Last year was very active in the real estate markets of San Juan del Sur and Tola. We saw a high amount of sales for existing homes, apartments, and commercial property that were deemed to be priced below replacement cost value and had final sale prices that were reflective of current market conditions. The latter half of 2018 marked the bottom of the real estate market as we saw fire-sale prices from owners who were primarily affected by local economic conditions and overburdened with unsustainable credit obligations – in addition to sellers who felt it was their time to exit the market, immediately. While these highly discounted properties were sold to first-mover investors in late 2018, 2019 saw a lower amount of fire sale-priced properties but still a solid number of attractively discounted properties that remained below their early 2018 / 2017 asking prices.
Whereas properties were selling for 40-50% below previous years amounts in late 2018, the market hardened in 2019 as the fire sale properties were removed from the market and sellers began to see a higher level of interest and demand from buyers.
Sales prices in 2019 were approximately 25-35% lower than their prelate 2018 sales prices and this is due to a combination of an increase in market demand and a decrease in the amount of inventory. We sold a high number of homes in 2019 and a smaller number of lots. Buyers were significantly more interested in existing homes and apartments that were priced below true market value as opposed to vacant land. Vacant land sales occurred at a much lower frequency and land sellers had to be more aggressive with pricing to match the abundance of land availability in comparison to the scarcity of desirable homes on the market. We did see new construction in 2019, primarily from existing and new landowners who were building their vacation homes as well as permanent residences – with no intent to sell in the near future. There was also remodel and improvement based construction that occurred on a number of existing commercial properties.
These market factors create an intriguing outlook for the 2020 real estate market in San Juan del Sur & Tola. If home sales continue at their 2019 pace we are most likely going to have a lack of home inventory towards the end of the year and into 2021, as pre-construction and spec home construction is more or less at a stand still. Unless it’s a personal home that a buyer plans to hold on to for a few years and/or use permanently, the majority of buyers prefer buying under valued existing homes opposed to building a new property, which costs more than existing home options available on the market.
What does this mean for you as a buyer in 2020? Do not wait too long to make a move on that property you have been admiring from afar. The best properties continue to get scooped up, leaving little opportunity for those looking to wait and see what happens.
If the most desirable homes continue to sell at the 2019 pace, buyers will be forced to look at pre & new construction projects and land as alternative options.
With a lack of available credit from local banks and hesitation from builders and developers to build numerous homes at scale that are priced higher than the existing discounted inventory, we have a chicken and egg situation. Whether builders and developers start to build model and spec homes or buyers start to buy land and build to their specifications, we predict that the majority of currently available homes that are deemed “good deals” will be gone by the end of 2020
If you are a seller in 2020 you have to be pragmatic and recognize the reality of our current buyer’s market. Although there is trickling of families, retirees, and young couples entering the market – which was our primary demographic prelate 2018 – the bulk of current buyers are primarily focused on the investment perspective of their purchase and looking for value. Buyers are relying heavier on the financial aspect of their purchase as opposed to the emotional element which was a stronger driver in earlier years.
Unique properties such as distinct commercial property in the heart of San Juan del Sur and beachfront / oceanfront homes & lots in developments such as Hacienda Iguana and Rancho Santana in Tola have retained their value more so than other properties. Landmark locations & properties traditionally are less susceptible to market swings due to the primary rule of real estate: location, location, location.
The developments in Tola have benefited from a larger foreign ownership pool which is less sensitive to the Nicaraguan economy while benefiting from strong US & global market conditions.
Whether looking to buy or sell in 2020, Invest Nicaragua can assist. We are buyers & sellers in this market as well and understand the creative strategies needed to obtain your goals on both sides of the fence.
Contact us if you would like to discuss your property journey in greater detail, we are more than happy to help!
Leslie & Belkys