SAN JUANDEL SUR – After suffering a temporary lull on the beach and a dip that was probably more substantial than first reported in Granada, Nicaragua’s real estate market seems to be on track to make a full recovery, according to industry insiders.
For an industry that is highly susceptible to rumor, speculation, fear and hype, the real estate market took one on the chin at the end of last year, when it became clear that former revolutionary leader Daniel Ortega had a chance to return to power. It then took another hit when he won.
After several benchmark years of unprecedented market growth and 100-percent-plus annual appreciation rates, the market cooled substantially. Realtors reported that the upward price trend in San Juan del Sur leveled off and stabilized, while in Granada, which for some reason seemed to react much stronger to Ortega’s victory, prices plummeted.
Some Granada realtors reported last November that prices had dropped 20% in the city immediately following the election.
Some foreigner investors pulled a panic sale immediately after the vote returns and fled the country as if trying to ensure themselves a limited spot on a life raft.
Most, however, took a more calculated wait-and-see approach. Those who rushed to put their house on the market took a loss, and those who bought them laughed to the bank. As a new wave of intrepid and educated investors cashed in on the panic of others, slowly the market started to recover.
Now that the waters have calmed and the sun again has started to poke through the clouds, some realtors in Granada are admitting that the “Ortega storm” caused more damage than initially reported.
“Prices dropped 50%, the market bottomed out,” said Gabriell Farelli, of Tropical Real Estate.“Most realtors said the effect was less to keep clients from panicking.”
Since hitting rock bottom, the market has recovered 25-30%, fueled by “Europeans who are sympathetic to Ortega, and Americans looking for a profit,” Farelli said.
Farelli said most of his clients these days are “more educated,” they realize the risks but have a better perspective on global and market affairs. But the buyers’ market won’t last forever, he warned.
“Six months from now, it will be a different story when the market recovers 100% and there won’t be anymore good deals,” Farelli said.
Kirk Hankla, president of Coldwell Banker Nicaragua, with offices in Granada and San Juan del Sur, agrees that the market lull is officially over.
“Of the buyers who pulled out of transactions immediately after the elections, most have returned,” Hankla said. “Perhaps one telling indicator is that now the questions relative to Ortega are rarely even asked by those who are actively searching for property in Nicaragua.”
Adds Hankla, “We are now as busy as we have ever been.”
San Juan Recovers
Though the formerly red-hot real estate market along the southern Pacific coast had cooled considerably for several months before and after the elections, it started to pick up again in February and reportedly has been recovering quickly ever since.
Juan Manuel Caldera, vice-president of development project Las Fincas de Escamequita, south of San Juan del Sur, reports that the buyers are back.
After not selling any properties from October 2006 to January of this year, Caldera says the project sold four properties in February and four more on March 19.
Adam Harris of Century 21 in San Juan del Sur reports a similar sales boom at Costa Dulce development on the southern Pacific coast, near the Costa Rican border. He says the development project sold one property from September to January, and then sold nine lots in February.
“Ortega’s victory was like the Y2K scare,” said Century 21’s David Brownlee.
“Everyone was scared of it and talked about it beforehand, and then nothing happened.”
The pick-up in the market action has already started to shift the market back from a buyers’ market to a sellers’ market, realtors say. Buyers, who had power to negotiate prices several months ago when no one was buying, now have less wiggle room.
Overall prices, however, are still relatively attractive considering they haven’t increased in six months at the beach.
Jason Puracal, a realtor for Remax San Juan del Sur, says the temporary leveling off of prices has allowed him to get back into the market by spinning his commission on sales into purchases of his own.
“I’m a realtor and I am buying property for myself,” Puracal said. “Everyone I know who lives here is buying now; they see this as a great opportunity.”
He claims the next price adjustment probably won’t be until December.
Puracal and other realtors claim that Ortega’s victory has changed the profile of the buyer, scaring off the uninformed speculator, which ultimately is a good thing for the market and Nicaragua as a whole.
Those who are buying now, Puracal say, are “educated buyers,” both those in under-$50,000 category and big,multi-million-dollar buyers.
Today’s buyers, he says, are people who are looking to build and live here. In other words, they are generally people who care more about Nicaragua than just turning a quick carpetbagger’s profit. This, ultimately, is a much healthier buyer profile for the country’s development, Puracal said.
Things to Consider Before Buying Property
1) Make sure there are no pending liens against the property.
2) Don’t take the seller’s word on boundaries and property lines. Carefully check the location and boundaries of the property to make sure they are clearly defined in the municipal Catastro Office. Doing this could protect you from future boundary squabbles with your neighbors.
3) Make sure the seller is the lawfully registered owner of the property and that there are not multiple titles or deeds to the same property.
4) Make sure all property taxes have been paid.
If not, the new owner will assume the previous owner’s debt.