April 13 2009 by Steve Bergsman
Corporate executives have long used the Caribbean and the countries surrounding the Caribbean as escape locations. The islands of St. Bart’s, St. Martin and Anguilla or exotic resorts in places such as Mexico and Costa Rica always attracted weary executives, attempting a short break from the high pressure ride of managing, more often than not, an international corporation.
Early in this decade, numerous corporate managers decided that simply vacationing in the sunny sands south of the U.S. wasn’t enough, that it could be very easy to own property there as well.
Why and Where?
A number of factors elevated the Caribbean and Latin America as a second home consideration, including: moderate political risk-especially after September 11, 2001- compared to other places around the world; accessibility via a relatively short plane ride; English being commonly used, even in the Spanish-speaking countries of the Caribbean Rim; beachfront land available and attractively priced as compared to the U.S.; strong communication infrastructures; and the fact that the kind of home a well-paid corporate executive would need or want could be had or built without too many problems.
Some executives became even more knowledgeable about the lands south of the United States through business. One London banking executive, who didn’t want to be named because his firm had to be bailed out during the current financial malaise, became very familiar with the Punta Cana region on the east end of the Dominican Republic while putting together a Destination Club company six years ago (eventually sold to Exclusive Resorts). He liked Punta Cana so much that a few years ago- before the financial crisis hit-he bought a second home there.
And one doesn’t have to be the chief executive of a big company to invest in the Caribbean. Duane Thoreson owned his own builder/contractor company in Seattle when he came down to Roatan, Honduras, on a vacation swing through Central America with his partner, Barb Wastart. They eventually ended up buying a traditional (rests on stilts above a flat slab of earth or concrete), 1,000-square-foot home on the island for $220,000 and then added another 450 square feet of living space. The house sits about 900 feet from the beach.
“We fell in love with the island,” says Wastart. The couple has long-range development plans for the island and has already purchased a piece of land for a wellness retreat they are considering building.
While the economic climate has changed considerably since some of these purchases, those still positioned to invest in second homes can do very well in today’s market. After a spectacular run-up in prices, most Caribbean and Central American markets have settled down.
Location, Location, Location
Up until this year, Panama City was looking very much like the Dubai of the Western Hemisphere. High-rise condominiums were going up like weeds in an empty lot. At the start of 2008, there were still at least 50 cranes dotting the skyline. Even Donald Trump had a Panama City building with his name on it, the Trump Ocean Club International Hotel & Tower. Prices remained reasonable: A two-bedroom condo with a maid’s quarters could be found for under $150,000. For those with more expensive tastes, penthouses ranged from $1.6 million to $3.2 million-still not bad when compared to New York or London prices.
Panama City real estate very much depended on the international set and with economies worldwide slowing down, so have the city’s real estate markets. During this past summer, one broker in the city said condo construction overshot the market and there were not enough buyers for all the units coming online. He expects some deep discounting ahead.
One country that seemingly appeared to rise up overnight as a second home market was Honduras. This is a nation where knowing the landscape when investing overseas is critical because mainland Honduras is dangerous. Instead, the place Americans should consider is the spot Thoreson chose-a small island off its coast called Roatan.
Roatan is self-contained and far enough from the rigors of Tegucigalpa to be considered a true Caribbean paradise. It also has direct airlift to the U.S. and a good airport, which makes commuting to the States and back convenient. Two acres of land with some beach exposure runs around $500,000.
As noted, the second home markets in the Caribbean and along the Caribbean Rim vary greatly. While the Punta Cana area of the Dominican Republic is a typical island development, with white sand beaches, golf courses galore and luxury villas, Panama City is more an urban, condominium market. Mexico, the most popular location for Americans buying overseas, offers both Caribbean development in places like Cancun and Pacific Ocean locales such as Puerto Vallarta or Cabo San Lucas. (Mexico is one of the few countries where foreigners cannot own beachfront land directly, but must acquire property through a trust.)
In Costa Rica, the most popular beachfront locations are also on the Pacific side of the country, although EscazÃº and the Central Valley area of the country have also become very popular. EscazÃº can be found just outside the capital city of San JosÃ© and has become the Beverly Hills of Costa Rica. Foreigners like the salubrious mountain climate, while locals enjoy restaurants and shopping. This is a place where the country’s president can be spotted at the EscazÃº Pizza Hut. The condo market began flattening in 2007, while single-family residences kept appreciating. Still, EscazÃº is a market where a 2,500- square-foot home costs $350,000, much cheaper than a condominium on Costa Rica’s Pacific Coast, which can cost $600,000 for about the same amount of living space.
The Caribbean has not escaped the global recession. As Casey Halloran, a U.S. entrepreneur who now has a home in Panama City and sells real estate in Costa Rica and Panama notes, “We’re all doing our best to survive the financial storm down here in Costa Rica and Panama. The boom is finally slowing down and showing potential for a bust.”
That could mean better prices ahead.
Steve Bergsman’s third book on real estate, Passport to Exotic Real Estate: Buying U.S. and Foreign Property in Breathtaking, Beautiful, Faraway Lands, was published in 2008.