The Latest Scoop on Nicaragua

Monday, July 14, 2008

Read more about Nicaragua in International Living Postcards —your daily escape

Dear International Living Reader,

In the July issue of International Living magazine, Ronan McMahon told us about the property market in Nicaragua, which has experienced two major setbacks in the last 18 months. First, the election of Daniel Ortega was followed by a nervous wait-and-see view of the market. The second blow came from the subprime crises and onset of recession in the U.S.—the real estate market in Nicaragua was dependent on U.S. investors, who rapidly dried up.

Shortly after his election in November 2006, Daniel Ortega met with dozens of the country’s top business leaders and foreign investors and promised to respect property rights and support the country’s Central American Free Trade Agreement with the U.S.

He assured existing investors that they would be able to continue their work as they have in the past and expressed his welcome to new investors in the country.

“No one is going to allow seizure of property, big or small,” Ortega said. “We need to eradicate poverty, but you don’t do that by getting rid of investment and those who have resources.”

Right now, Ronan doesn’t know one developer, local or gringo, who fears that Ortega will renege on his promise to respect property ownership rights. Here at IL, we are keeping a close eye on the situation. Ronan has scheduled an interview with Nicaragua’s top ministers and will speak to them over the coming weeks. We want to confirm Ortega will stick to his word.

In the meantime, the clock has been turned back two to three years, with prices now at where they were when the boom in Nicaragua really took hold in 2005. Today’s lower prices reflect a perceived political risk…but the political risk has diminished since 2005.

The mainstream press has reported on the same subject this past month.

The International Herald Tribune reports: “The 2006 election of Daniel Ortega, once a prominent figure in the Sandinista government, as Nicaragua’s new president created the first lull in what real estate agents described as a frenzy of activity.”

“It just became completely dead for his first six months,” said Robin Donaldson, a local real estate agent and developer interviewed by the Herald Tribune.

“But gradually, as Ortega refrained from pursuing an aggressively social agenda, foreign investors and the market began ‘slowly coming back,’” she said.

“Nicaragua has plenty of models in Latin America for growth in its real estate sector. Much like Panama, it has been trying to mold real estate laws to welcome foreign investors and retirees,” the paper says.

The Miami Herald reports on the pending legislation on coastal land usage, saying that it will determine whether the real estate market in Nicaragua is poised to boom—or bust. “In the next several weeks, Nicaragua’s National Assembly is expected to pass a law that will regulate development along the Pacific, Caribbean, and lakeshore coasts. The wording of that law, which has been intensely debated and anxiously awaited for more than three years, will determine whether investors get a green light to start building up Nicaragua’s pristine coast or whether they pull out.”

IL friends who live there say Nicaragua is the same easy-going place it has been for the last decade. And in fact, opportunities for investors are greater than ever. The uncertainties of Ortega’s reign have caused real estate prices to drop—yet as the Los Angeles Times reported about Nicaragua, “with prices along its Pacific Riviera one-fifth of those in already discovered Costa Rica, a 45-minute drive to the south…the second-home market is now mirroring the first wave of Costa Rican real estate investments by North Americans 20 years ago.” In this same article, the Times also reported, “Nicaragua is reportedly the safest of all Central American countries today, according to a study by INCAE, the Harvard Business School affiliate in Managua, and strongly encourages tourism and foreign investment.”

Laura Sheridan
Managing Editor, International Living

Editor’s note: Our International Living magazine is full of news you won’t hear in the mainstream press. We take that a step further and find out about the best secret hideaways that the tourists don’t know about, real estate bargains that can only be found by our on-the-ground scouts, and investment and tax advice from experienced experts. If you would like to start receiving our monthly magazine, go here.

Read related IL Postcards:

- Discovering Nicaragua’s New Value Play

- Thanks to Daniel Ortega, Beach Prices Are a Steal