Archive for the ‘International real estate outlook’ Category
We’ve just compiled Nicaragua real estate market statistics for 2009 and compared this against our 2008 data. With price falls across the main real estate categories, it’s clear that Nicaragua is not immune to the global contagion of sliding property markets.
The numbers that tell the story
Median asking prices in real estate developments that target the international buyer have fallen 9.57% for single family houses, 7.43% for condos and 10.54% for serviced lots since 2008.
Looking deeper into the numbers, we found that beach front lots (the premium end of the market in lots) showed the largest fall in median price at 20%.
But, this pattern of greater falls in premium categories doesn’t hold true for houses or condos. (In fact beach front houses showed a very modest fall of 0.63%)
After beach front lots, long ocean view houses showed the next largest drop at 15.33%. Overall (close) ocean view property held its own quite well against the other property categories, but if houses or condos only have a distant ocean view (defined as ‘long ocean view’), median prices have fallen more since 2008.
Not immune
Nicaragua, is clearly feeling the pinch of the slowing global economy. The falling GDP real growth rate from 3.8% in 2007 to 2% in 2008 (according to the CIA Word Factbook) paints the picture for the local economy. But the biggest factor at play in the international real estate space is the fall-off in demand from the US, Canada and, to some extent, European countries. Many of these buyers no longer have access to the necessary capital (be it from investment portfolios or built-up equity in their properties at home) to purchase a property abroad.
But, despite the darkening economic mood, Nicaragua is not experiencing the double digit drops we’ve seen in property markets elsewhere. One of the reason for this is the low levels of lender mediated activity in Nicaragua, making the real estate market stickier. There could be some pockets of finance-driven speculation, but the broad foreclosure waves as experienced in the US are not a factor. Another reason could be the low cost of living possible in Nicaragua. This is attracting a particular type of ‘lifestyle purchaser’ looking for a more affordable retirement.
The upshot for investors
All-in-all if you’re a buyer looking at Nicaragua, you’re in the driving seat. The factors you’d expect from a buyer’s market are present: developers are offering incentives, charter programs, package deals, heavy discounts for cash buyers, extended financing and so on. In fact, if you negotiate hard enough, you may get a deal of a lifetime.
From Reveal Real Estate - charting trends in international real estate in Central America focusing on Belize real estate, Costa Rica real estate, Nicaragua real estate, and Panama real estate.
Are real estate prices stickier in Central America?
April 15th, 2009
We’ve just started a new round of data collection for 2009 covering Nicaragua, Belize, Panama and Costa Rica. When we have this collected, we’ll present a trend analysis - showing how prices have changed since 2008.
Kirk Hankla, owner of International City Mortgage, on a recent trip to Nicaragua, put forward the view that we would find property prices in Central America to be stickier on the downside than in the US (or other more mature markets).
The argument for stickier property prices
The argument being that people who buy in Central America are typically making cash purchases and are usually not effected to the point of having to liquidate assets in order to meet demands. This characteristic, of not being highly leveraged, generally speaking, is how they conduct their lives in their home country as well.
Even if they were looking for financing, they would be hard pressed to find the kind of financing products commonly available in the US. This is because Nicaragua, Costa Rica, Belize and, albeit to a lesser extent, Panama do not have capital markets developed for the selling of mortgage backed debt instruments.
So due to the lack of financing, there is no debt load and the fact that property taxes are low across the region, the buyers are not backed up against a wall to meet a monthly debt service which has required that they liquidate. The result being that prices are stickier on the downside.
Regional variances will exist
We’ll see if the numbers bear this out, and we’ll dig into the regional variances. Some real estate areas, such as Panama City for example, have seen significant levels of financed purchases. And some heavily leveraged large scale projects have suspended operations - the St Regis project in Costa Rica in the wake of the Lehman Brothers collapse was a case in point.
But regionally we’re not seeing the waves of foreclosures that have swept across the US. There are of course motivated buyers who are lowering their prices, some of whom are having their hand forced by a debt burden in their home country that must be satisfied. But that may not be enough to add up to the heavy across-the-board price falls we’ve seen in the US.
We’d love to hear your views. Let us know what you think in the comments below.
