Getting in early by investing in Nicaragua real estate
Critical to any successful real estate investment is the question of timing. Ideally, you want to get in early, before the rest of the world catches on to a new purchasing destination. Ten or fifteen years ago, you could describe Costa Rica or Belize as an ‘early-in’ investment destination. Today they welcome millions of people from all corners of the earth and property values have risen significantly over the years. Right now, many commentators are calling Nicaragua the ‘early in’ investment destination for the region, set to follow a similar growth trend as Costa Rica or Belize.
Comparison shopping
The key indicator to look at to determine where a market lies along a development curve is the cost of property. Problem is, it can be hard to get hold of comparative market statistics in Central America, particularly in areas where there is no functioning MLS.
So we turned to Reveal Real Estate, a market research organization focusing on international real estate in Central America. They have aggregated listing prices from real estate developments and master planned communities in Nicaragua, Belize, Costa Rica and Panama and put this information online. The chart below shows their analysis of median price per square foot for houses in 2008 across the four countries.
Nicaragua emerges as the lowest cost property destination across all categories, and second cheapest (after Panama) for ocean view houses. The 2009 data, which has just been released for Nicaragua and Panama real estate, backs this up with Nicaragua emerging as a cheaper investment destination across all property types. Costa Rica real estate and Belize property data will soon be released so we’ll run the comparison when it is available.
And it’s not just property values that are paving the way for early-in property investors, Nicaragua has the lowest cost of living in Central America. (Calculated using implied Purchasing Power Parity (PPP) conversion rate from the IMF.)
It’s a buyers market in Nicaragua
Right now it’s a buyers market in Nicaragua. The country is not immune to the global economic crisis. Developers are offering incentives and there have been some price reductions. But what’s clear is that Nicaragua is not experiencing the double digit declines we’re accustomed to seeing in headlines across the globe.
As noted by Reveal Real Estate, the key reason for this is the low levels of lender-mediated activity in the Nicaragua property market. With most property purchases being made in cash, foreclosures are very rare.
A second factor is the emergence of a new type of ‘lifestyle investor.’ These are buyers who are seeing their chances of retiring in, say, Florida unwind but they’re not ready to give up on the lifestyle they had planned for their retirement. So they’re looking at countries like Nicaragua where the real estate is cheaper and, crucially, the cost of living more affordable. And they’re getting in early by investing in Nicaragua real estate.
