You’ll find regular commentary on real estate markets in Costa Rica, Panama, Nicaragua and Belize in mainstream press. But it’s Costa Rica that racks up the highest amount of coverage on the blogosphere. Costa Rica has been a destination for vacation home buyers for decades and is now home to an impressive array of hospitality brands. The other markets are newer and at an earlier stage in their development cycles.

The image counts the number of real estate blogs per country according to Technorati.com, the blog search-engine. The results broadly correspond to the relative number of online searches for real estate. It’s a useful proxy for the maturity of, and buzz around, the different real estate markets.

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 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…

Most of the foreign buyers for real estate in Central America are from the US - with California and Florida leading the way.  The graph adds the detail to this trend.  It includes not only buyers but people researching Central American real estate markets over the internet.  The last two years have seen a slight but perceptible shift with more buyers appearing from Europe and South Asia.  Many of whom are likely to have business interests in, and/or spend time in, the US.

By drawing on purchasing-power-parity (PPP) data released by the IMF, we can calculate what US $1,000 “adds up to” in various countries across Central America. 

According to Wikipedia ”Purchasing power parity (PPP) … is the method of using the long-run equilibrium exchange rate of two currencies to equalize the currencies’ purchasing power. It is based on the law of one price, the idea that, in an efficient market, identical goods must have only one price.”

So the theory behind PPP is that exchange rates should adjust to equalize the price of a basket of goods and services around the world.  In the United States $1,000 is the equivalent of, well, $1,000.  But in Nicaragua, for example, it rounds up to a hefty $4,144, see below.

We have to be careful not to draw too much from these averages as they don’t apply to all product categories.  But for day-to-day goods and services your dollar will stretch further in Central America.

Tourism trends are useful predictors of real estate sales.  This is particularly the case where tourists and real estate investors are both traveling a long distance from their primary residence and staying for an extended period of time. Of course, a second home purchase is a larger discretionary payment than a vacation with many more factors needing to be taken into account.  But at a general level there is considerable overlap in the attributes that second home buyers and holiday makers are looking for.

You know how it goes.  You go on holiday.   You find a charming little fishing village and spend two glorious weeks relaxing and doing fun stuff.  On the last day you look at realtors window and then buy a property or at least start looking.  Real estate and tourism are inexorably linked.

We are seeing this phenomenon all over Central America.  Key tourism areas are also those generating the highest levels of real estate activity.  Examples are Granada and San Juan del Sur in Nicaragua; Ambergris Caye in Belize, Antigua in Guatemala, the Bay Islands in Honduras and Bocas del Toro, Panama City and Boquete in Panama.

Given this link, how Central America is positioned within wider international tourism trends provides a key indicator for the real estate market going forward.

The prospects look good:  According to the UNWTO, at 16% growth, Central America was the fastest growing sub region for tourism in the world in 2005.  2006 has also seen double digit increases for all Central American countries, with the exception of Belize.  The area is clearly growing in importance as a crowd-puller for holidaymakers.

If you wanted a rough-and-ready way to calculate investor interest in real estate in different countries, type a commonly used search term into a tracking service. Then repeat, using the same search term, for comparison countries. What you are looking for is not the absolute number of searches (something, incidentally, that can be hard to find) but the relative results between counties. Have a look at the graph below for countries in Central America for searches made in November 2006

Costa Rica tops the bill for November. This is not altogether surprising. Costa Rica is the most established market in the region, has the largest number of US citizens as residents, and has been a popular real estate destination for many years. Panama and Belize rack up the second and third spots for Internet searches followed by Nicaragua in fourth position.

It is impossible to know exactly how this translates into investor confidence or relative real estate sales volumes for the different countries. Data on sales volumes and prices is not maintained centrally so we cannot make definite correlations. However, one thing is certain, investor interest in information on real estate (at least over the Internet) is highest for the more mature real estate destinations.

Going forward, we plan to conduct a trend search focused on conversations, tags and posts made in blogs. But we want to wait until there are enough blogs covering real estate in Central America to make the results meaningful. Looking at the explosion of new blogs worldwide this may be quite soon. As soon as we have the data we will post it here.