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Ecuador’s Real Estate Industry Has Been Gutted

The years 2007 to 2014 were a golden age for real-estate sellers, developers and builders in Ecuador.

The real estate and construction businesses in Ecuador were boosted by a booming oil industry and a national government that was pumping massive spending into roads and infrastructure.

Since then, the bottom fell out of oil prices.  The economy soured.  The real-estate picture has completely changed.  It has been a brutal two years for the real estate business and the many related businesses that serve it.

The national real estate association reports that there was a 60 percent drop in real estate sales between April 2015 and April 2016 -- the latter month being when the coastal earthquake hit.

That drop followed a 20 percent decrease in the previous year.


Construction companies have been operating at a level about 70 percent below the business they had previously. 

Real estate sales on the coast have come to a standstill since the earthquake.

However, the builders will be busy for years with re-construction on the coast.

Source: www.cuencahighlife.com

El-Comercio just released an article about rental prices dropping in high value areas in Quito and Guayaquil. They stated that the “housing boom” in 2013 fell when rentals were going for $12.26 per meter in such areas in Quito. The rent decreased from that amount by 12% in 2015, and the first five months of this year saw an additional 30-50% drop. I live in the area they alluded to and did the math and can confirm the numbers personally. I heard this information before but thought it was a negotiating ploy by my landlord.

http://www.elcomercio.com/actualidad/pr … valia.html

Great data guys!  The numbers tell an interesting story!  Expats probably are a very small factor affecting construction activity and real estate sales, but the decline since around 2012 and 2013 lines up with the spike in the USD against other currencies, in particular CAD (losing as much as 30% of its value) and the EUR and the GBP (especially after Brexit!).  Current and potential expats from these currency countries (the "economic refugee" types) are finding it tough to move to (and continue to survive in) USD countries, something I'm thinking will not change for many years as there is a "flight to safety" and out of weaker and declining currencies.   Obviously, other factors are at play too - it's not always about living cheaper.

SawMan :

Great data guys!  The numbers tell an interesting story!  Expats probably are a very small factor affecting construction activity and real estate sales, but the decline since around 2012 and 2013 lines up with the spike in the USD against other currencies, in particular CAD (losing as much as 30% of its value) and the EUR and the GBP (especially after Brexit!).  Current and potential expats from these currency countries (the "economic refugee" types) are finding it tough to move to (and continue to survive in) USD countries, something I'm thinking will not change for many years as there is a "flight to safety" and out of weaker and declining currencies.   Obviously, other factors are at play too - it's not always about living cheaper.

Spot on analysis SawMan. At least in my opinion.

Anyone earning a decent income in USD, or who has some nice savings in USD should be having some great buying opportunities. Of course, suppose it depends what your mentality is. Have always been  of "buy when there is blood in the streets" or "buy on the cannons, sell on the trumpets" mentality.

j600rr :

Spot on analysis SawMan. At least in my opinion.

Anyone earning a decent income in USD, or who has some nice savings in USD should be having some great buying opportunities. Of course, suppose it depends what your mentality is. Have always been  of "buy when there is blood in the streets" or "buy on the cannons, sell on the trumpets" mentality.

Ha! Well put!  Sometimes the "blood in the streets" might be a false positive - consider Venezuela might soon meet that test!  But, if economic downturn presents a buying opportunity for retirees, look at Puerto Rico, although like Ecuador I think things get worse before getting better, if ever.

SawMan :
j600rr :

Spot on analysis SawMan. At least in my opinion.

Anyone earning a decent income in USD, or who has some nice savings in USD should be having some great buying opportunities. Of course, suppose it depends what your mentality is. Have always been  of "buy when there is blood in the streets" or "buy on the cannons, sell on the trumpets" mentality.

Ha! Well put!  Sometimes the "blood in the streets" might be a false positive - consider Venezuela might soon meet that test!  But, if economic downturn presents a buying opportunity for retirees, look at Puerto Rico, although like Ecuador I think things get worse before getting better, if ever.

Probably should have put a disclaimer with my previous. Was talking from an investors mentality, and was referring to someone who has expendable cash, that can afford to be patient, and wait out the storm. Do think prices in Ecuador will probably continue to drop for the next several years, and there is no need to rush in at this point. Things could very easily get much worse economically in Ecuador before they get better.

Venezuela is an interesting case study. Kind of seem to be doubling, and tripling down on the economic philosophy that put them where they are now. Kind of like being in a 20 foot hole with a shovel, and deciding the best way to get out is keep shoveling.

Would love to see Puerto Rico get it's act together, and start stabilizing. Unfortunately that's probably years down the road, but would put money on Puerto Rico coming out in better position in the long run than Venezuela.

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