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.
From Reveal Real Estate - charting international real estate trends in Central America.
The real estate market in Central America: In graphics
March 28th, 2009
Whether you’re in the market for real estate in Central America, or you are selling, market data matters more than ever. Without data how can you determine fair value, track where the market is heading or feel confident that you are making the right investment decision? Trouble is, in Central America market data and comps are not readily available from property institutes, registries or central bank databases.
To try and fill this data gap, we’ve collected data from real estate developments in Panama, Costa Rica, Nicaragua and Belize and put this information online. As part of our research we also collected country-level indicators that shed light on the investment climate. Here are some highlights from what we have found:
Real estate developments targeting the international buyer
Costa Rica has the largest number of real estate developments that target the international investor, with 34% of the total in our database. No surprise really. It’s been on the international real estate map for longest. Panama follows close behind. This is largely due to the explosion in condo projects in recent years in Panama City.
The price for an ocean view condo
The order from most expensive to least expensive country to buy an ocean view condo is Costa Rica - Belize - Panama - Nicaragua. The data looks at median price per sq.ft.
The ordering is what you would expect given the different levels of maturity of the markets and level of infrastructure. But did you think the differential between Costa Rica and the other countries would be greater? We did.
The average size for an ocean view condo in Costa Rica tends to be larger than in other countries, which may explain part of this. We’ll be publishing more data in later posts to dig into the comparatives further.
Internet searches on Google
There were more searches for ‘Costa Rica real estate’ on Google than for ‘Panama real estate’, ‘Belize real estate’ and ‘Nicaragua real estate’ combined. We predicted the order, but again were surprized by the differential between Costa Rica and the other countries - this time in the other direction.
Cost of living
Nicaragua stands out as offering the lowest cost of living. Using purchasing-power-parity (PPP) data we can determine what US$1,000 ‘adds up’ to in different countries. In the US $1,000 has the purchasing power of $1,000, but in Nicaragua it has a purchasing power equivalent to $2,629. 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 all four countries than in the US.
Completed golf courses
There are several golf courses planned or under construction in the region. At least 3 in Nicaragua and 3 in Panama. The data below is for completed golf courses that can be played on. Before seeing the data, would you have guessed that there would be more than 2 completed golf courses in Nicaragua?
The data is drawn from research done in 2008, see notes to the data for more information. We’ll be updating for 2009 and charting the trends. Dig into our main site, run some searches, and check out the property hotspots and country indicators for Nicaragua, Panama, Costa Rica and Belize.
What’s your reaction to this data. Any surprizes for you?
Tell us about your real estate investment in Central America. Was it a triumph or a mistake?
March 19th, 2009
We’re looking for the inside scoop, your investment story. Why? Because we think personal insights, reflections and information direct from other investors will help those who come after make more informed decisions. It’s all about increasing market transparency and providing an additional lawyer of information to people researching the region.
So what makes a good review?
Reviews vary in tone and approach. Some deliver hard facts and quantitative data while others focus on softer attributes like the feel of a place or its reputation. Although there’s no single formula to follow, there are some content topics that we see in the best property reviews:
- Informed judgments based on real-life experience
- Comparisons between different options
- Examples (perhaps even with photos) of previous investments made and how they have performed
- Specific information on the kind of investor that would be be most suited to a particular area or property type
- Coverage of how a particular place or region has evolved over time
On Reveal Real Estate you’ll find reviews organized by property hotspot - the areas generating the most attention from international real estate investors.
Study after study has shown that people who read reviews say that their purchasing decisions have been influenced by what they have read. Your review may help someone confirm that an investment in a property hotspot is the right decision for them. Or it may result in them changing their mind about a buying decision.
And, over time, we want to highlight the people behind the best reviews and build a network of expert reviewers. If you are interested in joining the network, please contact us.
So, write a good review, upload a photo of an investment that you have made, demonstrate your expertise, and you’ll be helping those who come after you.
Tags: Ambergris Caye, Belize, Golf, Real estate tour, Reviews
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