OCEAN VIEWS FOR $90K AMID NICARAGUA MESS
Big losses lurk in what seems like a prime chance to buy real estate
SAN JOSE, COSTA RICA After 45 years in Texas, retired U.S. military veteran Erick Estrada is looking to snap up some of the world’s cheapest real estate back in his native Nicaragua.
For US$50,000, he expects to find a two-bedroom house with a courtyard in Granada, a 500-yearold colonial town with cobblestone streets, on the shores of Lake Nicaragua. The Central American nation was already one of the cheapest places to live in the Americas, but the political turmoil currently engulfing the nation has made it even cheaper.
Nicaragua’s political crisis, which erupted in April, has claimed more than 400 lives and forced tens of thousands to flee the country. U.S. Ambassador to the United Nations Nikki Haley said the Central American nation is sliding toward the type of tyranny seen in Syria and Venezuela.
It’s also paralyzed an economy which had been one of the region’s better performers in recent years. Amid the chaos, investors with a lot of stomach for risk are moving in to buy up assets at knock-down prices.
“As someone who wants to buy, now is the time,” said Estrada, 69, who still has family in the country. “Little by little, it will recover.”
Real estate values have tumbled at least 25 per cent since the bloody unrest began as homeowners sell at steep discounts in order to leave the country or avoid foreclosure, creating a market for bargain hunters, said Roddy Gonzalez, vice-president of Nicaragua’s Chamber of Realtors.
Banks have put the brakes on issuing mortgages, while an increase in squatter invasions of farmland has scared off some buyers, he said.
Venezuela’s experience is a cautionary tale of for anyone trying to time the real estate market amid political unrest. After Venezuela essentially stopped exporting oil, it started exporting people.
In the past 16 years, oil production plunged almost two-thirds, turning the country with the world’s biggest proven reserves into a mere fringe player in global markets. Venezuelans, meanwhile, began fleeing in droves. An estimated 1.6 million have left since 2015 — roughly five per cent of the population. The United Nations now estimates that are some 2.3 million Venezuelans living abroad, while in 2005 there were only 437,000.
This new export is paying dividends. As the Venezuelan diaspora earns ever greater income, they ’re sending more to struggling relatives back home. Remittances surged to US$1.5 billion in 2017 and will climb a further 60 per cent this year to US$2.4 billion, according to Caracas-based consultancy Ecoanalitica.
This is a paltry sum, compared to the riches that a good year of oil exports can generate. And it’s just a fraction of what traditional remittance-dependent nations receive. (Tiny El Salvador, for instance, takes in some US$5 billion a year.) But in a country where millions have been driven into deep poverty by hyperinflation and economic paralysis, every dollar counts.
The transfers, as little as US$10 a month, evade currency controls and trickle into Venezuelans’ pockets through networks of small businesses and relatives lucky enough to possess foreign bank accounts. Ecoanalitica estimates that roughly 2.1 million Venezuelans sent money home last year. Asdrubal Oliveros, a company director, says access to dollars has split Venezuela as it faces inflation expected to soar to one million per cent this year, as well as shortages of everything from chicken to car parts.
“You practically have two societies living side by side,” said Oliveros. For those without help from abroad, “hyperinflation makes it very, very likely they’ll end up in poverty or immiserated.”
Buyers in Venezuela who tried to snap up cheap real estate and hope that things would improve are nursing big losses. Home prices have fallen between 50 and 60 per cent in real terms since 2015.
In Nicaragua, a two bedroom, two bathroom house built in 2014 on a 6,372 square-foot lot with Pacific Ocean views was listed as “half-priced” at US$90,000 on Re/ Max’s website. A more luxurious beach townhouse at Pelican Eyes Resort in tourist hot-spot San Juan del Sur just sold and its adjacent unit with the same layout is available for a “reduced price” of US$165,000.
By comparison, prices for a parking space in Brooklyn’s The Parking Club start at US$185,000.