3 trends in Central American real estate as developers and buyers respond to market conditions
April 4th, 2009
Times are certainly tough. But sometimes its the tough times that provide space for innovation and new ideas. Yes, some real estate projects in Central America are stalling, but others are responding to the tough economic news with new products and attractive incentives to persuade buyers to purchase. Here are 3 trends that we’re seeing in the Central America real estate scene.
1) Developers are going to greater lengths to woo buyers
Developers, particularly those at early pre-construction stages, are pulling out the stops to generate sales and maintain project momentum. From guaranteed rental agreements, free in-country tours where all expenses are paid, lot/home packages where the home is built at cost, to attractive seller financing, special programs for defaulting buyers and even buy-back guarantees.
As one real estate agent remarked, ”It’s a way sellers can drop their prices without really dropping their prices.” Developers know that momentum is king. A stalled project is hard to re-start and prospects quickly sense a lack of activity and progress.
2) Plans are being scaled back, pushed back and offerings altered
Months are being added onto construction time-lines for golf courses, clubhouses, restaurants and even basic infrastructure work. Developers are no longer emphasizing trophy apartments and ostentatious mansions. Instead they’re releasing simpler, smaller and more functional properties more in line with the current economic mood.
Some are fractionalizing existing real estate to offer a more accessible price-point. There’s also more focus on green building to appeal to a demographic whose decisions take into account social and environmental considerations.
3) Re-sale properties offered for less than developer direct sales
Existing owners who are feeling the pinch are motivated to flip their properties and some are pricing them well below developer prices. In situations where they purchased pre-construction, the price for re-sales can be as much as 30-50% lower. Re-sale properties are harder to track down and don’t always have the same marketing support as developer direct sales. But right now, it’s worth putting in the effort to dig them out.
What trends are you seeing in the market place? Let us know in the comments below or leave a review of a property hotspot that you are familiar with.
Should you buy in an overseas property hotspot?
February 13th, 2009
Real estate activity is not uniform across a country. Different regions will have different properties for sale at different price points. That’s why on revealrealestate we’ve identified a number of real estate areas for each country that we cover. We then focus in further on the ‘hotspots‘ - those areas generating the most interest from international real estate investors.
Each property hotspot has a different risk/reward profile. Some are early-in opportunities, some are established real estate areas and others fall somewhere in between as middle markets - not quite emerging, but also not yet developed. Despite these differences they all share three characteristics (defined in more detail, here):
1. The tourists are coming
2. A good range of local attractions
3. Infrastructure improvements
Property hotspots in Central America
Nicaragua hotspots: San Juan del Sur, Granada, Tola Riveria & Popoyo, and the Central Pacific
Belize hotspots: Ambergris Caye, Placencia, and Corozal
Panama hotspots: Panama City, Coronado & San Carlos, Boquete, and Bocas del Toro
Costa Rica hotspots: Jaco, Flamingo, Tamarindo, and Coco, Hermosa & Papagayo
Some investors will argue that it’s best to avoid hotspots altogether if you’re looking for the ‘real’ bargains. This can be a tempting proposition to the pioneer investor with a speculator’s stomach. But, before jumping in, remember to ask why there is a price differential now and whether this is likely to change in the future.
Momentum effects are important
Remember the mantra: location really is everything. Hotspots tend to have inherent appeal - perhaps it’s the views and geographic features, the ease of access, the local attractions or the climate - which is why interest and development gravitates there.
That’s not to say that we’ve defined all the property hotspots in Nicaragua, Belize, Costa Rica and Panama or that there won’t be price appreciation and development in other areas. But momentum effects are important and it’s worth asking whether a significant price differential that exists now is due to something inherent about the area. If it is, then a price differential could remain well into the future.
NAR report on Americans living abroad
November 24th, 2007
The National Association of Realtors released a report this month that pulls together data and trends on Americans living abroad. This kind of data is hard to come by making this white paper an important contribution to the field.
Download the paper here.
The data does not include Americans still living in the US who have bought second homes and investment property abroad. This number is likely to exceed the number who have moved abroad.
Central American countries make up 4 of the “6 hottest markets for second home buyers in 2007″ according to CNN
January 29th, 2007
The four countries are Belize, Honduras, Mexico and Panama. Costa Rica also gets a mention as a destination attracting real estate investors. According to State Department estimates, some 6.6 million Americans live abroad - about 2.2% of the US population. The Brits are still far ahead in relative terms with 10% of the nation’s population living as expatriates. Read the full article.
