While Cuenca's real estate market continues to show strong growth, the inflow of immigrants from North American is only a small part of the reason why.

"What's driving the local market is the return of Ecuadorians from overseas to live in Cuenca, or who are investing now and planning to live here later," says Joseph Guznay, a real estate agent who sells to both Ecuadorians and foreigners. "Returning Ecuadorians make up between 30% and 35% of the buyers."

Guznay adds:  "North American buyers are an important part of it but, at this point, they represent only about one-half of one percent of sales.”

Cuenca property values have risen steadily over the past six to seven years, bucking the down-trend in the U.S. and much of the rest of the world, including many Latin American countries. Annual real estate appreciation is running 8% to 12%, according to local agents. Appreciation is even stronger for raw land in out-lying areas such as Challuabamba, San Joaquin and Yunguilla, where annual increases of 15% and more are not uncommon.

"People are surprised when I tell them that property values are going up," says Kathy Gonzalez, partner at Cuenca Real Estate, the city's largest agency selling to foreign buyers. "I explain that Cuenca is not only popular with expats, but with Ecuadorians too. Many of the Ecuadorians coming back from the U.S. and Spain are not from Cuenca, but have decided they want to retire here."

The most popular properties for both foreign buyers and returning Ecuadorians are new or resale condominiums. Guznay, Gonzalez and other agents estimate that 65% to 70% of sales to foreigners are condos.

The 25 major projects currently under construction testify to Cuenca's popularity with condo buyers. And more projects are on the drawing board.

A check with local developers shows that costs for new condos are running between $800 and $1,100 per square meter ($75 to $102 per square foot). This means a new 3-bedroom, 2-bath unit, with good views of the city and mountains, ranges from $90,000 to $110,000.

Despite rising prices, Gonzalez says that Cuenca condos are still a bargain compared to other countries. "An international real estate survey was published in May that showed that the average prices in the U.S. and Panama were $2,250 per meter and they were $3,500 to $5,500 in Europe. Cuenca looks like a pretty good deal."

Per-meter costs for resale condos run from $600 to $900 per square meter.

The advantage of condos for foreign buyers is that they are easy to resell and rent. Says Guznay, "Many foreign buyers come here with the idea of buying a farm or large house. After looking around, they decide they need more time to find the right property, but they like Cuenca and want to live or invest here and end up buying a condo."

The best bargains in Cuenca today, according to Gonzalez, are larger homes. "You can find finely detailed 3,000- to 5,000-square-foot houses, with landscaped yards, in nice neighborhoods for less than $250,000. Not only is the square-foot price lower than for condos, but you get a yard too." The downside of larger homes, she says, is maintenance and upkeep.

For those who want to live in the country, but be within a short driving distance of Cuenca, the Yunguilla Valley, southwest of the city, deserves a close look. Yunguilla is often compared to Vilcabamba, the popular semi-tropical valley 120 miles south of Cuenca. Construction prices in Yunguilla are also a bargain, with per-square-foot costs averaging $40 to $50.

If there is an unfilled need in Cuenca's real estate market, it is for modern apartments in the historic district. "There are very few of these and, unfortunately, many people would like to live in El Centro," says Gonzalez, explaining that most of the existing apartments in the district are in need of renovation. "This is beginning to change," she says. "Two high-end renovation projects are about to begin construction and we expect to see more."

What about so-called gringo pricing, the practice of charging higher prices to foreign buyers?

"This is not a problem in Cuenca for anyone who does a little homework, whether they´re gringos or Ecuadorians," says Cuenca resident Sylvan Hardy. "Foreigners, especially North Americans, are not a large enough segment of the market here to be a lucrative target. In fact, the folks being ripped off are Ecuadorians who live in Europe or the U.S. and buying through local relatives. They often don't know the true value of what they're buying, because they rely on family members who take advantage of the situation."

Hardy adds: "Anyone considering buying in Ecuador, especially foreigners or Ecuadorians not in the country, should spend some time comparing prices and studying the market. If you don't, you set yourself up to be a victim."

In addition to real estate sales, the rental market in Cuenca has shown rapid growth in the past two years.

According to those who rent to foreigners, the demand for furnished, short-term rentals has skyrocketed. "Three years ago, I managed eight or nine condos for foreigners and two or three of them were usually vacant," says Graciela Quinde, manager of Rentals Cuenca, which specializes in rentals to North Americans. "Now, I have almost 50 and I'm fully booked most of the time."

Quinde's units are mostly furnished, short-term rentals with all utilities included in the rent. "I rent to people who are here to study, teach or to check out Cuenca as a place to live," she says. "They need a turn-key situation where everything is provided and most of them understand they will pay more than for a regular rental. What we rent would be called holiday or vacation rentals in the U.S."

Monthly rentals for turn-key units range from $400 to $1,500 a month, with the average coming in at about $850.
 
Quinde says that unfurnished rentals with one- or two-year leases make more sense for people planning to stay in Cuenca for longer periods. "You can find nice unfurnished rentals in the local market for $300 and $400 a month. If you do the legwork, you can find some real deals," she says.

Quinde cautions that foreigners considering renting through local real estate agents or directly from owners need to understand local rules before they commit. "In Ecuador, the tenant is usually responsible for most repairs and it is very common for the landlord to keep the deposit to cover depreciation." She adds: "Before you sign a lease, make sure you understand what you are agreeing to. If you don't speak Spanish, have someone explain it to you."

Is it possible that Cuenca's real estate market is getting overheated? "A lot of people are asking this question, but I don't see it happening in the foreseeable future," says Guznay. "Th demand continues to be strong and there seems to be enough inventory to satisfy it. All of the larger projects continue to sell out before they are completed."

“At this point, it's definitely a sellers' market, especially for condos,” says Guznay.

Credit: Reposted from the Miami Herald International Edition, July 15, 2011: photo captions: Condos, like this one on Av. Lazo, are popular with both Ecuadorians and North American expats: some prefer the tropical climate of the Yunguilla Valley, 40 miles southwest of Cuenca.