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Market Situation

Overall, the Central American region has made steady progress in the past decade towards social development and economic growth. Although the region contains some of the poorest countries in the world, economic progress has generally been positive. Democratic governments in the region encourage trade and promote increasingly open economic policies. The region is, however, highly vulnerable to natural disasters and fluctuations in commodity markets. Hurricane Mitch in 1998 caused a great deal of damage, especially to El Salvador and Honduras, resulting in significant economic setbacks for the region. Agricultural exports drive Central American economies. A recent drought, combined with the dramatic decline in international commodity prices, especially coffee, has slowed economic growth. As a result, government revenues and financial systems are weakening, increasing the possibility for general social and economic instability.

From a real estate perspective, Central America has become a popular retirement location for many Americans. Relatively low land and construction prices, low cost of living, and the tropical environment have made the region very attractive to retired couples. Comfortable homes with ocean views can be had for a fraction of what they would cost in the United States. The real estate industry is very informal, with little regulation or oversight. Panama, however is an exception to this, as it has recently passed a law requiring real estate agents to be licensed. Panama is the only Latin American country other than Brazil to have such a law. Many countries do have national real estate associations that provide standards and support for their members, but few, if any, can claim to represent a majority of the industry. In general, land registries are spotty. Most real estate agents operate independently of any franchises, and licensing is not usually required. In 1999 Coldwell Banker signed a master franchise agreement for all of Central America. Century 21 and Remax also have a significant presence in the region. Multiple listing services are generally undeveloped, although Panama is attempting to implement one.

Belize

Belize is one of the more expensive countries in Central American as far as real estate is concerned. Homes in high-class neighborhoods range from $100,000 to $300,000. Standard lots sell for around $15,000, while beach front property sells for $35,000 and up. Land prices vary depending on proximity to rivers and the ocean. While property taxes vary from area to area, they are generally low, hovering around 1.5 percent. Foreigners are allowed to own land in Belize, but can only own up to 10 acres outside the city and a half acre inside the city. Purchase of larger tracts of land or land on the cayes requires approval, which is usually granted in one to two months. Foreigners must pay a transfer tax of 15 percent on a transaction.1

Foreign Ownership Details
Moving to Belize--Escapeartist.com
CIA World Factbook--Belize

Costa Rica

Costa Rica, along with Mexico, is one of the most popular retirement locations in Latin America. An estimated 50,000 Americans and Canadians own property there, 5,000-7,000 of whom are retirees.2 Costa Rica's climate, notoriously friendly population, high-quality, inexpensive health care system, and low cost of living are all factors that make it an attractive location for retirees. For example, medical costs are about 40 percent of U.S. costs, and a couple can live comfortably on $1500 a month.3 While specific figures are not available, real estate prices in Costa Rica are considered to be the highest in Central America. There are few, if any, restrictions on foreign ownership. There are restrictions against developing on the first 50m of oceanfront property. According to the Costa Rican Real Estate Board (CCCBR), there are approximately 3,500 real estate practitioners in Costa Rica, but only 700 of which are deemed "serious". CCCBR claims to represent 45 percent of the "serious" practitioners. A license is not required to practice real estate in Costa Rica. Franchises are unusually prevalent, encompassing about 30 percent of the market. Century 21, Remax, and Coldwell Banker all have a presence in the country.

It is worth noting that there are some land rites issues in Costa Rica that are relevant to the foreign purchaser. A common problem in the country is squatting. Squatters begin to gain legal right to occupation of a particular private property within three months of establishing themselves there, and cannot be removed without recourse to the courts. After they have been on the site for a year or more it is very difficult to have them evicted, and after 10 years the squatters can register the land as there own.4 This is a problem that has plagued American land owners in the past. The possibility of government expropriation is also worth keeping in mind. In the past the Costa Rican government has expropriated large tracts of land for the creation of national parks and reserves. While it is the policy of the government to compensate the owner for the land, there have been reports of difficulty in obtaining adequate compensation.5

