The News From Ecuador | Pathfinder International

Wednesday, June 10, 2009

Dear Reader,

Last year I was joined by a small group of your fellow readers for a scouting trip to Ecuador. This country has my attention because it offers some of the cheapest property values in the world today. For example, you can a buy high-end 1,000-square-foot condo on the beach for less than $100,000…or a comfortable mountain retreat for less than $50,000.

Over the past decade, while prices rose in the rest of Latin America, property prices fell in Ecuador as it grappled with financial instability and an adjustment to the dollar peg.

Today, inexpensive real estate and an incredibly low cost of living, combined with a great climate and sheer natural beauty means that Ecuador deserves a serious look.

I chose Manta as the focal point for our trip as it is a market that is uniquely positioned to capitalize from the domestic market, while also appealing to the overseas second-home and retiree buyers.

Built right on the beach, Manta is Ecuador’s third-largest (260,000 inhabitants) and fastest-growing city. Home to the busiest and biggest commercial fishing port in the world, tuna-catching and processing is the main industry.

Manta is well-served with domestic flights from Ecuador’s capital, Quito, and there’s talk of new international flight routes, which would dramatically improve accessibility. While there is a small and well-organized expat community in Manta, the property bargains are mostly snapped up by Ecuadorians looking for a weekend beach retreat.

Even in this bustling city, you can buy luxury oceanfront condos for $100 per square foot.

Just behind the Howard Johnson hotel I saw a one-bedroom, one-bathroom condo with an asking price of $60,000, including furniture. If you buy here, you can use the hotel facilities, including the tennis courts and a pool and gym. The hotel will also rent the condo for you when you’re not there.

Even in Manta’s most prestigious building, Santorini, we found a 1,150-square-foot apartment with partial ocean views with an asking price of $90,000.

There are several pre-construction opportunities available today in Manta with prices typically in the $100-per-square-foot range. Construction quality is consistently high.

You get the message: These are some of the best real estate values I have ever seen.

The point of this trip however was not to find inexpensive real estate but to answer the following questions:
1. Will real estate values in Manta rise?
2. If so, what’s going to make that happen and how can investors maximize return on investment?

Supply and demand are pretty much in equilibrium at current prices. Increased demand from the domestic or foreign market would drive prices higher.

The market in Manta is currently dominated by domestic buyers. Don’t expect to see an increase in demand from the domestic market. Ecuador has defaulted on foreign debt. Ecuador’s capacity to grow will be constricted by lack of access to capital. Ecuador’s wealthy aren’t going to become poor overnight or anytime soon. Just don’t expect to see a rapidly expanding middle or wealthy class.

On the other hand, the foreign retirees I met in Manta weren’t worried about the default. Their Ecuador won’t change. It will still be as beautiful…their dollars will still go a long way here. These retirees are living well here for as little as $600 per month. Healthcare is good, cheap, and accessible. This is possibly the best place on earth to live on a fixed income or limited budget.

While global financial turmoil claimed Ecuador as its first Latin America default victim, it is strengthening the case for Ecuador as a retirement destination. We heard stories of retirees who had planned to enjoy their retirement in Italy and France—only to revise their plans and chose Ecuador as they saw a substantial portion of their savings vanish. Once word gets out, retirees will come, driving demand and forcing up prices of beachfront condos here in Manta.

They will come. The quality of life and value proposition is compelling…beyond dispute. If you are looking for an affordable and beautiful place to retire or buy a second home (as opposed to looking for a pure investment) Ecuador needs to be on your shortlist.

For now this is a market to watch. Stay tuned. When the retirees start coming in their droves we’ll be ready to invest accordingly. For the moment I’m just going to enjoy Ecuador.

Ronan McMahon