The global financial crisis and its impact on international real estate is still discussion topic #1 among investment analysts, real estate agents and developers in Central America. Everyone agrees that 2009 was a difficult year. The tricky part is that the arguments being presented paint quite different scenarios for the future.

On the one hand, large-scale real estate projects, especially if heavily leveraged, have proven vulnerable. The suspension of the St. Regis project in Costa Rica in the wake of the Lehman Brothers collapse was the first high profile example. Other project closures and suspensions followed in 2009 including the Rosewood at Costa Carmel (Costa Rica), La Punta Papagayo (Costa Rica), Marea Alta (Nicaragua), and Orchid Residences (Panama City), to name a few.

But perhaps more important than the direct impact of the international financial crisis, the property pessimists argue, was the indirect effect of tighter lines of credit in North America - the main source of buyers for international real estate in the region. No longer is the market being carried by North American buyers flush with equity and easy credit. It’s easy to point to low sales volumes and falling prices to make this point.

Any bright spots? Counter trends?

One can overdo the gloom.  The optimists point to sticker prices on the downside in Central America relative to more mature markets. The relatively low levels of lender mediated activity across the region meant that the market did not suffer the kind of foreclosure crisis we’ve become used to reading about in the US.

Second, international real estate markets, and Central America included, are increasingly being seen as tax-friendly, safe haven investments. The kind of places investors and retirees seek to shield themselves from the US financial system.

Added to this, is a new wave of lifestyle buyers looking for areas where the real estate is cheaper and, crucially, the cost of living more affordable. We included examples of developers, such as Montecristo Beach & Golf Resort in Nicaragua, Grand Baymen in Belize and Valle Escondido in Panama, successfully marketing to these buyers in a recent article for the International Property Journal.

The upshot?

The impact of the financial crisis has been mixed both within and between countries. Developers are having to adapt quickly to a new market.  Those that understand the mindset of the post-crisis real estate investor are best placed to succeed.

Investment activity is trending towards well-planned developments with good locations, quality products and a master plan that delivers against end-user requirements. Pre-construction offerings in weak locations face an uphill battle.

The property pessimists are right that the boom years are over for international real estate in Central America.  It’s a different market now, with buyers firmly in the driving seat. Welcome to the ‘new normal’.

Tags: Add new tag, Costa Rica, Nicaragua, Panama
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