Cuenca hit the top spot in International Living’s Retirement Index in February this year. To anyone familiar with the city, it didn’t come as a surprise. Cuenca combines perfect weather, and a low cost of living, in an artistic and cultural center. Best of all, property prices are highly affordable. If you want a colonial home…a comfy redbrick condo with mountain views…or your own farm…for a fraction of what you’d pay back home: read on.

With an elevation of 8300 feet, Cuenca sits in a fertile valley in Ecuador’s southern highlands, washed by four rivers and surrounded by mountain peaks. Like the rest of the Ecuadorian Andes, Cuenca enjoys spring-like weather all year, with warm sunny days and cool evenings.

It’s possible for a couple to live well here on $1500 a month, including rent, utilities, running a car, and having a twice-weekly maid. Eating out costs less here, too. A delicious lunch of organic salad, quiche, a large glass of fresh juice and brownie and ice-cream dessert, came to just under $8. Lunches averaged $5 a head, and dinner never cost me more than $15 a head.

The city’s a UNESCO world heritage site, thanks to its well-preserved colonial buildings in the historic center. Walking around this district, you’ll want your camera close at hand. Sky-blue domes reach heavenwards from grand cathedrals. A colorful flower market contrasts sharply with the crisp white walls of a monastery. Family groups stroll the spotlessly clean plazas. Brightly painted colonial buildings adorned with ornate tile work and intricately carved doors grab your attention as you walk past.

If you prefer river and mountain views, just outside the old city runs the Tomebamba River, tumbling its way between grassy banks lined with tall trees. Homes here are modern: single-family homes mixed with redbrick condo buildings. To appreciate the city’s layout, head to the Turi lookout point. From there, you’ll see the whole city spread out in front of you.

You won’t sacrifice culture or the arts in Cuenca: it’s the cultural heart of Ecuador. Some of Ecuador’s finest writers, musicians and artists originated here. The city hosts around 200 cultural events each year, from opera to jazz to crafts fairs, many of which are free to the public. Today, the city’s thriving arts scene attracts young artists from many other countries.

You’re also close to national parks, archaeological sites, Inca ruins, lakes and waterfalls…and some stunning mountain scenery.

Property prices in Cuenca appreciated at a rate of about 7% in 2009. Surprisingly, rising prices here don’t reflect a huge influx of foreign buyers snapping up bargain properties. Sales to foreign buyers are on the rise, but at a slow and steady pace. Foreign buyers represent only around 0.5% of all property transactions in the area. Locals aren’t driving the market entirely, though. In addition to its in-country population of 14 million, 3.5 to 4 million Ecuadorians live overseas. Many want their own home in Ecuador, or plan on retiring back to their home country…and many favor Cuenca. Those overseas Ecuadorians purchased a third of the properties sold in Cuenca in 2008 and 2009.

For properties in a large, comfortable, modern city, (Cuenca is Ecuador’s third-largest city), pricing here is very low. Modern redbrick condos along the Tomebamba run around $600-800 a meter. Colonial property in the historic district averages $800-1000 a square meter for properties in good condition. In comparison, you’d pay $1000 a square meter for a wreck that needed a complete rebuild in Panama’s Casco Viejo…and $1200 a meter on top for renovation. In Cartagena, Colombia, old colonials average $3000 a meter.

Interestingly, unlike many other historic cities, Cuenca’s larger colonial buildings aren’t subdivided into smaller, renovated apartments. Difficulties getting the permits and approvals needed (which can take 2 years), and the extra cost of high-standard renovation (which makes prices for finished units on the high side), puts off most developers. One developer did launch a small project, with 9 condos and 3 commercial spaces, in a good location 5 blocks from the central plaza in the old side of the city. Most of the units sold in the first two months after release, and all sold to foreign buyers (only one remains on the market, at $49,000 for 500 square feet). Clearly, there is a market for this type of inventory. The developer has plans for another similar property close by. I’m staying in touch with the developer and will keep you updated on progress with their new project.

On the market today in the old city is a 5200 square foot colonial house, well-cared for by three generations of the same family. With two courtyards and 12 rooms, the property has original wrought-iron, woodwork, doors and windows. It could make an attractive B&B—or a very large family home—with some renovation. The asking price is $315,000.

A three-bed three-bath redbrick condo in excellent condition just outside the historic district offers 1600 square feet of living space for $90,000. That’s just $56.25 a square foot. The building (one of the nicest condo buildings in the city) is close to shopping and some excellent restaurants and cafes.

If you dream of escaping to the country, a 13.5 acre farm 70 miles south of Cuenca is on the market for $198,000. With beautiful mountain views, and at a lower elevation than Cuenca, the property has a recently remodeled 3000 square foot house, newly rewired and plumbed, with modern bathrooms and kitchen, and a spacious patio and pergola at the back. It also has a large lagoon and eight working trout ponds holding 15,000 rainbow trout. With pastureland, citrus trees, a caretaker’s house and some outbuildings, the property could continue as a trout farm, or become a smallholding for raising livestock or growing produce. You can relax in your rural idyll—yet you’re still close enough to access the big-city shopping and entertainment in Cuenca.

Cuenca offers something for everyone—old colonials, modern condos, and countryside living—at a pocket-friendly price. Throw in the big-city amenities, with small-town friendliness…eternal spring…access to art and culture…and that ultra-low cost of living…and it’s easy to see why Cuenca ranks as the top retirement destination.

If you want more information on properties in Cuenca (including the ones here) contact Kathy Gonzalez here.

Editor’s note: Author Margaret Summerfield is a director of Pathfinder (International Living’s preferred real estate advertiser). Pathfinder’s mission is to scout the globe to find the most unique and value-oriented real estate opportunities the world has to offer.