The COVID-19 pandemic has had a sudden and significant worldwide impact on the real estate market with 2.6 billion people across the world now living under some sort of lockdown quarantine, according to a JJL Research and Strategy report.
As Ecuador prepares to initiate a soft launch back into the “new normal” many clients have asked what the state of the real estate market is here in Cuenca and on the Ecuadorian coast.
The level of uncertainty in the economy, the massive dip in oil prices, the negative press that our port city Guayaquil has received in the international media, and questions about air and inter-province travel are all impacting the future of real estate, with the trajectory of the recovery difficult to predict.
However, real estate continues to offer good risk-adjusted returns that are less correlated to other asset classes. And, historically real estate has performed well in Ecuador. Buying the right real estate at the right time allows smart investors to collect in the long-run and set themselves up for ongoing and increasing income as the economy rebounds.
In fact, we are already seeing savvy high-net-worth global investors and developers with long-term strategies snatching up properties on the Ecuadorian coast where some bargain beachfront properties are still available. In Cuenca, investors are looking to buy long-term rental properties, as Airbnb units will probably take a hit for the foreseeable future.
In the weeks since March 15th when Ecuador’s “shelter in place” and curfew ordinances went into place, there have also been a number of inquires from snowbirds, retirees, aspiring expats and some younger digital nomads who are looking for more desirable and less expensive places to live and work post-pandemic.
Ecuador has consistently been listed as one of the “Top 10” destinations for expats and retirees in publications such as International Living and Live and Invest Overseas. And, all the reasons that made our country popular are still in place including a lower cost of living, the US dollar currency, mild climate, farm-fresh and organic products readily available, low crime, healthy living, and affordable medical care — with the ability for expats to tap into government-subsidized IESS health system.
According to Kathleen Peddicord, the publisher of Live and Invest Overseas, Cuenca is a city that may thrive post-pandemic. “The world’s most livable cities with modest to small populations will recover quickly and see booms as people look for options for reinvention and starting over in locations that offer good and affordable quality of life and relative safety from a new pandemic. The possibility of another COVID-19 crisis will be on all our minds for a long time, and small cities and rural areas offering the possibility for appealing yet physically distanced living will enjoy growing demand. Medellin, Colombia, and Cuenca, Ecuador, are good examples.”
Buying property in Ecuador is also easy and there are no restrictions for foreigners. Buyers don’t have to be a resident to purchase property in Ecuador and buying property qualifies them for residency.
In fact, buyers don’t even have to come to Ecuador to purchase real estate. We suggest hiring an attorney to ensure there are no debts or liens on the property, that it has a clear title and there are no issues with the registration. But, all of this can be done without personal interaction – and can even be accomplished from your home country through DHL and the Internet. Buyers give local lawyers a limited Power of Attorney for purchasing a specific property and all the legalities are dealt with by them. We’ve sold a number of properties this way and can easily recommend respected and trusted lawyers and can help in this process should clients be anxious or unable to physically see offerings.
While some sellers have taken their homes off the market during the shutdown, others have lowered prices due to a desire to return to their homelands and families. As owners scramble to change directions, liquidate assets and move on in different directions, there are definitely some bargains to be had but don’t think this means that all prices will drop.
According to a May 2, 2020 article in Forbes. “The situation we’re about to see play out will not be the same as what we witnessed in the wake of the 2008/2009 global real estate crash when some countries—Spain, Ireland, and Costa Rica, for example—saw property prices fall by as much as 70% and more. Those bonafide collapses were thanks to bubble pricing and over-lending. Markets with less leverage at work—Panama was the best example—saw far lesser drops in values and quicker recoveries.”
Further, a report in Thomson Reuters based on a Zillow study of previous pandemics said, “During the SARS outbreak, the number of homes on the market in Hong Kong fell sharply, primarily because people wanted to avoid exposure to the epidemic. Still, the value of the homes that did remain on the market remained steady (possibly due to limited inventory.) The same is true of the COVID-19 outbreak in China. There were fewer homes on the market, and transactions nearly ceased, but prices were not reduced much on the homes that sold.”
Having said that, the real estate industry as a whole, post Coronavirus has changed and the practical issues of viewing, showing, and closing deals and keeping social distancing will continue to alter the way we do business.
Real estate is a face-to-face business and many clients still want to see a property before buying it, so new ways of doing business will be required in Ecuador including wearing masks and gloves, taking your shoes off, and sellers leaving lights on and opening closet doors so no touching is necessary. More extensive photo layouts on real estate websites and possibly video tours will also be on the rise. And additional rules may crop up depending on government regulations.
Only serious buyers, not people” just-looking” are going to have these face-to-face previews most likely and pre-approval letters from lending institutions demonstrating that the buyer’s finances are in order may also become necessary.
Delayed closings and lengthier transaction timelines will take place, at least for the short-term. The good news is that construction crews are now allowed back to work in Ecuador and notaries have been deemed “essential” businesses, so we’re hoping that deals can be made and closings completed very soon.
If you are interested in buying or selling or if you are a current client wanting to update the status of your listing with Ecuador At Your Service, please contact Ashley@ecuadoratyourservice.com. And stay tuned for Part 2 of this series on “The State of Real Estate in Ecuador Post-Pandemic.”