EFAM | Escape From America Magazine

Crisis Hit Latin American Real Estate?

Latin America Real Estate

Latin America Real Estate

Foreclosures, defaults, fire sales…

We all know the story of the housing market north of the border, but has the crisis had the same affect on real estate in Latin America?



 
An important question, indeed, for anyone staring out their frosty window with a sore throat dreaming of their big leap south.
 
After investigating the housing market in several Latin countries, the best answer I can give you is “it depends.”
I know what you’re thinking. “It depends.” What a nice, safe cop out. 
 
But it’s true. Let me explain.  It is a little more complicated down here.
 
First and foremost, the Latin market has not had across the board drops in prices as seen in the US and Europe. 
 
In Latin America, it has depended on the country, your location within the country, and the type of property you own.
 
For example, for a rather undiscovered, under-priced country like Ecuador, the crisis has actually increased demand in some areas by as much as 20-30%. 
 
According to one owner of a prominent real estate website in Ecuador wishing not to be revealed,  said that traffic arriving from Google nearly doubled as the crisis intensified in the last quarter of 2008 and the first quarter of 2009. 
 
His theory is that with the crisis up North, more and more people have begun to look for cheaper places to reside, and with new technologies like the internet and Skype, many people can continue to work from remote locations.
 
Whereas in the Dominican Republic, a country that has already experienced a recent market boom, the consensus from local agents seems to be that prices have taken a noticeable drop in the touristy, foreigner-dependent areas like Punta Cana, but in less touristy places like Santo Domingo, the prices have remained relatively stagnant through the crisis. 
 
Although, even in the touristy places, prices have not fallen as much as they have in the US.
 
Which brings me to my next point: your actual location is also important.  As Dr. Christoph Sieger, a real estate attorney in the Dominican Republic with the firm Guzman Ariza pointed out, one of the main factors people look for when moving to Latin America is security.
 
This may be the reason why prices for properties in gated communities and posh condo buildings have not felt the effects of the low market as much compared to similar properties located outside guarded areas. 
 
Another important observation is that in both countries, Ecuador and the Dominican Republic, prices of beachfront property have not gone down. For beachfront, they never do.

One possible reason for the softer impact of the crisis on the housing market of Latin America is that, let’s face it, the traditional investors in Latin America have been the world’s rich, and the rich have not been nearly as affected by the world economic crisis as the middle class.
 
Another important observation is that credit has always been expensive in Latin America, so people, foreign and local, normally buy in cash, minimizing the affect of the credit crunch as well.
 
With that understood, with a little due diligence, there is no better time than now to start taking a gander south of the border.

About the author:

Domenick Buonamici teaches expats how to find the hidden beachfront property bargains of Ecuador through his e-Book “The Insiders Guide to Ecuador Real Estate” available for immediate download at www.EcuadorRealEstate.org

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16 Comments

  1. Rosana Hart June 24, 2009 at 9:15 pm

    As an American who has been living for 3 1/2 years in the popular expat area of Lake Chapala, just outside Guadalajara, Mexico, I have watched real estate sales drop in our area. A couple of reasons for this are[1] that people NOB (north of the border) are waiting for their homes up there to sell before they can buy here, and [2] that the Mexican drug cartels have gotten huge publicity NOB.

    But like you say, here too prices do not seem to have fallen as much as they have up north. And homes in the more moderate price range are getting a lot more attention.

  2. German June 25, 2009 at 8:38 am

    The real state market in Latin America its different, in most Latin Countries when people buy a house they have to put down 25%-35%, so in Latin America there are not toxic assets only real assets, so the variations in price are minimum,like in any other country the price depents on location, location and location
    but you can still buy an apartment from 75.000 to 125.000 the same apartment that in Florida it will cost
    you 350K-400K……..In other workds the equity down there is real not like in the USA that is a mirage….

  3. Bob Johnson June 26, 2009 at 6:52 am

    Just bought a two bedroom two bath condo in Las Vegas, NV for $30 K in an upscale area of town. Brother Dave can’t move the condo he bought several years ago in Costa Rica. He says there are no buyers. The Costa Rican property is gated, and beachfront. Beware rosy sales talk by RE agents.

  4. david June 26, 2009 at 10:33 pm

    It depends? Yes, it depends…it depends if you have a clue as to what you’re talking about.

    The value of expat residential real estate is directly reflective of the net worth of the expats, and we know the current story there. And the growth in the expat markets was a direct expansion of their markets back home. And now the fantasy that real estate is a great investment, in and of itself, has been exposed for what it is, and most Americans and Europeans are back to viewing res. real estate primarily as shelter. And then we have the funding which is MIA.

    !!!!!!!Which is why residential real estate of interest to most readers of EFAM has taken a serious pounding around the globe as new buyers have disappeared!!!!!

    Ask any expat dependent developer.

  5. Armand Boissy June 27, 2009 at 5:15 pm

    In lake Atitlan, the real state market have not been yet affected as in other places… Prices of the property for sale have not come down as most of the times people who are selling are not in need of money. But the demand is right now more toward houses under $ 100k or land to be acquired for the future betting that the market will pick up. Also here most of the transactions are cash on hand. Still a great value for what you get

  6. Dave Kropelnicki July 4, 2009 at 10:13 am

    After living in South America for over five(5) years, I will be happy to leave and never return! The place is full of abject poverty, over priced and controlled by the Catholic Church! They are at least 100 years behind the US and will never catch up. The people are very stubborn and do not want to learn anything new or different from the primitive system they are used to! I would not pay one US dollar for the entire continent!