Costa Rican Real Estate Board
Legal Details of Buying Real Estate in Costa Rica
University of Denver Global Real Estate Project--Costa Rica
Living in Costa Rica--Escapeartist.com
commercial real estate info--Chesterton Blumenauer Binswanger
CIA World Factbook--Costa Rica

El Salvador

El Salvador ranks number one amongst Central American nations in immigration to the U.S., with 607,000 El Salvadorians living in the U.S. in 1997.6 This number increases by about 17,000 each year. El Salvadorians living in the U.S. send $2 million in remittances each day back to El Salvador. An estimated 10,000 American citizens live in San Salvador, the country's capital. "Private American Citizens Residing Abroad".7 While El Salvador is one of the poorest and least developed countries in Central America, the real estate industry is relatively sophisticated. There are an estimated 300 practicing real estate agents in the country. The Salvadorian Chamber of Real Estate (CSBR), claims to represent 30 percent of these agents. There are no licensing requirements to practice real estate, and many agents operate in small firms. Franchising has not been successful in the past. Exclusive listings make up only about 20 percent of the market.

There are no restrictions on foreign ownership of property in El Salvador, and government approval is not required.

Living in El Salvador--Escapeartist.com
CIA World Factbook--El Salvador

Guatemala

Guatemala's economy is dominated by free enterprise and has the potential to experience significant growth in the future. Inflation is low and the monetary rate is stable. As of 1997 446,000 Guatemalans were living in the U.S., with an immigration rate of about 8,000 per year. An estimated 10,000 Americans live in Guatemala City.

There are official licensing requirements to practice real estate in Guatemala, but they are not enforced. The Guatemalan Association of Real Estate and Appraisers (AGBRV) provides its own standards and a code of ethics to an unspecified percentage of the industry. Property titles are kept in the National Registry for Property, a computerized system run by the government. While foreigners can own property, the are restricted from owning land that borders rivers, oceans, or international borders.

Guatemalan Association of Real Estate and Appraisers (AGBRV)
International Consortium of Real Estate Associations--Guatemala
Moving to Guatemala--Escapeartist.com
commercial real estate info--Chesterton Blumenauer Binswanger
CIA World Factbook--Guatemala

Honduras

1998s Hurricane Mitch was disastrous for Honduras. Total losses to the country's economy were estimated to be in the range of $3.0 - $5.0 billion, over one-half of annual GDP. Agricultural business, one of the main sectors of the economy, suffered great losses. In the time since, the rebuilding effort has benefited greatly from international aid, creating improved transportation and housing infrastructures. One-third of the population was made homeless by Hurricane Mitch which has resulted in a huge demand for housing. More than 6,000 Hondurans legally enter the U.S. each year, adding to the 1997 total of 212,000. An estimated 10,500 Americans live in the capital city of Tegucigalpa.

Foreigners can own property in Honduras as long as it is not within 25 miles of shorelines or national borders. New laws have been passed to allow foreigners to purchase property in specially designated "tourism zones" along the coast. The Honduras Real Estate Association (ANABIR) is considered to be quite a sophisticated organization for such a small market, offering member benefits, monthly meetings, and other organized events.

Living in Honduras--Escapeartist.com
commercial real estate info--Chesterton Blumenauer Binswanger
CIA World Factbook--Honduras

Nicaragua

Nicaragua was badly hurt by Hurricane Mitch, although not as severely as Honduras, incurring nearly $1.0 billion in total losses. Rebuilding efforts have yielded similar improvements in transportation, communication, and housing infrastructures. The resort/vacation market that has swept through Costa Rica and Belize over the past two decades is beginning to expand into Nicaragua, with an estimated 6,000 retirees from the U.S. and Canada currently living there.8 Property prices are much lower in Nicaragua than in Costa Rica and Brazil. While reliable averages are not available, a house with an ocean view can be had for $68,000, which includes construction and land costs. Beachfront lots can cost around $25,000, nearly four or five times less than in Costa Rica.9 The Nicaraguan government provides incentives to attract foreign retires (must be over 45), such as tax relief on foreign income, and no duty on one car and the first $10,000 worth of household goods brought into the country. There are no restrictions on foreign property ownership. While a property registration system does exist, care should be taken as some pieces of land have two titles, the original and one issued during the Sandinista era. The Nicaragua Association of Real Estate Agents (CNCBR) is the burgeoning representative body for real estate agents in the region.