Real Estate: Nicaragua Optimism Despite Ortega
January 15th, 2007
by Chronicle Staff
Despite a new, leftist government led by President Daniel Ortega, executives in Nicaragua’s growing real estate industry remain bullish.
“The real estate market outlook continues to be positive,” says Claudia Gonella, director of the Nicaragua offices of U.S.-based real estate agency Coldwell Banker.”We are selling well out of both of our real estate offices, at approximately the same rate as this time last year.”
Timothy Thomas, owner and broker at ReMAX Monteverde, agrees. “I think [the government] will be OK,” he says. “Our investors met with Daniel Ortega after the election and he wasn’t the Danny Ortega of the 1980s, that’s for sure.”
Nicaragua is one of the key growth markets in Latin America outside Mexico for U.S.-based First American Title Insurance Company. “The market has not slowed down as people seem to be optimistic about Ortega staying the course when it comes to investments in the country,” says Turalu Brady Murdock, vice president of First American. “From an investment opportunity there are still very good opportunities in Nicaragua in the real estate market.”
The colonial city of Granada, Nicaragua
Promises property rights
Ortega has vowed to respect private property rights, the free trade agreement with the United States (CAFTA), agreements with the International Monetary Fund and continue with the same macro-economic policies of his predecessor, Enrique Bolanos. He has also gained some praise for appointing Arturo Cruz, a well-respected economist, as his ambassador to the United States. His new pledges stand in contrast to his last government (1979-90), when private property was expropriated, inflation skyrocketed and the economy went into freefall.
“The Sandinista party has actually been one of our strongest allies in the resolution of title claims caused by the 1980 confiscations, so I do not foresee any problem with property rights during Ortega’s presidency,” says Murdock.
Ortega assumed Nicaragua’s presidency last week, vowing to forge closer relations with Venezuela while continuing the country’s close relations with the United States. “The release of pro-Chavez rhetoric, which we expect to continue through the term of the new government, is unlikely to undermine a working relationship with the US as long as democratic principles are upheld,” Gonella says. “These next six months are crucial and provide an opportunity to sweep away once and for all the ghost of the Sandinista party that has hovered over the country for the last 15 years.”
Thomas sees the next two months as key to determine whether Ortega means what he has said. Gonella expects price stability for a few months and, assuming the new administration keeps to its verbal and written commitments (in support of DR-CAFTA, private property rights, tourism, free market etc), the market could come back strongly in the second half of 2007.
A new costa rica?
Nicaragua has seen significant growth the past few years, partly helped by inexpensive prices, a reputation as a safe country, growing tourism and increased flight connections with the United States. Some realtors dub the country “the next Costa Rica.”
“It’s close to America and one-fifth of the price of Costa Rica for the same properties,” Thomas says.
The real estate market is driven by both residential and commercial properties. On the residential side, many baby boomers from the United States are discovering Nicaragua as a less-expensive alternative to Costa Rica and Mexico, while banks and factories are helping the commercial market.
Banpro bank is constructing a new $15 million building across the street from Thomas, while a Korean investors is planning a $100 million factory to manufacture Levis. Meanwhile, a client of Thomas plan an ethanol plant in Nicaragua, while another one is expanding a chain of coffee shops in the country. Meanwhile, local real estate group is developing a major resort, Gran Pacifica Beach & Golf Resort, with hotels, apartments and gold courses on the Pacific coast.
Prices don’t fall
While the asking prices from developers and owners usually increase during high season (which runs from December to May), that did not happen this time. However, neither have they fallen, according to Gonella. “The major developers are continuing to roll out their master plans with no delay,” she says. “This is a sign of confidence.”
Another reason for optimism is that tourism also is seeing stable demand. Hotels in key tourism towns such as San Juan del Sur and Granada are experiencing high occupancy levels as would be expected at this time of year and tour operators have bookings well into 2007, according to Gonella. “Real estate and tourism sectors are closely linked here,” she says.
As more tourists visit Nicaragua, more people plan to come back to buy property, says Thomas. “Tourism is huge…and just getting bigger,” he says. This weekend, some 5,000 tourists visited San Juan del Sur thanks to four cruise ships, he points out.
