Market Update & Trends - September 2020
Hello everyone,
This is a quick update on the San Juan Del Sur property market. What things are like after six months of Coronavirus related travel restrictions. Plus my predictions about future trends as we come out of this.
Back in May of this year I wrote an article on my side project blog, The Central Investor, about what I think the effects of Covid-19 will be on the real estate market in Central America. It touched on Nicaragua, with tiny bit on San Juan Del Sur. But I wanted to go narrower and deeper and really focus on this part of Nica.
When Coronavirus hit, and upended travel around the world, my initial worry was that we were going to see a steep decline in sales. I was concerned we would see something similar to what happened after the 2018 political issues here in Nicaragua, when real estate demand dropped significantly.
For a while that looked like it might happen. Flights were cancelled and the clients on those flights put their potential purchases on hold.
But then a curious thing started to happen. My website traffic volume actually started to pick up. Then it exploded. I was seeing the most visitors since I started this blog in 2017.
Part of it, I imagine, was that people stuck at home during the start of the quarantine were armchair surfing tropical and beach destinations. Makes sense right? If you can’t visit in person you can at least daydream digitally:)
At the same time the short term rental market did exactly what you might expect in a tourist town without tourists. Rental demand dropped off a cliff. Foreigners couldn’t fly in. AirBnB, VRBO and other short term rental occupancy rates and prices declined dramatically. This was a worldwide occurrence that led to AirBnB cutting 25% of its staff.
Then the prices for long term rentals came down too. Owners and managers opened up more units to month to month and longer leases. Properties that had previously been only been available nightly & weekly. It all makes sense from a supply and demand perspective. Lots of the former, not much of the latter.
Not quite every segment of the rental market dropped though. We did see an increase in Nicaraguan domestic tourists coming in for the weekends. Wealthier Nicas, who otherwise might have done quick trips to Cancun or Miami, are now doing more weekend visits to San Juan Del Sur. While that doesn’t nearly make up for the more numerous and higher-spending foreign visitors, we are seeing a little more of that from Friday to Sunday.
So what does all this mean for the property market?
In terms of deals being closed we have seen a moderate decrease between asking prices and sale prices. Many sellers are willing to be more negotiable on price than they previously would have. How much really depends on the owners, the properties, and how they were using them.
Many owners here in San Juan Del Sur use their properties almost exclusively as income generators. They might visit a week or two a year and then AirBnB and VRBO them the rest of the time. The current lack of demand, and revenue, is making them re-assess those investments. The asset profile has changed. So we are seeing some great deals when those types of owner choose to divest.
Buyer demand levels have stayed fairly steady after the drop and bounce back mentioned above. We are seeing plenty of transactions in the San Juan Del Sur area. Almost all of them are being completed remotely. For a breakdown on how we do that check out the article on buying property in Nicaragua from outside the country.
The demand is coming from a a few distinct groups - opportunity investors, digital remote workers, retirees and families.
Opportunity investors are common, all over the world, at any time of decreased prices. San Juan Del Sur has seen hundreds of thousands of visitors over the last few years. Some people (who maybe were priced out of the market before) are looking now.
There is a booming trend for digital remote workers. You can check on my article on working remotely for more on that. The pandemic-related changes to work mean that there are millions of people who will never have to go back to a traditional office.
There’s a great article in the New York Times about what’s motivating people to head to foreign destinations like this as these travel restrictions lift. Central America is particularly attractive as it’s in a North American time zone. Perfect for those that need to be online during office hours, and still a short flight home when they need to get back.
They are often looking for specific things: a low cost living environment, attractive climate, outdoor space and activities, beaches and a time zone where they can have a normal life. San Juan has all that.
We are also seeing increased interest from retirees. Many who had already been considering a move to escape cold North American winters are making the jump early. They have similar motivations to the remote workers. The coronavirus outbreak, and current political unrest in the US, has taken the shine off of big-city North American living. With the excellent prices on property here right now retirees are investing.
