Moving Abroad May See Post-Recession Comeback Marilyn Alva - Investor's Business Daily
go to original March 25, 2012

Foreign investors fueled Panama City's boom, top. David Muck and Cole Martelli opted for Mexico, Dan Prescher and Suzan Haskins for Ecuador. (AP)

When semiretired marketing executive Cole Martelli was looking to buy a home near the beach in a warm climate, Mexico made his short list, and won out over Florida.

Martelli and his partner picked up a 3,000-square-foot Puerto Vallarta condo for $520,000 cash late last year. And they just might be on the leading edge of a renewing trend.

Home sales slowed in places like Mexico and Costa Rica after the U.S. housing and economic downturn. But interest is starting to pick up again in second-home and retirement markets outside the U.S.

"We are just now seeing an uptick in retiree relocation and I suspect there is a lot of pent-up desire to move," said Dan Owens, director of the National Active Retirement Association.

The economic downturn curbed the likelihood of relocation anywhere, he says.

"Retirees were squeezed by housing price declines and stock market losses," Owens said. "So they have been like deer in the headlights."

Away From The Fray?

Some destinations such as Nicaragua got hit hard. But home values in Mexican hot spots, despite occasional State Department travel warnings due to crime, didn't sink nearly as much as retiree-magnet markets in Florida, Nevada and Arizona. One big reason is that most buyers pay cash in the foreign havens.

Martelli had visited Puerto Vallarta on Mexico's Pacific coast and was enchanted by its beauty. It was also a fairly quick plane ride from Houston, where he lives with his partner David Muck.

Martelli says they "strongly considered" Fort Lauderdale, Fla., where prices have dropped 50% or more from the peak. But oversupply "kind of scared us away. ... We didn't see the bottom necessarily."

Mexico's real estate market seemed more stable by comparison. And Martelli felt Puerto Vallarta was unmarked by the violent crime wave that hit northern border regions and some other pockets, including Acapulco.

Martelli opted for the Avalon, a 12-story building in the hills overlooking Puerto Vallarta's Old Town. It sports stunning ocean views and the beach is a 10-minute walk. The place also came with a spacious gym, resort-style pools, a concierge and security.

"We felt we were getting a good value but it wasn't a bargain-basement price," Martelli said. "That gave us a higher level of comfort purchasing in Mexico."

There's a reason for that, says Wayne Franklin, broker-owner of Tropicasa Realty in Puerto Vallarta.

"We don't have the debt against the properties so sellers don't have the motivation to drop prices dramatically," he said. "A lot of sellers say, 'I'll just wait.' Deep discounts are not the norm."

Beachcombing For Bargains

Most properties there are selling at 5% to 11% off the asking price "assuming the asking price is realistic," said Franklin, who's the former president of a Realtor trade group in Mexico. But he adds that some sellers who can't wait do trim more than 20% off.

Anyone who's considering buying abroad is advised that ownership legalities can differ from those in the U.S., on a country-by-country basis.

If American buyers want deeper discounts in foreign locales, they'll have to look beyond Mexico and Costa Rica, which is "not as affordable as it once was," Owens said.

High on watchers' lists of potential bargain locations are Nicaragua, Ecuador and Panama.

"Nicaragua is very dependent on the U.S. for foreign investment and tourism," said Ronan McMahon, publisher of the Pathfinder Alert newsletter and a contributor to International Living magazine. "When the U.S. market tanked, the Nicaraguan real estate market suffered badly."

International Living's globe-trotting contributors have found modern beachfront condos in Nicaragua selling at 50% to 60% off 2008 prices. A furnished two-bedroom once listed at $225,000 is now $100,000. A one-bedroom furnished bungalow: $59,000.

Ecuador has also been getting a lot of buzz lately for its cheap real estate and low cost of living.

The north Pacific coast of Ecuador ranks first on International Living's new Global Real Estate Index, to be featured in its April issue.

The index highlights the best real estate opportunities abroad for North American buyers, McMahon says. It factors in value, appreciation potential, rental-income potential and the cost and ease of buying.

"Ecuador has it all," said Dan Prescher, special projects editor for International Living. "It has long Pacific shorelines and beautiful mountains. It is a very cheap place to live."

Prescher and his wife Suzan Haskins live in Ecuador, in a 1,100-square-foot condominium with a huge terrace that looks out on the Andes mountains.

They paid $50,000 for the unit, in the valley town of Cotacachi. Many neighbors are budget-minded retirees from the U.S. and Canada.

"We live very well for about $1,300 a month," Prescher said. "That includes utilities, taxes, food and entertainment."

Retiree-friendly Panama also has scenic coastlines and mountains where bargains can be had. Its fast-paced urban capital, Panama City, is rife with discounts on new high-rise condos thanks in large part to a Miami-style building boom that went too far.

"There's a glut of Panama City (condos) that needs to be taken out," Prescher said.

He says buyers can "pick deals" from sellers who overleveraged units as prices were rising — many had intended to flip. But those sellers don't dominate the market.

"Again, the urgency to unload these properties is not as great as in the U.S, where everything is leveraged," Prescher said.

Panama's Miami Moment

Another batch of condos in pre-construction during Panama City's boom is expected to finally hit the market this year, portending what some predict will be another round of price drops. Prices on the city's overbuilt waterfront have already fallen over 20% by some estimates.

If buyers don't care about appreciation, Ireland may be a good pick, says McMahon. Its once booming economy tanked after the financial crisis, sinking property values. But it might be wiser to wait a while.

"Prices are still falling fast," McMahon said.

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