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Nicaragua In the News

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Real estate continues its boom in Nicaragua


Real estate continues its boom in Nicaragua, spurred by low prices and growing tourism.

Despite a new, leftist government led by President Daniel Ortega, executives in Nicaragua's growing real estate industry remain bullish.

"The real estate market outlook continues to be positive," says Claudia Gonella, director of the Nicaragua offices of U.S.-based real estate agency Coldwell Banker."We are selling well out of both of our real estate offices, at approximately the same rate as this time last year."

Timothy Thomas, owner and broker at ReMAX Monteverde, agrees. "I think [the government] will be OK," he says. "Our investors met with Daniel Ortega after the election and he wasn't the Danny Ortega of the 1980s, that's for sure."

Nicaragua is one of the key growth markets in Latin America outside Mexico for U.S.-based First American Title Insurance Company. "The market has not slowed down as people seem to be optimistic about Ortega staying the course when it comes to investments in the country," says Turalu Brady Murdock, vice president of First American. "From an investment opportunity there are still very good opportunities in Nicaragua in the real estate market."

PROMISES PROPERTY RIGHTS

Ortega has vowed to respect private property rights, the free trade agreement with the United States (CAFTA), agreements with the International Monetary Fund and continue with the same macro-economic policies of his predecessor, Enrique Bolanos. He has also gained some praise for appointing Arturo Cruz, a well-respected economist, as his ambassador to the United States. His new pledges stand in contrast to his last government (1979-90), when private property was expropriated, inflation skyrocketed and the economy went into freefall.

"The Sandinista party has actually been one of our strongest allies in the resolution of title claims caused by the 1980 confiscations, so I do not foresee any problem with property rights during Ortega’s presidency," says Murdock.

Ortega assumed Nicaragua's presidency last week, vowing to forge closer relations with Venezuela while continuing the country's close relations with the United States. "The release of pro-Chavez rhetoric, which we expect to continue through the term of the new government, is unlikely to undermine a working relationship with the US as long as democratic principles are upheld," Gonella says. "These next six months are crucial and provide an opportunity to sweep away once and for all the ghost of the Sandinista party that has hovered over the country for the last 15 years."

Thomas sees the next two months as key to determine whether Ortega means what he has said. Gonella expects price stability for a few months and, assuming the new administration keeps to its verbal and written commitments (in support of DR-CAFTA, private property rights, tourism, free market etc), the market could come back strongly in the second half of 2007.

A NEW COSTA RICA?

Nicaragua has seen significant growth the past few years, partly helped by inexpensive prices, a reputation as a safe country, growing tourism and increased flight connections with the United States. Some realtors dub the country "the next Costa Rica."

"It's close to America and one-fifth of the price of Costa Rica for the same properties," Thomas says.
The real estate market is driven by both residential and commercial properties. On the residential side, many baby boomers from the United States are discovering Nicaragua as a less-expensive alternative to Costa Rica and Mexico, while banks and factories are helping the commercial market.

Banpro bank is constructing a new $15 million building across the street from Thomas, while a Korean investors is planning a $100 million factory to manufacture Levis. Meanwhile, a client of Thomas plan an ethanol plant in Nicaragua, while another one is expanding a chain of coffee shops in the country. Meanwhile, local real estate group is developing a major resort, Gran Pacifica Beach & Golf Resort, with hotels, apartments and gold courses on the Pacific coast.

PRICES DON'T FALL

While the asking prices from developers and owners usually increase during high season (which runs from December to May), that did not happen this time. However, neither have they fallen, according to Gonella. "The major developers are continuing to roll out their master plans with no delay," she says. "This is a sign of confidence."



Another reason for optimism is that tourism also is seeing stable demand. Hotels in key tourism towns such as San Juan del Sur and Granada are experiencing high occupancy levels as would be expected at this time of year and tour operators have bookings well into 2007, according to Gonella. "Real estate and tourism sectors are closely linked here," she says.

As more tourists visit Nicaragua, more people plan to come back to buy property, says Thomas. "Tourism is huge...and just getting bigger," he says. This weekend, some 5,000 tourists visited San Juan del Sur thanks to four cruise ships, he points out.

Most of the real estate sales will take place in the residential sector focused primarily in key tourism destinations. "Investors will be looking for capital appreciation, but also for properties that they see as good candidates for rental income," Gonella says. "The strong outlook for tourism visitors for 2007 will support this trend."

COMMERCIAL INVESTORS WAIT

Coldwell Banker expects less activity in the commercial sector in the early part of 2007, as many investors will take a wait-and-see approach. "Commercial investors tend to invest on a larger scale than the residential buyer, and for the longer term," she says.

In terms of geographical areas, the more “established” markets for foreign real estate investment such as Granada and San Juan del Sur are likely to be where most investor activity will continue to be focused, while newer, more speculative, cities and areas for investment such as the colonial town of Leon and Inland Mountains around Matagalpa, are likely to see less activity, at least for the first part of 2007, Gonella predicts. "Investors are likely to feel more comfortable investing in areas where a positive growth trend is already established," she says.


Coldwell Banker has also seen good demand for its four-day real estate tours to Nicaragua scheduled for each of the next three months. The tours typically have between six and 12 participants to better tailor the group's requests. "he tours offer a great way to make sense of real estate opportunities here," Gonella says.

So far, the participants are mainly from the United States, but Coldwell Banker plans to boost its marketing to Europe to take advantage of the strong Euro and British Stirling, she says.