The Crisis Effect on Ecuador Real Estate

Foreclosures, defaults, fire sales…

We all know the story of the housing market north of the border, but has the crisis had the same affect on real estate in Latin America?

An important question, indeed, for anyone staring out their frosty window with a sore throat dreaming of their big leap south.

After investigating the housing market in several Latin countries, the best answer I can give you is “it depends.”

I know what you’re thinking. “It depends.” What a nice, safe cop out.

But it’s true. Let me explain. It is a little more complicated down here.

First and foremost, the Latin market has not had across the board drops in prices as seen in the US and Europe.

In Latin America, it has depended on the country, your location within the country, and the type of property you own.

For example, for a rather undiscovered, under-priced country like Ecuador, the crisis has actually increased demand in some areas by as much as 20-30%.

According to one owner of a prominent real estate website in Ecuador wishing not to be revealed, said that traffic arriving from Google nearly doubled as the crisis intensified in the last quarter of 2008 and the first quarter of 2009.

His theory is that with the crisis up North, more and more people have begun to look for cheaper places to reside, and with new technologies like the internet and Skype, many people can continue to work from remote locations.

Whereas in the Dominican Republic, a country that has already experienced a recent market boom, the consensus from local agents seems to be that prices have taken a noticeable drop in the touristy, foreigner-dependent areas like Punta Cana, but in less touristy places like Santo Domingo, the prices have remained relatively stagnant through the crisis.

Although, even in the touristy places, prices have not fallen as much as they have in the US.

Which brings me to my next point: your actual location is also important. One of the main factors people look for when moving to Latin America is security.

This may be the reason why prices for properties in gated communities and posh condo buildings have not felt the effects of the low market as much compared to similar properties located outside guarded areas.

Another important observation is that in both countries, Ecuador and the Dominican Republic, prices of beachfront property have not gone down. For beachfront, they rarely do.

One possible reason for the softer impact of the crisis on the housing market of Latin America is that, let’s face it, the traditional investors in Latin America have been the world’s rich, and the rich have not been nearly as affected by the world economic crisis as the middle class.

Another important observation is that credit has always been expensive in Latin America, so people, foreign and local, normally buy in cash, minimizing the affect of the credit crunch as well.

With that understood, with a little due diligence, there is no better time than now to start taking a gander south of the border.

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