Most of the real estate sales will take place in the residential sector focused primarily in key tourism destinations. “Investors will be looking for capital appreciation, but also for properties that they see as good candidates for rental income,” Gonella says. “The strong outlook for tourism visitors for 2007 will support this trend.”
Commercial investors wait
Coldwell Banker expects less activity in the commercial sector in the early part of 2007, as many investors will take a wait-and-see approach. “Commercial investors tend to invest on a larger scale than the residential buyer, and for the longer term,” she says.
In terms of geographical areas, the more “established” markets for foreign real estate investment such as Granada and San Juan del Sur are likely to be where most investor activity will continue to be focused, while newer, more speculative, cities and areas for investment such as the colonial town of Leon and Inland Mountains around Matagalpa, are likely to see less activity, at least for the first part of 2007, Gonella predicts. “Investors are likely to feel more comfortable investing in areas where a positive growth trend is already established,” she says.
Coldwell Banker has also seen good demand for its four-day real estate tours to Nicaragua scheduled for each of the next three months. The tours typically have between six and twelve participants to better tailor the group’s requests. “The tours offer a great way to make sense of real estate opportunities here,” Gonella says.
So far, the participants are mainly from the United States, but Coldwell Banker plans to boost its marketing to Europe to take advantage of the strong Euro and British Stirling, she says.
Source: Latin Business Chronicle
Posted in International real estate outlook, Property news | No Comments »
9 reasons why investors are choosing Central America real estate
January 9th, 2007
The word is getting out and recent years have witnessed a massive upsurge in investor interest in real estate in Central America. We have analyzed the investing pattern of real estate investors and identified 9 main reasons why investors are choosing Central America:
- Property prices across the region are affordable and below levels in North America and most European countries.
- Consistent growth in real estate prices in the past few years and a strong foundation for further appreciation particularly in “up and coming” areas.
- The region boasts areas of outstanding beauty even when judged on a world scale.
- Governments in Central America are proactively promoting tourism and real estate dollars are following close behind.
- The demographics are set for growth as millions of baby boomers are now starting to retire and turning to non traditional retirement destinations – the proximity of Central America to the mainland is a key factor.
- US real estate investors armed with a mountain of equity from the recent boom years are diversifying their properties internationally.
- In many Central American countries the cost of living allows one to live comfortably at a fraction of the price than in the US.
- Rental market opportunities are improving particularly in key tourism destinations with the promise of an immediate cash flow.
- Searching for utopia - a growing number of investors are motivated by the notion of changing their world reality by trying something new and exotic.
Real estate search going global
January 5th, 2007
According to the Economist, the developed country real estate boom has created more than 30 trillion dollars between 2000 and 2005. This trend has given a lot of people a lot of buying power. Armed with this mountain of equity many investors are looking to diversify their real estate portfolio by turning their attention outside US where property prices are looking more attractive than ever.
Better information over the internet, globalisation, better airline services, a growing tourism and leisure industry are all factors that are supporting this growth in international real estate purchasing. It is not only the adventurous who are taking this step the attraction of cheaper properties and in some cases, warmer climes, is attracting the more docile investor.
“The foreign second homes market will continue to explode in the coming years, this is not a temporary trend” according to Jeff Hornberger, International market Development Manager at the National Association of Realtors quoted in a recent edition of 2nd Home journal. We agree, a slow down in the US market is likely to shift investor attention overseas as they look for better candidates for capital appreciation.
It remains to be seen how severe the slowdown will be. Cheaper international destinations may remain immune. But there may be a cooling effect on the luxury end of the international real estate market if the slowdown is severe.
Costa Rica property market success will continue in 2007
January 4th, 2007
There are no two ways about it, Costa Rica is booming and its property market is already an unmitigated success story; but fear not for there are a whole host of factors, including some about to come into play for the first time that will ensure that Costa Rica’s property market success will continue in 2007.
Despite the fact that Costa Rica has had an exciting property market for the past decade it is still considered to be an emerging market because of the record gains that are still achievable and also because its real estate market success has not yet been duplicated across the entire country.
While it remains an emerging market and yet one stable, secure and with so many factors ensuring its appeal, high gains will be made on properties bought and also on land banked in 2007.