Magazine and website articles promoting Cuenca as the world's top retirement destination are attracting record numbers of North Americans and Europeans to the city. They have also, however, fostered two major misconceptions about the market.
The first is that real estate in Cuenca, and Ecuador in general, is at bargain-basement prices. Although it is still cheap by most North American and European standards, prices have risen dramatically in recent years. In fact, compared to the U.S., prices are 60% to 75% higher than they were in early 2008, the result of dropping prices in the U.S. and five years of appreciation in Ecuador.
The second misconception is that that foreign real estate buyers are significantly affecting the local market. The number of English-speaking foreign residents in Cuenca, 3,000 to 3,500, is a small proportion of the metropolitan population of more than 500,000. The market continues to be driven by Ecuadorians, both local and those returning from overseas, primarily from the U.S. and Spain. In 2012, returnin Ecuadorians accounted for an estimated 30% of local sales. North Americans and Europeans, on the other hand, accounted for less than 1.5%.
The most popular properties for foreign buyers continue to be condominiums close to the center of town, just outside of the historic district.
Trhough the first four months of 2013, property values continued to rise steadily despite the recession in much of the world. The overall rate of appreciation in Cuenca has held constant for the past five years at 8% to 12% per year, depending on the type or property and location. Annual appreciation for newer condos was running 10% to 12% and higher, in a few cases.
At the beginning of 2013, builders and real estate agents believe that appreciation is easing slightly. The general consensus is that prices will increase 6% to 9% this year. Again, prices for condos in the most attractive areas of the city may be rising at a slightly higher rate.
Cuenca is undergoing rapid growth, with more than 30 large condominium projects under construction in early 2013, with more on the drawing board. Costs for new two-bedroom apartments with nice tile and wood finishings, average between $75,000 and $90,000. A new 3-bedroom, 2-bath unit, with spectacular views of the city and mountains, ranges from $95,000 to $120,000. Older apartments are less expensive, of course, but finding attractive properties for under $50,000, is becoming increasingly difficult.
Purchase prices for new condos, per meter, in early 2013, are running from $975 to $1,250.
There has been some concern that the supply of new condos will out-strip demand but, as of early 2013, there seems to be more than enough buyers to absorb the growth. It is reasonable to assume that there will be a price correction at some point if there is not a real estate price recovery in the rest of the world but local developers don't anticipate market changes within the next 24 to 36 months.
The major advantage of condos for foreign buyers is that they are easy to resell and rent. Many condo buyers express an interest in purchasing homes in the city or property outside of town but decide that an in-town "foothold" will allow them more time to make a decision on a larger purchase.
Since 2010, the historic district has seen the development of several new residential condo projects and more are planned. These are renovations of older properties with seven to 10 units each, that have sold out quickly. Prices for these units are slightly higher than for new condos outside of the district, due to building rules and restrictions and a poor economy of scale. Of Cuenca's English-speaking residents, only a few hundred live in the historic district. The new projects promise to lure more of them into El Centro.
The best bargains in Cuenca today are in the larger home market. Nicely landscaped, finely detailed 3,000 to 5,000 square-foot houses, in Cuenca´s most desirable neighborhoods, can be had for less than $275,000. Many of the homes have guest houses and other out buildings. There are also a number of larger homes with acreage available outside of Cuenca. Although the market for larger properties has been sluggish in recent years, the large-house sector seems poised for a rebound. The downside of larger homes is maintentance and upkeep and expenses for caretakers.
Construction costs for new houses run $450 to $575 per meter, depending on finishings and architectural fees, not including land. Small buildable lots (1,000 meters or less) range from $60,000 to $100,000, depending on location.
For those who want to live in the country but be within a short driving distance of Cuenca, Yunguilla valley, southwest of the city, deserves a close look. Yunguilla is often compared to Vilcabamba, the popular expat destination near the Peruvian border, because of similarity of weather and terrain. The major difference is that land prices are running about 50% of those in Vilcabamba. Other popular outlying areas are the Tarqui and Paute Valleys, both within 25 miles of Cuenca. Construction prices are also a relative bargain in rural areas, with per foot costs averaging $40 to $50.
While many foreigners continue to buy, the trend, especially among English-speakers, is strongly in favor of renting and, since late 2010, there have been more new renters than buyers. The rental market for foreigners breaks into two categories, the traditional unfurnished rental with a one-year lease and short-term, turn-key rentals, which include furnishings, utilities, building fee and often internet and cable tv service. In the traditional market, good quality 2- and 3-bedroom rentals can be had for $300 to $500 per month while turn-key rentals of three to six months run from $600 to $900, both a fraction of rental costs in North America and Europe. On the low end, small, older construction rentals can be found in the $200 to $350 per month range. One pronblem is that demand often exceeds capacity during the busy times of year. Cuenca Real Estate partner, Rentals Cuenca, manages about 50 turn-key rental units; contact them at RentalsCuenca@gmail.com.
A down-side of the on-going "good news" about Cuenca is that prices reported in some publications and websites that promote the low cost of living are often inaccurate. Tales of luxury penthouse condos for $50,000 and high-end rentals, all utilities included, for $350 reflect the market five and even 10 years ago, not the current one. We believe that when the facts are reported accurately, however, prices still represent a good deal.
For the record, Ecuador´s GDP grew at 5.1% in 2012 while inflation increased by 4.9%.
Please keep in mind that prices are averages and the cost of particular properties will vary.