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Getting Real on Real Estate in Nicaragua

Here are my thoughts on the state of real estate in Nicaragua. My opinions are worth what I charge for them which is nothing.

We arrived in 2006 but we had traveled here since around 2001. 2004-06 were the boom years when everyone was saying Nicaragua would be the next Costa Rica. Properties were being bought and resold at a frenzied rate. Unfortunately a very small percentage were buying for their own usage and even most of those purchases were pegged for a future retirement home or a nest egg to be sold when its value had increased enough. Who could resist an oceanfront lot for under $50,000? But unlike Costa Rica’s boom, there were few people moving to Nicaragua so there was simply a lot of foreign investment but very few people were moving here to watch or use their investments. Many were buying to have equity outside of the states with hopes of selling without reporting capital gains.

Developers and realtors were coming out of the woodwork though few had any experience.  People with no idea of how to run even a small business were buying up large tracts of land, subdividing into lots and selling many of them sight unseen over the Internet. There were no licensing requirements and the government had no idea how to control or regulate this sudden influx of investment. Lawyers scrambled to learn how to handle real estate sales and especially the development sales since they were easier and often were sales of several lots with a single contract.

Many people were too busy selling to worry about putting in infrastructure, having home owner associations or the lack of access to their land. To be fair, there were a few honest realtors and competent developers. Some of them have survived to this day but so few.

We had left the states at the peak of the real estate boom there and people later thought we were prescient in selling our stateside properties at that time. It was just dumb luck and it is hard to remember how lucky we were. Our home sold within hours at full price as did some other things we owned. And all of it was sold FSBO (for sale by owner) without realtors. I doubt those days will ever come back soon. But we got caught up in the frenzy in Nicaragua and bought several pieces of land and a home. Oh, if we could only go back in time but at the moment it seemed a good idea as an investment. After all, look what happened in Costa Rica.

At the end of 2006, the unthinkable happened. People deny it now but very few thought Ortega had a chance of winning the presidential election but he won it handily with the popular vote and won it fairly. The large investors and many of the expats living here freaked out thinking their land would be confiscated and their rights destroyed. Some of the home and landowners placed their holdings on the market at a much lower price but it was too late since there were even fewer buyers. Almost all values slid to a much lower base where they would remain for several years. Many of the realtors closed up shop and only the strongest of the developers remained. The global economic crash in 2008 was the final nail in the coffin and Nicaragua went to sleep until almost 2011.

For all the fears of Ortega, few materialized in any appreciable form and in fact, Nicaragua made some major improvements. While city streets are still a little rough, the major highways are the best in Central America. Education and health for the poor majority is still woeful but they have been improved. Ortega did cozy up with Venezuela and some other less than desirable relations were formed but it did bring in some much needed capital.

In 2011 tourism and buyers began to return to Nicaragua for several reasons. First, it is a beautiful country and articles began to appear in major publications touting the many things to see and do here. Second, it is inexpensive here and it began to look like an option for the many people retiring from the states, Canada and Europe. Third, our neighbor, Costa Rica, had been almost too successful. Many of the CR expats were discovering it was getting more expensive, less safe and too gringo for them. Many of these people discovered Nicaragua while taking their required three day leave out of the country. In addition, many of the people coming to Nicaragua were Nicas that had lived abroad since fleeing in the 1980s and wanted to return to their homeland.

Rentals began climbing especially in San Juan del Sur, Granada and even at some of the developments. Not only were prices going up but availability was going down. The latter issue was exasperated by the fear of the 2008 real estate meltdown in the states and Europe which converted many home owners to permanent renters. Suddenly, a rental unit that might see 20 short-term rentals in the year was occupied by a couple living there for six months to several years. Usually, rentals going up precedes real estate sales but the effect on real estate sales was negligible. Real estate sales did slowly increase but this also brought on the market much more real estate as sellers saw there were more buyers. Property values did not appreciate after the fallout but now it is 2013.

Nicaragua has greatly matured. You still have to be careful but many of the shysters have left the country, thank goodness. 2013 may be the beginning of discovery of Nicaragua again but it is happening slowly. Sales will likely continue to increase but probably at 10-20% each year and all of this is dependent on the real estate market improving in the states and Europe which allows people to sell their homes to make the move to Nicaragua. Panama and Ecuador are booming which also reduces the number of people coming here. Generally, people with money are going to Panama and the rest are going to Nicaragua and Ecuador. Due to the rental demand there are several condo projects happening in Granada and more people are building rental units. One development on the Pacific coast is finally building a hotel after several false starts and there is talk of more hotels along the beach. I do believe in the theory of “build it and they will come”. Several condo buildings have been built and all of them sold out immediately showing the demand.

