Friday 19 September
2008, San José, Costa
Rica
Nicaragua Becomes The
New Costa Rica
By Benedict Mander,
Financial Times
As he reclines in a
white leather easy chair
with cocktail in hand,
his gaze wandering
beyond the swimming pool
across the shimmering
Pacific Ocean, Chris
Renshaw admits this was
not exactly what he had
had in mind.
On holiday in Costa
Rica, he impulsively
jumped on to a local bus
heading north to escape
the crowds and what he
felt was an
overdeveloped coastline.
“When we got to
Nicaragua we just loved
the people and the
country – and then fell
in love with this piece
of land,” said Mr
Renshaw, an Englishman
who directs musicals in
London’s West End. Three
and a half years, some
$450,000 and a reservoir
of patience and
dedication later, he had
turned a two-acre plot
into an exquisitely
designed multi-level
property spilling
sympathetically over a
steep, jungly hillside
that drops abruptly down
to a small, deserted
white-sand beach.
“Now it is home,” he
says of his tranquil
villa an hour’s drive
south of the Nicaraguan
property market’s
epicentre, San Juan del
Sur.
Mr Renshaw was not the
first to discover the
charms of Nicaragua,
which first started to
attract foreign property
buyers about a decade
ago. But developers are
confident that he will
not be the last, either,
as foreigners
increasingly look beyond
the region’s most
traditional market,
Costa Rica, where
investors have been
heading since the 1980s,
and which is now
becoming both crowded
and expensive.
Where, in Costa Rica,
land with an ocean view
costs at least $200 per
square metre, and up to
as much as five times
that, in Nicaragua,
premium property has not
yet exceeded the range
of $100-$150 per sq m –
even if the same land
could have been snapped
up for around $20-$50
per sq m 10 years ago
(although plenty is
still available at that
price). The prevailing
mood in Nicaragua is
that its enormous
potential has yet to be
realised.
“There’s no reason why
prices here shouldn’t
reach the level they
have in Costa Rica,”
says Raúl Calvet, a
leading property
consultant in Nicaragua,
who believes a number of
temporary factors are
holding back land
valuations as well as
investment.
Like elsewhere,
Nicaragua has suffered
from the knock-on
effects of the US
subprime crisis, but the
effects have been
magnified by the
accession in January
2007 of a populist
president and former
Marxist revolutionary,
Daniel Ortega. The
uncertainty this
produced has caused
development projects to
slow and the pace of
land sales to fall,
although prices have
remained firm,
particularly of
developed property.
“We’re not worried about
the rhetoric per se, but
we are worried about the
effect this could have
on prospective investors
who don’t know better,”
says Mr Calvet, who
argues that macro-
economic policy remains
faithful to the IMF
rulebook. “We are at the
lowest part of the
cycle.”
Other concerns include a
patchy infrastructure,
particularly in water
and electricity, while
many roads remain poor.
But legal issues pose
perhaps the most serious
barriers to investment.
One problem is that much
land in the war-torn
years of the 1980s was
expropriated, leading to
some uncertainty over
ownership.
“You have to make sure
you have a good lawyer,”
says Kirk Hankla,
president of estate
agent Coldwell Banker
Nicaragua.
Among the most keenly
awaited changes is a new
coastal law, although
new laws in the pipeline
on zoning, municipal
development and
protection of the
environment will also
improve investment
conditions.
Despite sounding a note
of caution, Mr Hankla –
who is also a US
investor behind Aguas
Calmas, one of the most
ambitious projects
underway in San Juan del
Sur – reels off a series
of reasons to be
optimistic about
Nicaragua’s property
market.
Not only does it have
all the natural beauty
of Costa Rica – it has
understandably become
known as “the land of
lakes and volcanoes” –
but, unlike its
neighbour, it is also
endowed with a rich
cultural heritage.
The jewel in the crown
is the elegant colonial
architecture of the city
of Granada, which is
vying to be recognised
as a Unesco World
Heritage Site. Wedged
between a volcano and
the shores of Lake
Nicaragua, it already
has a significant
expatriate population
that has fallen in love
with its easy colonial
charm and traffic-free
streets.
Nicaragua has also long
stopped being the bloody
battleground of the
Sandinistas and
US-backed
counter-revolutionaries,
and is now the safest
country in the region,
despite also being its
poorest.
Indeed, living is cheap,
an attraction that is
impossible to ignore for
some 80m baby boomers in
the US alone, whose
pension system is
looking precarious.
Mr Hankla reckons that
$800 will buy you in
Nicaragua what $3,400
will in the US.
Certainly, sheer
demographics will drive
Nicaragua’s property
market if nothing else.
So far there are more
than 4,000 US citizens
in the country, while
some $85m has been
invested in the property
market. But analysts
expect investment in the
sector to surpass $1bn
over the next decade.
While the growth of the
real estate market has a
great potential to
generate jobs and
economic growth,
triggering a virtuous
cycle that will lead to
infrastructure
improvements, in turn
enhancing the value of
property, some locals
have their reservations.
Alan, a fisherman from
San Juan del Sur
squatting on a rocky
outcrop assailed by
crashing waves,
contemplates the bobbing
heads of dozens of
surfers, the first
foreigners to discover
the area.
“I just hope that we
don’t make the same
mistake as Costa Rica,”
he says, worrying about
massive condominiums
scarring the landscape
and problems such as
prostitution and drugs.
“If it brings more
prosperity that’s great,
but not if it means
spoiling our country.” |
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