2023 Nicaraguan Real Estate Market Update: What you need to know about the real estate markets of San Juan del Sur and Tola for this year.
2023 Real Estate Market – San Juan del Sur & Tola
A myriad of unprecedented events has caused a severe change in the global macroeconomic environment, including, but not limited to: the Russia-Urkraine war, global fiscal and monetary tightening, China’s Covid restrictions and manufacturing slowdown, inflation, as well as stock & crypto market slumps. Although most of these events are not directly correlated with Nicaragua, they create a global condition affecting many individuals and businesses: most people are financially worth less than they were 12 months ago due to various asset classes losing value in 2022. The economic outlook for 2023 is very uncertain, and we are witnessing large-scale layoffs from even some of the strongest companies in the world. In summary, individuals, families, and investors are much more conscious about their spending currently, and many have much less to spend than they had previously.
So, what does this mean for the 2023 Real Estate Markets of San Juan del Sur & Tola?
Emotionally driven purchases have cooled – Nicaragua saw a huge increase in real estate sales driven primarily by emotional purchasing during COVID when many individuals and families decided to leave their home country and relocate to Nicaragua, where restrictions were minimal compared to other countries. Now that COVID is behind us, we saw emotionally driven purchases slow down in 2022 and expect this trend to continue throughout 2023. Based on the current global macroeconomic conditions, emotional purchases will be the minority as more investors with cash on hand enter the market focused on economics instead of emotions.
We are in Neutral Real Estate Market – Specifically, in San Juan del Sur & Tola; we are not in the frothy seller’s market we had during COVID. However, we are not in a buyer’s market as home inventory is still relatively low, and the number of buyers has decreased due to the aforementioned global economic conditions. The real estate markets of San Juan del Sur & Tola are in an interesting position because they are primarily cash markets. Current sellers are not dealing with increasing mortgage rates as they typically own their property outright, and rising interest rates do not fetter buyers because they are buying in cash. This causes less fluctuation in property prices and a certain level of insulation from the global macro environment. Due to this, we think the market is currently neutral.
Home demand will continue to outpace supply – In our 2022 Nicaraguan Real Estate Market Update, we predicted that home sales would continue to rise and eat away at the existing inventory. This prediction was 100% correct, as home sales were at an all-time high in 2022, leaving a limited amount of desirable inventory in both the Tola and San Juan del Sur markets. Two observations from this are the resiliency the markets had against the 2022 economic headwinds and the continuing lack of new home inventory being built. Home inventory will remain low in 2023 as the most desirable properties are quickly snatched up by eager buyers, and new home building at scale is virtually non-existent.
The rental market is on fire – 2022 was an excellent year for landlords as both short-term and long-term rental demand increased. Whether snowbirds spending the cold winter months in the sunshine, digital nomads escaping for a few months, families testing the waters, or vacationers enjoying a long weekend; homes were packed. The strong increase in short-term rentals has left fewer options in the long-term market, creating less supply than demand. Finding a long-term rental in 2023 will be challenging and rental rates will likely increase. The commercial rental market will also continue to see growth in 2023 as current availability is extremely low in both San Juan del Sur & Tola, as investors continue to open new businesses (restaurants, offices, retail, etc.) and current businesses expand and relocate to upgrade.
Positive outlook for Nicaragua – In the last few months, three airlines have resumed flights to Nicaragua: Spirit, American Airlines, and United. The increase in flights will cause an uptick in tourism, which will benefit the local economy and rental market and build interest from new potential buyers as more people get to spend time on the ground in Nicaragua and fall in love with the country. We have also seen a string of positive news articles highlighting San Juan del Sur, Tola, and Nicaragua as a whole as a top destination to check out for tourism, retirement, and full-time living. These are all excellent tailwinds as we enter 2023.
2023 Nicaraguan Real Estate Market Update Summary
The resiliency of the San Juan del Sur & Tola real estate markets during 2022 indicates that the global macroeconomic conditions in 2023 should not affect our real estate markets as strongly as other countries more affected by rising interest rates, inflation, layoffs, etc. Safety, low cost of living, availability of high-quality education, weather, and affordable real estate will continue to drive buyers looking for a lifestyle upgrade and higher quality of living to Nicaragua. Investors will be looking to diversify from more affected asset classes and markets to places like Nicaragua, with less exposure to interest rates and inflation fluctuations. Investors looking for steady returns via monthly cash flow and appreciating assets will take advantage of the growing rental market with high demand for both long- and short-term rentals. The high level of uncertainty in the stock market and other assets will encourage investors to look for other options to park their cash. This makes the affordable, cash-producing real estate in Nicaragua an attractive choice, especially due to the ease of purchasing here.
We hope you’ve found our 2023 Nicaraguan Real Estate Market Update informative and useful. As always, please feel free to contact us with any questions and/or to set up your free consultation to discuss 2023 property goals.