February (+4.2%). The turn came in March, when international arrivals fell 7.1% — from over 545,000 to about 507,000 — following late-February security incidents in Mexico that were broadcast on US and Canadian television. Add a strong peso eroding foreign purchasing power, softer US capacity, nine consecutive months of declining domestic tourism, and the 2026 World Cup pulling travel budgets toward host cities like Mexico City rather than beach destinations.
The Canadian Angle, and an Honest Caveat
The Canadian story is genuinely encouraging. Canadians now represent roughly one-eighth of total arrivals — the second-largest international market. Air capacity has expanded meaningfully: WestJet’s restructuring reportedly helped Cabo, Porter has entered the market, and Air Transat returned with large aircraft after a six-or-seven-year absence. Canadian air routes to Mexico were up around 9% in the first half of 2026, with Toronto–Mexico traffic reportedly up 18.6%. There is credible reporting that Canadian visitors outspend Americans on a per-trip basis in Mexican sun destinations.
You will see a contradictory number floating around, so let me address it directly. A regional business council representative was quoted in the Mexican press describing a 23% decline in Canadian travellers in Q1 2026, alongside a 49% drop in US demand.
That figure does not survive contact with the hard data. Mexico News Daily, reporting the quote, immediately flagged the numbers as not matching airport statistics. FITURCA’s own Tourism Observatory — drawing on GAP passenger data — showed Canadian passenger arrivals up 14.8% in January 2026 versus January 2025, with WestJet’s share of Canadian traffic up 12.5 points and strong growth from Calgary, Toronto and Vancouver. The 49%/23%/16% figures appear to describe perceived demand as reported by an industry association, not counted arrivals.
So the resolution is: hard passenger data shows Canadian traffic growing, while an industry sentiment figure showed it falling. Trust the turnstile count, not the survey.
That said, don’t overcorrect. Canadian seats for March–August 2026 were forecast up only 1.5% — growth, but modest, and nowhere near enough to offset US and domestic softness on a market this US-weighted. Canada is a cushion, not a replacement. Build your model on the air capacity data, not on either set of arrival headlines.
Where I’d Look, by Buyer Type
| If you are… | Look at | Why |
|---|---|---|
| Buying for personal use + occasional rental | San José del Cabo, Club Campestre | Walkable, family-friendly, near airport, less STR saturation |
| Chasing STR revenue | Corridor condos, Cabo San Lucas marina-adjacent | Highest ADR, but brutal 1–2BR competition |
| Long hold, appreciation focus | Pacific side — Quivira, Diamante, Rancho San Lucas | Strong appreciation, master-planned water infrastructure |
| Genuinely value-hunting | East Cape, Los Barriles, Todos Santos | Materially cheaper — accept thin resale liquidity |
| Wanting to actually live there | Boulevard Forjadores corridor, San José residential | Purpose-built residential near schools and markets |
| Comparing against a lower-cost Mexico entry | Mérida real estate for Canadians (coming soon) | Direct ownership, no fideicomiso, far cheaper entry |
One trend worth noting: new development in Los Cabos is shifting toward purpose-built residential communities — mid-rise condos integrated with schools, markets, and services — rather than pure vacation-rental product. That is a healthier long-term signal than another 400-unit resort tower.
Financing: The Part That Surprises Canadians
There is no Canadian-style mortgage market here for you.
Your realistic options:
- Cash. Most common. Simplest. Highest opportunity cost.
- Developer financing. Widely offered on pre-construction, typically 30–50% down with the balance over 2–5 years. Rates are unattractive and terms favour the developer. Read the default clauses, not the rate.
- Cross-border USD mortgages. Several specialist lenders offer fixed-rate USD mortgages to foreign buyers of Mexican property. Rates run well above Canadian mortgage rates and fees are substantial, but the product exists.
- Borrowing against Canadian assets. A HELOC on your Ontario home, or a readvanceable mortgage. Rates are dramatically better, approval is straightforward, and you avoid the Mexican lending market entirely.
On option four, and the interest deductibility question. Canadian interest deductibility depends on the use of the borrowed funds, not the location of the security. Money borrowed to purchase an income-producing property — including a foreign one — generally supports an interest deduction. Money borrowed to buy a personal vacation property does not. If your Cabo condo is genuinely a rental with incidental personal use, there is a real strategy here. If it is a vacation home you occasionally rent, the CRA will not accept the same treatment.
If you are already running a leveraged strategy against your home equity — a Smith Maneuver or a readvanceable mortgage — the interest-deductibility logic above is what determines whether the CRA treats it as an income-producing borrowing.