The final group we are seeing is families. The school here in San Juan Del Sur is a big draw. Having North American trained teachers means the quality of education is on par (and in my opinion often better) than most schools in Canada or the US. Especially when you consider kids get a full bilingual education on an organic cloud farm.
The parents of those families often work online as well. As I mentioned in the article about getting a maid in Nicaragua, there is a huge geo-arbritage advantage to living here while drawing a North American salary. Domestic assistance is easy and super affordable. So parents can enjoy being parents - as opposed to being just a chauffeur, maid and cook :)
What effect has this had on sales prices and volume?
There are some great values on real estate here at the moment. As mentioned above certain sellers are willing to unload assets if the performance no longer matches their portfolio. I would expect that to continue for the medium term. The trade-off is that if you buy a property at the moment, don’t expect great rental income right away.
When we see price drops, on attractive properties, they are selling quickly. I have more deals in process at the time of writing than ever before. So if you see the property you like, at a price that works, you may need to jump on it. Values are great and, as mentioned, demand is strong as well.
What is most in demand are detached homes with pools and ocean views in gated communities. That makes sense. It fits with the needs of the buyer groups profiled above.
What are the likely trends going forward?
In my opinion there are going to be some long term trends that come out of this “year of the Coronavirus.”
The first trend is that tourism is going to take a while to recover. Countries, airlines, and individuals will take time to adjust. The International Air Transport Association, the body which represents 290 of the worlds largest airlines, predicts international air travel will not recover to pre-Coronavirus levels until 2024.
I agree. It’s hard to imagine an overnight explosion in short-term tourists returning. The rebound in numbers is going to be slow and steady.
The second trend is that when people do travel they will do so for longer. And they will often be working while here. These visitors have greater financial resources. They are more likely to be white-collar as opposed to our previous budget-traveller demographic.
So if you own a rental property here you should set it up so guests can work comfortably. High speed internet is now mandatory. With boosters if necessary, to make sure it reaches everywhere. Owners should include the touches that make a wealthier demographic feel at home. Nice linens, good lighting and a well equipped kitchen will keep them coming back.
Short term occupancy rates in San Juan Del Sur will likely stay low even after flights re-open. That will keep prices lower both for short term and long term rentals. So it’s also good time to come and visit if you want to try-before-you-buy here. I am seeing a lot of people planning / coming down to rent for 3-6 months as soon as flights resume. If you’re looking for a long term rental contact me and I can put you in direct contact with the best rental managers.
What does the future of the town look like?
Tourism & hospitality related businesses here will continue to struggle in the short term. Those businesses based their activity on foreigners spending money. Previously that was short-term tourists but that will take time to recover. So the potential for long term expats moving here is obviously attractive for San Juan.
Long term I think the trend for the town is good. The local economy may end up more stable. San Juan Del Sur ticks all the boxes for people looking to escape Canada and the US.
The people that will be moving here - retirees, families, and those working remotely, have greater financial resources than our previous demographic. Those expats will be living here and continuously injecting money into the local economy. Capital inflows from North American salaries and retirement accounts will provide more stability than solely the seasonal tourist-based economy.
That would lead, one hopes, to the re-hiring of locals in all market sectors in the years to come. It won’t happen overnight. Tourist destination all over the world have challenging years ahead.
But San Juan Del Sur is extremely well positioned to do well in the future with the shift in how and where people live and work.
Want to know more about Life in Nica? Contact me!
Joel Stott-Jess
Cell / WhatsApp: (+505) 8176 8624
Skype: joelstottjess
Joel Stott-Jess is a New York Times featured agent / broker in San Juan Del Sur.
Originally from Alberta, Canada he has been doing business in Nicaragua since 2014.
An investment consultant, serial entrepreneur, surfer, and outdoor enthusiast he is an expert on the real estate and business markets in Nicaragua. He also operates The Central Investor, a real estate and investment blog focused on the entire Central American region.
Thanks to his lovely Nicaraguan wife, a medical doctor, he is also well informed on health care services in the country.