Guacalito was finally built by the Pellas family in the Tola area and is sparking growth and real estate sales in that part of the Pacific Coast. Iguana, Rancho Santana, Aqua and Gigante are already seeing renewed interest due to the road being built in front of them. Word on the street is that the Pellas family would build the road and the government would build an international airport near Iguana. They say it will have flights to Costa Rica, Panama City and Miami. Wouldn’t that be cool? Speaking of Guacalito, the 19 rooms go for $550 a night plus taxes and the golf greens fee is $250 plus taxes. That is so high that I wouldn’t go there even if I had the money. But the good news is that it was even built in this country. Someone has great faith in the future.

It is difficult for me to comment on the San Juan del Sur area since it is a quirky little seaside village that has been the epicenter of so many new developments, many of which never developed. Some of the developments that have been sleeping for many years are waking up and of course, there were many casualties along the way. For Nicaragua, real estate prices in SJDS have remained higher even during the dormant years. SJDS does have the advantage of many restaurants and more expats which attracts even more expats. The cost of living is higher in SJDS due to the higher percentage of gringos and the distance from the major stores and supplies. You will need to speak to realtors and property owners in SJDS to get a feel for the real estate there.

The disparities in pricing along the coast almost amaze me but not having a MLS here prevents looking at comparables easily. Of course, you would think land within a development would be more expensive due to the amenities of living in a development though few developments have many or any amenities yet and you will be surprised how few have power and water near your lot. A beachfront lot at Iguana costs over $300,000 yet at Boquita a few miles north you can have a similar lot for under $100,000 with a small house on it and there are smaller ones half that price on a good road. Remember that Iguana has one of the best surfing locations in the country if not the world and I’m finding out that there are lot of surfers with money. Yet Iguana has some of the cheapest lots on its golf course, that’s correct, I said golf course. Some of the golf lots have asking prices of $25,000. But if you are not a golfer or surfer?

Speaking of golf courses, there are four in Nicaragua and they receive very little play. Amy and I are both golfers but since coming to Nicaragua we play very little, perhaps every other month but I hope to play more soon. At none of these golf courses have I seen many golfers unless there is a special event or tournament. When I say few golfers I mean I usually do not see another golfer on the course during my play. Currently there are golf courses at Iguana (9 holes), Gran Pacifica (9 holes), Guacalito (18 holes) and the private country club of Nejapa Managua (18 holes). Iguana and Nejapa are in excellent condition and the one at Gran Pacifica is being spruced up with the new hotel on the horizon. As mentioned before, Guacalito is $250 a round plus taxes and if you can afford that, why are you in Nicaragua? Though, it is a stunningly beautiful course and I would like to play it at least once.

Not sure why the developments are not receiving more interest though the tempo has picked up in the past year.  For Nicaragua a home in a development tends to cost more since materials must be trucked in (gas is more than $5 a gallon) and the homes tend to be more upscale. Developments do have the advantages of not needing bars on the doors and windows, a few have amenities like a golf course and a restaurant and the controlled environment. I expect the real estate sales in developments will begin picking up and probably surpass other real estate sales eventually. There are some very simple developments where costs are much lower and some are more ECO but these tend to be further away from the ocean though there are exceptions. Nicaragua has a little of everything so plan to spend a couple weeks looking at all of the possibilities. And remember rule #1 which is if it does not exist or it is not being built, don’t count on it ever happening. Remember that the Pacific coastal road was first proposed in 1928 and we are still waiting for it. And lordie, make sure there is power and water to your lot. Do your due diligence and talk to people already living there. Nothing wrong with investing in a development you think has future potential but this article is for people that plan to build or buy a home now.

We live in Granada which has substantially improved in the 10 years since we first visited. Real estate sales have increased here but it is a different market. Most people, especially retirees, want to live within six blocks of the central park to allow them to walk to any restaurant or bar. Most people do not have vehicles and a surprising amount do not plan to learn Spanish. There are not many homes left near the park and few lots or unrestored homes are available within six blocks. Having said that, there are huge areas of Granada still available with very good buys so I expect people will begin to be satisfied living further away from the park.

Large colonials were very popular when we arrived but now the shift has been to smaller homes with just some colonial touches. Prices in Granada are all over the map and make no sense at all. Some home prices are at $200 per sf and some are at $50 sf and the difference in quality is often negligible. Be sure to determine the cost per square foot or square meter for comparison. Unlike the states, the cost per sf here does not include land price. In general, the cost per sf is less for a larger home. Obviously, the cost to build a tiled patio is cheaper than an enclosed room and a colonial has a great deal of square footage outdoors or only under a roof without walls.

