Investing in Real Estate on the Central Coast of Ecuador
The question often comes up about investing in Ecuador…is it a good decision, what about the timing, is it too late? Before we dive into that let's look at some of the background and fundamentals. Ecuador has been a top destination for retirees for many years - I would say at least two decades. Some of those early investors were considered mavericks and “risk takers” and that may have been true back then but definitely not now. Ecuador has grown from a fringe destination to a major destination for retirees, remote workers, and entrepreneurial North Americans and Europeans looking for a different way of life. Investing not only in real estate but perhaps a business in this growing South American country has a lot of appeal for a variety of reasons.
There are a lot of positive factors to investing in Ecuador in general, which have contributed to its growth as a destination for foreign investors and expats. It has one of the easiest visa policies making it possible to get residency in 3 months, as long as you arrive with the correct paperwork (it is generally not a long or complicated list of documents needed). It is possible to own land or a business directly and easily. The low cost of living is very attractive, allowing your investments and pensions to go further. It is very straightforward to start and run a business here compared to anywhere in North America. Start-up costs like rent and labour are very low while regulations and red tape are minimal making it simple to get a new small enterprise off the ground quickly. Couple that with a growing middle class and demand for goods and services that may not even exist here and you have endless possibilities. All this growth and investment has led to steadily rising real estate prices in all coastal areas as well as key urban centers.
Let me tell you our story so you understand our background and perspective. My wife and I had very good careers. She managed key accounts for a large CPG company while I managed start ups and turnarounds for small entrepreneurs or large multinational corporations. We also had 5 investment/rental properties in Canada. We were “successful” but needed a change, too young to retire but very tired of the North American lifestyle, so we started looking for an alternative that made sense. Having researched Central America and the Caribbean extensively we settled on Ecuador for a number of reasons: stability of the government, USD based economy, access to good medical facilities and doctors, low cost of living, affordable real estate and the opportunities to open a business and thrive in a growing open system. We opted out of North America (Canada) and bought a property in 2019, renovated it the following year and opened a boutique hotel in late 2020 (Casa De Terrazas). Even in the middle of a Pandemic we generated traffic and income proving the need and concept was right. By mid 2021 we partnered with a reputable and long established realtor (Ecuador Beachfront Property) and began offering tours, helping people get acquainted with the country, culture, lifestyle, and finding a home on the central coast.
What has been occurring on the coast in the past five years is a steady double digit rise in land prices with a plateau in the last 1.5 years due to COVID-19.
Right now real estate can be had for relative bargains due to market stagnation. That however will not last long as the momentum is already building with people starting to travel and move abroad again. We have seen sales jump in the last few months of 2021 and it appears like it will remain strong into 2022. As we look ahead we expect to see continued strong growth in most sectors after a prolonged period of depressed activity due to the COVID-19 pandemic. The new president is forward thinking and focused on improving foreign investment making many policies less of a barrier for foreigners. There are also many infrastructure projects like the new international airport in Manta and the launch of 2 new airlines based out of Ecuador, Ecuatoriana Airlines and Ecuair. Combined, these kinds of investments will make access to Ecuador easier, increase investment, and increase the flow of people and goods into the country.
So where does that leave an investor today, too late or good timing? That is the question. I believe the answer is in the trends. The government aiming to encourage investment and simplify many taxes/duties to encourage foreign participation in the economy is a great indicator of the near future. The infrastructure projects underway, both large and small, indicate widespread plans for development by both the country itself and small cities throughout. These plans include, the major airports and airlines, roadways, new waterfront areas, marinas, and beautification projects. The growing middle class, which doubled between 2005-2015 from 18% to 36% of the population, has more disposable income and drives the need for goods and services creating opportunities across many sectors. Real estate, always a strong indicator, continues to rise steadily and while we are not seeing some of the early meteoric rises there is continued upward pressure on prices as supply continues to dwindle. Investments in land, a house to live in or a development project are all solid long term investments. The difference in Ecuador is the entry point is lower and upward pressure is making it an ideal location for investors.
Opening a small business, bringing a skill to Ecuador that is lacking, or filling a service need gap could all prove fruitful. In my opinion overall Ecuador is poised for a period of growth. Not without its challenges as any developing country has but approached with care, due diligence and enthusiasm it has all the right ingredients to be a great part of your investment and or life strategy.
The Author: Andrew Sweeny