As of 1997, 239,000 Nicaraguans were living in the U.S. There has been a surge in Nicaraguan immigrants in recent years with the number of immigrants increasing from 3,500 in 1998 to over 20,000 in 2000.

Moving to Nicaragua--Escapeartist.com
CIA World Factbook--Nicaragua

Panama

The major issue in Panamanian real estate in recent years has been the reversion of the
Canal Zone from the United States to the government of Panama. In January of 1999 300,000 acres of land, including hotels, airports, golf courses, and 7,000 building all valued at $4 billion, were handed over to the Panamanian government. This windfall of land presents opportunities for residential, commercial, and industrial development. The distribution and sale of the land is being managed by the Interocean Region Authority (ARI).

Panama has, arguably, the most organized and sophisticated real estate industry in Central America. There are about 2,000 real estate agents working for 230 firms, and assisting in 65-70 percent of all transactions. Typical commission ranges from 3-6 percent and is usually paid by the seller. Since 1999, a license has been required to practice real estate in Panama. Requirements to earn a license include membership in ACOBIR (Panama's real estate association), citizenship, 10 years of experience, passage of an exam, and insurance. Continuing education is also required.

An estimated 20,000 U.S. citizens live in Panama City, and a little less than 2,000 Panamanians immigrate into the U.S. each year. There are no restrictions on foreign ownership other than that foreigners cannot own property within 10 kilometers of the countries two international borders with Columbia and Costa Rica. Since 1994 there have been incentives in place designed to promote investment in designated tourism development zones. These incentives include: (i) total exemption from income tax for 15 years; (ii) total exemption from real estate tax for 20 years; and (iii) total exemption from import tax on materials, equipment, and furnishings, as long as these are not available in sufficient quality and quantity in Panama.

ACOBIR
Interocean Region Authority (ARI)
University of Denver Global Real Estate Project--Panama
Moving to Panama--Escapeartist.com
commercial real estate info--CB Richard Ellis
commercial real estate info--Chesterton Blumenauer Binswanger
CIA World Factbook--Panama



Political Environment

Democratic governments are prevalent in the nations of Central America. While countries such as Honduras, Nicaragua, Panama, and Guatemala have experienced serious internal conflicts over the past two decades, democratic institutions have been established and are becoming stronger.

For detailed political reports, see the U.S. State Department's Country Background Notes.







Recommended Resources

Find a real estate professional who specializes in Central America



Association Activities

NAR currently has bilateral agreements with real estate associations in Costa Rica, El Salvador, and Panama. NAR is also affiliated with the Federation of Real Estate Associations of Central America and the Caribbean (FeCePaC), an umbrella organization for the entire region. FeCePaC objective is to support real estate regionalization and act as a network and portal for individual real estate association members in the region. The federation supports security, efficiency, and transparency in international real estate transactions, and requires its members to abide by the code of ethics established by their respective association. In addition, the federation holds an annual conference in a different Central American country each year.



endnotes

1. "Real Estate Ownership". www.regentrealtybelize.com/regentrealty/ownership.html
2. "A Place in the Sun". Latin Trade, November, 1997.
3. ibid.
4. Kovaleski, Serge F., "Squatters threaten foreigners: Land ownership unsafe in Costa Rica". The Washington Post, March 3, 1998.
5. U.S. Department of State, Country Commercial Guide, Fiscal Year 2000: Costa Rica.
6. "Foreign Born by Country of Birth". U.S. Bureau of the Census, May 13, 1998.
7. "Private American Citizens Residing Abroad". U.S. Bureau of Consular Affairs, July, 1999.
8. "Gray Market". Latin Trade, July, 1999.
9. ibid.

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