    • Richard July 29, 2009 at 4:46 pm

      David you are 100% right is very hard to live with stupid peoples the are doing things deferent way then a Western World. I visited the 3rd World Countries and after two weeks I can not wit to see civilize World perhaps Argentina, or Panama City my be okay ,the rest is good for a 2 weeks in a good hotel on the beach only.

    • Willy November 13, 2009 at 12:18 am

      Good luck. We are glad to have the ugly Americans out of Latin America. Perhaps a lesson on Latin American culture would have been helpful to you before you embarked in this venture. Good luck looking backwards. Evindently you do not have the character to live outside of your small world

  7. Walter A July 9, 2009 at 2:16 pm

    I have lived in Costa Rica for the past year in a very touristy area on the north pacific side. Real estate is almost dead. Many are holding out for bubble prices. When a property sells, it is usually at a deep discount because the American owner had to sell.

    I am waiting for prices to fall to between 10-25% of the bubble peak before I buy. There are signs of this in some areas already.

    • Joel July 14, 2009 at 5:47 pm

      I’m looking into Costa Rica for retirement. Would you say that you prefer the Coast over the Central Valley?
      What are you seeing for nice condo prices close to the ocean?

      • Tom Roucek Broker August 25, 2009 at 5:33 pm

        Joel
        This would depend if your question is based on climate, what you like to do, or future values.
        Climate being my first choice is most important to me. When I first came to Costa Rica I went right to the beach. We bought some oceanfront properties and even a commercial property for a future office. Over the years I have seen many people do the same thing. As things go we soon figured out that the hot weather, high humidity, and Air conditioning driving our utilities up was not what we had in mind.
        When visiting friends in the central valley it was like stepping into a spring day. Very refreshing and the air felt crisp and clean. In talking with friends we were amazed that their electricity bills were $30 @ month compared to ours at $120.

        We started to explore the possibility of moving to the higher elevations. As we looked into it we found several options and each had pros and cons.
        The higher density areas we found like the beaches to have higher crime rates, the areas out in the country there were less services available. In the end we found a home in Escazú a nice North American suburb outside of San Jose. This worked well but now as everywhere it is getting too big and it feels like the city.
        Once more I started looking around and have come to love a nice town (17,000 people) called Puriscal. It is about 45:min from Escazú, there is a new hospital under construction, they have high speed internet, a very large shopping district, low prices, and best of all, nice country people with no crime or pollution.
        Obviously I am a real estate broker; our company has listings all over the country. Everyone has their own idea of what their dream home should be like and I respect that. This is just the chain of events that I personally went through that may be of some help to you in making your choices.
        We have a 4-bedroom home; taxes are $360 @ yr. electricity is about $30 @ mo. We don’t have A/C or heat (never needed it) our neighbors are wonderful and someone has a party almost every weekend. Yes, you can retire here on a social security check and you will be amazed to find how many have.
        I hope this has helped you and please feel free to contact me with any questions about C.R. from fishing to real estate. http://www.costaricanrealtygroup.com

        Tom Roucek

  8. John August 1, 2009 at 6:49 pm

    Argentina has it all….wonderful people, excellent medical care, and reasonable Real Estate prices. The cost of living is half of that in the U.S.A.

    • Phil October 17, 2009 at 7:12 pm

      John – All you say about Argentina for Americans is true in addition to their great wines. I’ve made frequent business trips to many of their cities, but for the Argentinian folks they were hardly getting by and their inflation rate up to about 2003 used to be over 1000% a year. many areas were dealing with mob actions of folks running into grocery stores and clearing the shelves. Many stores had armed guards on their doors and only allowed 5 or so people at a time to enter, no one could enter with a back pack, all the banks had armed guards and would often limit the amount of money that could be withdrawn to the equivalent of $50.00 a day. Many of the older folks would parade around the outsides of banks banging metal spoons on the metal bars over the windows in protest to not being able to get their money out of the banks. There’s no FDIC in Argentina, when the banks fail it’s just ‘audios mucho denaro’ . . .

  9. David Anning August 24, 2009 at 2:54 am

    I lived in Costa Rica for 4 years before having to return to Australia last year.
    I have a house in central San Jose which is currently under contract.
    I can honestly say, Costa Rica is one of the most livable countries I have ever experienced.
    I am sure high end real estate has dropped in value, but a lot of it was overpriced to begin with.
    For anybody looking for a very comfortable lifestyle in a friendly latin American country; I would look no further than Costa Rica.
    David Anning.

    • Ray Stanbrook September 7, 2010 at 4:41 am

      thanks David I’m looking at going over there next year.

  10. Russel December 6, 2012 at 7:10 pm

    Thank you, I’ve just been looking for info approximately this subject for a long time and yours is the greatest I’ve found out till now.
    However, what in regards to the conclusion? Are you positive in regards to the supply?

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