Los Cabos vs. the Rest of the Mexico Series
Having now worked through the major markets, here is the honest comparative:
| Los Cabos | Riviera Maya | Puerto Vallarta | Tulum | |
|---|---|---|---|---|
| Entry price | Highest | Moderate | Moderate | Low–moderate |
| Currency | USD-denominated | Mixed | Mixed | Mixed |
| STR competition | High | High | Moderate | Severe oversupply |
| Infrastructure risk | Water — significant | Sargassum | Seasonality | Water, sargassum, overbuild |
| Canadian air access | Excellent and growing | Excellent | Excellent | Via Cancún |
| Luxury depth | Deepest in Mexico | Strong | Moderate | Thin |
| Liquidity on exit | Good in Corridor | Good | Good | Poor |
For the fuller picture across the country, start with the Mexico real estate overview for Canadians. For the two Riviera Maya markets in detail, see Playa del Carmen and the Tulum breakdown.
Los Cabos Real Estate Risks, Stated Plainly
Water. Covered above. The most specific, most researchable, and most consequential risk in the market.
US demand concentration. Cabo’s luxury pricing is underwritten by American buyers and American guests. A meaningful US recession does more damage here than in cheaper Mexican markets.
Condo oversupply in the 1–2 bedroom segment. Twenty-five months of inventory. If you are buying exactly what everyone else is buying, you will compete on price both as a landlord and as a seller.
Currency, twice. CAD/USD on the asset, peso on the operating costs.
HOA fees. Resort-branded condos in Cabo carry serious monthly fees. They rise. Model them rising.
Hurricanes. The Pacific hurricane season runs roughly June through November. Odile in 2014 caused severe damage. Verify insurance coverage, deductibles, and what the HOA’s master policy actually covers.
The non-resident tax treatment. Restated because it is the one that most reliably turns a “6% yield” into a 1.4% yield.
What I’d Actually Do
If I were writing a cheque for Los Cabos real estate this year, here is my actual sequence.
I would treat this as a lifestyle and appreciation asset, not an income asset. The 25%-of-gross non-resident tax makes the cash flow case weak at current prices. I would be honest with myself about that at the outset and stop trying to make a spreadsheet say otherwise.
I would buy in San José del Cabo or the Corridor, not Cabo San Lucas. Better long-stay appeal, better for a family, less exposure to the most saturated STR segment, and closer to the airport for the winter-escape use case that is actually why I would be there.
I would make water security a hard filter, not a consideration. Any building without independent supply, verified cistern capacity, and a clean 24-month service record comes off my list. No exceptions. This is the single highest-value hour of due diligence available in this market.
I would resolve the Mexican tax structure before making an offer, not after. Specifically, I would sit down with a Mexican contador and a Canadian cross-border accountant in the same week and get a written answer on one question: can I appoint a Mexican legal representative, obtain an RFC, and elect net-basis taxation? On the numbers above that election is worth roughly 70% more after-tax cash flow than the default. It outweighs anything I could achieve at the negotiating table, and almost nobody selling property here will raise it with you.
I would negotiate hard. Twenty-five months of condo inventory and 190-day marketing times are not conditions in which I pay asking price. I would be looking for 2021–2022 vintage owners who are carrying and tired.
I would keep every single factura. Filed, scanned, backed up. The 35%-on-net exit election is worth five figures and it depends entirely on paperwork discipline over a ten-year hold.
I would file the T1135 the first year I rent it. The penalty structure is punitive and the filing is not difficult.
And I would size the position honestly. A Cabo condo is an illiquid, single-asset, foreign-currency, foreign-tax-regime, hurricane-exposed, water-constrained holding in a market that just posted its weakest first quarter since 2020. It can absolutely earn a place in a diversified plan. It should not be 40% of one.
The Los Cabos real estate market is not the sure thing the sales offices present. But at 25 months of inventory, with Canadian air capacity expanding and American buyers stepping back, it is the most interesting entry point this market has offered in five years — for a buyer who does the water homework and structures the tax properly.
Disclaimer
I am not a lawyer, accountant, or licensed financial advisor, and nothing in this post is legal, tax, or investment advice. Cross-border property ownership involves Mexican federal and state law, Canadian tax law, and the Canada–Mexico tax treaty operating simultaneously, and the interaction is genuinely complex. Figures cited are drawn from public sources at time of writing and change frequently. Before purchasing property in Mexico, engage your own independent Mexican notario, a Mexican contador, and a Canadian cross-border tax professional — none of whom should be referred to you by the party selling you the property. I write from a first-person practitioner perspective about strategies I research and in some cases use personally; your situation is not mine.