For example, our home is around 4500 sf and is a true colonial with three foot thick adobe walls. We are asking for $239,000 which is $54 sf with a pool, a large garage and is on a corner facing the lake winds. Other homes in the area are as small as 1200 sf and asking for the same price. The most important thing is air flow due to the heat and the very high expense of electricity for A/C. In our case, we have not had to use A/C in over five years though we installed an industrial fan over each bed. Garages are very rare which is strange since colonial homes tend to have little storage. You need a pool here because we have tropical weather.

Land, as in lots, is expensive here considering it is Nicaragua. Hard to find anything under $30,000 and 500 square meters will be over $60,000. Thank goodness construction costs are still low though the price of cement and wood has gone up considerably. Many of the construction companies will charge you 20% plus cost and there are still a few that will give you a finished cost. If you manage your own crews and find materials at a good price you can still build a nice house for around $35 sf, there are still builders that charge $40-$50 a sf and then it goes all the way up to $100 per sf but that would be with all of the finishing touches and artistic architecture. So building is still a cheaper way to go and then you get exactly what you want.

Farm land is just as varied. Unimproved land within 10 miles of Granada can be anywhere from $3000 to $18,000 a manzana (1 manzana = 1.7 acres). This is quite high and higher than many locations in the states. I found one parcel of over three manzanas for $10,000 close to Granada with electricity nearby but you would need to drill a well which can be anywhere from $4,000 to $15,000. Yet larger farms are a fraction of the cost. In Nandaime (12 miles from Granada) we found 30 manzanas for $45,000 asking price and that is near a major river. Further away depending on the location, availability of power and water, proximity to major road, etc. there many parcels available under $1,000 a manzana. Oceanview property can be especially inexpensive but you may be a ways from the ocean. Surprisingly, even near Managua there are some high hills where you can see the ocean like Tecuantepe which is where the pineapple farms are located.

Sooooo…… property values have still not recovered from the 2006 and 2008 crashes but they are improving. The greatest returns are on rental units so we will see more of those everywhere but especially around Granada, SJDS and the Pacific coast. Hardly any condos or even hotels on the Pacific coast. In fact there is very little developed land along the coast. Remember that Nicaragua is still mostly empty with over 90% of the people living in the Southwest section. Major locations like Leon, Chinadega, Matagalpa, Esteli, Diriamba, Jinotega, Jinotepe, suburbs around Managua and many other beautiful areas have very few expats as of yet so lots of room for growth. We have not even discussed the gorgeous Atlantic coast where I have seen crazy prices like $20,000 for 100 acres with beachfront but I’m told titles are not clear so it is high risk. I don’t see any pressures in the near future that would drive up values, people will just start moving to places further away.

With no MLS and with very few exclusive property listings, it is not easy to determine property values. Many sellers list their property with all realtors in the area then also try to sell it on their own. Realtors are often told what the price will be instead of a discussion of what it should be. A common term here is “asking price” which almost tells the buyer that they will not have to pay that price to buy the property.

There are some negatives on the horizon that could affect home ownership. Property tax rates (normally around .8 to 1%) are not that low but they are based on a catastral value determined by the city home inspector and not the purchase price. The catastral value is just a fraction of the sales price or perceived value. For example, my home is for sale at $239,000 but the catastral value for tax purposes is around $30,000. Granada taxes are .8% and you get 10% off if you pay by March 30th so our taxes are around $225 a year and have gone down around 10% a year because of the devaluation of the córdoba. Recently, the catastral values have been jumping up on the new sales, updated inspections and the real purchase prices are starting to be shown in the closing documents. Two friends in Granada recently received tax bills 10X higher than before. Add to that the property transfer fee at the closing up to 4% of a much higher value and costs start going up quickly. Remember, the number one selling point of Nicaragua is the low cost of living. Of course, the rising costs of owning or purchasing a home may also help keep the sales price lower.

It all comes down to how much are you willing to pay for your home in Nicaragua and what are your requirements for your standard of living here? You can build or buy very inexpensively but a lot depends on location, as always. I think the developments on the Pacific coast and around Granada are due for some much needed growth as people begin to move here. Granada will start expanding outside of the city center and other cities will begin seeing some attention from expats. For buyer confidence Nicaragua needs a real MLS to allow truer property valuations and comparison.

I remain optimistic on the future of Nicaragua.

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