Central America continues to attract investors and tourists alike.  But not all countries have the same pulling power. 

The graph below shows which countries rack up the highest number of searches for real estate online based on the generic country-followed-by-real-estate search phrase.  As you can see, there are more searches made for “costa rica real estate” than for “el salvador real estate.”  And every day the search term ”belize real estate” is typed into search engines more times than “guatemala real estate.”

The results that underpin the graph above are for July 07.  But the trends have stayed the same for a number of years.  Perhaps we will see the numbers of searches for “Panama real estate” and “Belize real estate” catch up with “Costa Rica real estate.”  At the moment though, Costa Rica is the leader for real estate searching online.

The real estate opportunities available in Central America span a range of risk / reward profiles.  There is real estate on offer to suit different investment goals.  Properties that are good candidates for short term capital appreciation exist as well as properties in lower risk environments with the promise of an immediate rental income. 

Of course there are markets within markets so the graphic provides only a general representation of relative position of the country as a whole. The Costa Rica real estate market is the most mature, Panama and Belize real estate represent classic middle markets - not quite emerging and not quite developed - with Nicaragua, Honduras, El Salvador and Guatemala at earlier stages of the development curve.  We plan to dig a little deeper and highlight the relative positions and profile of different real estate areas within each country.  More on this to follow…

National real estate associations exist for most counties in Central America.  And, given the sharp growth of real estate investment in the region, these bodies seem to be getting more active. There are some big ticket items on the table not least the question of licencing, code of ethics and ultimately (maybe) development of an MLS.   The associations are as follows:

• The Costa Rica Chamber of Real Estate (CCCBR), Costa Rica Global Association of REALTORS® (CRGAR),
• Camara Salvadoreña de Bienes Raíces (CSBR),
• Asociacion Nacional de Agencias de Bienes Raíces de Honduras (ANABIR),
• Camara Nicaraguense de Corredores de Bienes Raíces (CNCBR),
• Asociacion Panamena de Corredores y Promotores de Bienes Raices (ACOBIR),
• Camara de Corredores de Bienes Raices de Guatemala (CCBRG)
• Association of Real Estate Brokers of Belize
• Federation of Real Estate Associations of Central America and the Caribbean (FeCePAC) - an umbrella organisation that ties the other bodies together with a focus on integration and networking.

The recent activity is a good sign.  The FeCePAC and CNCBR conference held in Managua, Nicaragua last week had a strong turnout with some key action steps to take for more regional integration of real estate approaches and standards.  We were also pleased to see the recent announcement that the Association of Real Estate Brokers of Belize will be working together with the government to establish a code of conduct and general property industry standards.   The US National Association of Realtors (NAR) currently has bilateral agreements with real estate associations in Costa Rica, El Salvador, and Panama and is affiliated with the Federation of Real Estate Associations of Central America.

Savvy investors are always on the look out for emerging destinations - especially those with a twist on a familiar theme. The Inland Mountains region of Matagalpa and Jinotega could be just that. The area shares many of the characteristics of Boquete - probably the hottest spot for real estate in the Panama after Panama City - such as enchanted “hidden” valleys, mists that shroud the mountaintops, a perfect spring like climate, rushing rivers, flowers and high quality coffee. 

This is where you come to commune with nature, hike, fish, cycle, kayak and recharge your senses in a setting of peace and tranquility. Prices in the area are still 1/4 of what you will find in Panama and around 1/3 of property on Nicaragua’s Pacific coast. Read more on the mountainous, coffee growing areas of Nicaragua.

Panama is at the top of our list for the most secure, diverse and promising real estate destination in the region.

Security - Panama provides real estate investors with a strong sense of security based on its dollar based economy; stable political situation; transoceanic Canal, and its standing as a regional headquarters for many multinational corporations.

Panama has established a facilitative taxation framework to encourage foreign investment.  For example there are no real estate taxes for twenty years on any new construction and the tourism master plan exempts tourism related businesses from income or capital gains taxes for twenty years and allows the importation of a wide variety of goods duty free.  Financing on real estate purchases is more widely available than in other Central American countries given Panama’s position as a international banking centre.

Diversity - Panama combines a sense of the first world with an experience of the exotic. Within its borders visitors and investors can enjoy a Miami style capital city, tropical rainforests, beautiful mountain refuges, Caribbean-style beaches, living Indian cultures, historical sites as well as the Panama Canal, an 8th Wonder of the World.  Own an apartment in the rapidly growing Panama City, a villa in a private residential community in the mountains, a lot on the Caribbean or surf real estate on the Pacific.

Panama city skyline

Promise - In many areas, particularly outside Panama city itself, the real estate market is still at an early stage of a typical development cycle.  Here high levels of capital appreciation are possible - within a relatively low risk environment.  Elsewhere, in more mature markets, such as Panama city and Bocas del Toro, for example, the value proposition is less favorable than in the past, although investors can draw comfort from the fact that the positive price trend is well established. 

During the past several years, Panama has been consistently rated by a wide range of commentators in the top ten for the best retirement locations worldwide. A strong tourism and retirement trend is fuelling increased interest in real estate in Panama.  As with elsewhere in the region, tourism and real estate are inexorably linked and this trend bodes well for the Panamanian property market.

In many Central American countries it can be very hard to obtain a loan from a local bank for real estate investing and, where it is possible, the interest rates are not competitive to the US and terms can be unfavorable. 

Panama stands out in this regard as competitive financing is comparatively easy to obtain.   In most countries you can normally find private lenders offering loans based on refinancing US assets and an ever increasing number of developers are offering owner/developer financing although this number is still small in absolute terms.

International interest in Panama has been strong for a number of years on the back of government policies encouraging foreign investment and tourism. Panama’s dolarized economy. close allegiance to the US and recent election to the UN Security Council are all factors that build investor confidence in the country. The October 2006 decision to expand the Panama Canal underlines the continued strategic importance that Panama has in the region - a key factor underpinning future investor activity. And Donald Trump’s involvement in the Trump Ocean Club International Hotel and Tower in Panama City has raised the profile of the country further.

What we have at the moment is a booming property market, sharp increases in real estate prices across the county and a construction frenzy particularly in Panama City. A recent Economist article asked the question whether all the building activity in Panama city is “Too much, too quickly?” Can demand keep up with supply? We will maintain a watching brief but so far the market indicators are positive.